California’s Pro-HSR Political Consensus

Oct 28th, 2014 | Posted by

There are two things that should come as no surprise to anyone reading this blog. First, Californians support high speed rail. Second, Ralph Vartabedian does not.

Vartabedian has a rather whiny article up at the LA Times today complaining that high speed rail is not a factor in this fall’s statewide election:

Neither Brown nor his Republican opponent, Neel Kashkari, has delved publicly into the details of high-speed rail, including the complex construction plan, looming technical challenges or possible funding shortfalls.

That lack of substantial dialogue reflects a broader inattention that some political analysts and engineering experts warn could have long-term consequences.

This is a remarkable article, basically Vartabedian complaining that nobody agrees with him that HSR is a ticking time bomb and then going out and finding a failed candidate for office this year, Dan Schnur, to agree with him.

Vartabedian has spent years trying to undermine the California HSR project, and here in 2014 it’s clear that his efforts have been a spectacular failure. Californians simply don’t agree with him that HSR is a bad idea. And as a result, most of their political leaders see no point in bashing a popular project.

The most recent poll to examine the HSR issue, PPIC’s March 2014 poll, found a majority of Californians support high speed rail. A few months later, the state legislature agreed to Governor Jerry Brown’s request to devote a sizable portion of cap-and-trade revenues to HSR. That looks to have settled matters in Sacramento, as HSR is no longer a theoretical project but an actual thing the state is building.

Of course, there are those who have tried to make HSR an issue in this year’s election. Republican candidate for governor Neel Kashkari has made attacking HSR part of his campaign, with his ads attacking the “crazy train” and showing him literally smashing a toy train. (Another Kashkari ad showed a kid drowning – what is it with Kashkari putting kids and their toys in danger?) But Kashkari is expected to lose the governor’s race by as much as 20 points. Clearly his attacks on HSR aren’t helping his cause.

In fact, the campaign has seen some candidates embrace HSR when they hadn’t done so before. Consider the case of Betty Yee. I’ve known and respected her since my days working in Monterey County politics, when she was a member of the State Board of Equalization. In the past, Yee has been critical of HSR. But she’s now running for Controller against Fresno Mayor Ashley Swearengin, who is a notable Republican supporter of HSR.

If HSR were politically toxic at the polls, you’d have expected Yee to double down on any criticisms of HSR. Instead, she put out a statement last Friday embracing HSR:

Voters statewide approved Proposition 1A in November 2008, the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century. The Act authorizes the issuance of $9.95 billion of general obligation bonds for the project.

While supportive of the concept, I had opposed the project because of its governance and financing challenges. However, the direction of cap-and-trade funds to the project by Governor Brown has the great potential of attracting other sources of financing to move the project forward. Widening freeways and increasing air traffic are not sustainable responses from environmental and cost perspectives to the increased need to move people in this state.

I now support the high-speed rail project, and it should proceed as long as the financing meets all legal requirements, the project complies with all environmental laws, and local communities’ concerns are fully aired so that the project respects higher region and local priorities such as the dire water supply concerns affecting communities, families, and farmers in the San Joaquin Valley.

Welcome to the team, Betty Yee! Glad to have you on board.

It’s possible that Democrats may add to, maintain, or lose their supermajority in Sacramento. But that is largely dependent on Democratic turnout, which is anemic across the country this year. If Democrats did lose that supermajority, it’d be only by a seat or two, and HSR is not a factor in those races, most of which are in Southern California.

One sleeper race that could break for Democrats is the race for Congress in California’s 21st Congressional district. Democrat Amanda Renteria is making it a close race against David Valadao, who has been outspoken in his opposition to HSR. Renteria is more nuanced, but doesn’t outright oppose HSR, and thinks it would be a huge mistake for the Valley to turn its back on all those jobs.

So Vartabedian’s complaint isn’t with the candidates, but with the reality that Californians support HSR. His efforts to turn the public and the state government against the project have been a colossal failure.

Of course, the situation is different in Congress, where Bakersfield’s Kevin McCarthy continues to fight against HSR. He may soon have a Republican majority in the Senate to join him in his quixotic war against jobs for the Valley. But the Republican Congress’s opposition to HSR is not the death knell for California HSR that it once seemed. If California continues to support HSR, and if the Congress continues to oppose it, that will simply add momentum to the state’s efforts to chart its own course in building HSR. After all, the federal government has been AWOL on the drought and on climate change, and California is going its own way on those matters as well.

At some point you’d expect Vartabedian to accept reality and reconcile himself to the fact that HSR is getting built in part because Californians like it….

What’s Up (or Down) With Oil Prices?

Oct 27th, 2014 | Posted by

A few years ago it looked likely that we could see oil at $200 a barrel in 2015. Today, prices are rapidly falling, with Goldman Sachs now predicting oil will crash to $70/bbl in 2015.

What’s going on? Are we out of the woods of high oil prices?

Hardly. This is a temporary respite that, as I’ll explain, actually reinforces the long-term trend of rising oil prices.

Earlier this year reports indicated that the USA would overtake Saudi Arabia as the world’s largest oil producer, thanks to shale oil production in places like North Dakota’s Bakken formation. The result is that the world is awash in oil, almost glutted with oil. That new production was driven by visions of $200/bbl oil. But suddenly things look less promising at $70/bbl, a price at which the expensive process of shale oil production looks a lot less desirable.

The Saudis reacted by massively increasing production in order to bring down prices. The Saudis are the only oil producer with the ability to quickly and easily increase production, as they’re still pumping crude, rather than trying to extract shale.

The effect is to drain the pool so others are forced to get out. With a low price of oil, shale and other producers are driven out of business, just as happened in the 1980s in Texas. The Saudis can also put the screws to geopolitical rivals in Russia and Iran. It’s win-win.

It’s a win-win for the Saudis, of course, as long as they eventually bring the price of oil back up. And that’s exactly what they’re planning to do:

The decline in oil prices may continue for a year or so but will prove temporary as population growth spurs higher consumption and supports prices in the longer term, a leading Saudi petrochemicals executive said on Sunday.

He’s signaling that the Saudis are going to go back to a higher oil price once they’ve succeeded in driving other producers out. That’s the thing about crude production, it’s easily scaled down and up as needed. But if shale operations stop, they’re a lot harder to resume. There’s a longer lead time and a higher cost.

Saudi Arabia has been rumored to be at or past peak oil production for a few years now. They still have enough oil that they can increase production to drive down prices when it’s useful for them to do so. But that comes at the expense of future oil production. More oil today means less oil tomorrow.

In other words, don’t get used to this “temporary” decline in oil prices. By the spring of 2016 we may well see rising prices again. And because producers will have been driven out of the market, because the Saudis are moving future production to the present, and because all the other long-term factors driving peak oil remain in place, such as the decline in North Sea production, we can expect the next rise to be sharper and higher than what we’ve seen since 2008.

This all feels a lot like 1998-99, when the price of oil crashed to almost $15/bbl. But by the spring of 2000 oil prices had begun to soar. The cost of a barrel had tripled to $48/bbl. California gas stations saw their first $2 gallon gas. At the time, $2 a gallon felt like the end of the world – or at least like a major crisis.

But as the chart below shows, 1999 was a turning point. Ever since, the price of oil has been on a steady rise. Sometimes the rise accelerates dramatically, as happened in 2008. Sometimes the price crashes, as happened in 2001, 2009, and now in 2014. But those crashes are always temporary and the long-term rise always resumes in short order.

Macrotrends.org_Crude_Oil_Price_History_Chart

In fact, looking at that chart, you can see that the current price of oil is the same as it was in 2006, when gas first broke $3 at the pump, bursting the housing bubble and causing the long recession. So the price of oil right now certainly isn’t “cheap” by any means.

So enjoy the cheaper gas while you can. It won’t last, it never does. Let’s be thankful that California, at least, continues to move ahead with building alternatives to oil, like high speed rail. The case for HSR remains strong, regardless of the short-term behavior of the oil markets.

China Prepares Its Pitch to Sell HSR Trains to California

Oct 22nd, 2014 | Posted by

CNR Corporation, a state-owned enterprise of the Chinese government, is planning to pitch California on purchasing its high speed trains:

CNR, its unit Tangshan Railway and U.S.-based SunGroup USA are submitting an expression of interest to California’s $68 billion high-speed rail project for a contract to supply up to 95 trains that can travel as fast as 354 kilometers per hour (221 miles per hour), SunGroup told Reuters.

“We believe that high-speed rail is something that China does very well, and it’s a product that we can export across the world,” SunGroup spokesman Jonathan Sun said in a phone interview, adding that SunGroup, CNR and Tangshan Railway had been working together for four years….

Project details published on SunGroup’s website show the consortium is putting forward the CRH380BL train, a model used on the Beijing-Shanghai line, which can travel up to 380 kph.

Sun said an initial order would probably be about 18-20 trains and that they would open a factory to make the trains in California if they won the bid, as required by U.S. law.

The consortium also intends to bid for the next available contracts to build track sections of the line. A group led by Tutor Perini is building the first segment, while consortiums that include Dragados and Samsung are bidding for the next construction package.

“In the future we want to be involved in all aspects of the project,” Sun said. “Because by undertaking a package you can showcase the true value of the high-speed technology that China has created and manufactured.”

CNR just won a bid to deliver trains to Thailand for intercity rail service, with speeds up to 320 km/h, and California is their next big target.

The more bidders the merrier, I say. Bids from companies based in Germany, Japan and Spain are likely, and Germany’s Siemens already has a factory in Sacramento with room to grow to add capacity for building high speed trains. But China can pretty quickly scale up manufacturing capabilities in California if needed.

You can read more about SunGroup’s proposal to use the CRH380BL in this report – though it helps if you read Mandarin. I don’t, but you can at least see some interesting photos of the CRH380BL.

After Court Defeat, HSR Opponents Set Sights on Tehachapis

Oct 19th, 2014 | Posted by

Having been resoundingly beaten in the courts once again, opponents of the California high speed rail project are now shifting their attention to another part of the project in hopes they can derail it. Their new claim is that the route from Bakersfield to Tehachapi Pass is too steep:

A grassroots group of Central Valley residents called the Citizens for California High-Speed Rail Accountability presented a letter to the authority Tuesday that charges the agency with covering up the fact that any route selected through the Tehachapis would violate the terms of Proposition 1A, the 2008 rail bond measure.

“What’s most important is that the public and elected officials know that what they’ve been told all along is unachievable,” said Frank Oliveira, a Hanford-area private investigator and co-founder of the citizens’ group….

In response, a spokeswoman for the authority said program operators are still in the early stages of considering possible routes, but are confident that a suitable route will be found to meet all program requirements.

“There are engineering and design challenges in the Bakersfield to Palmdale section but they are challenges we will overcome,” Lisa Marie Alley said in an email. “I must say that there is absolutely no story here.”

HSR opponents will desperately try to prove her wrong, and their case rests on a section of the track between Bakersfield and Tehachapi, as was first reported by the Bakersfield Californian recently:

It comes as no surprise that the Tehachapi Mountains are a tough climb, even for a train that can travel up to 220 mph. The primary alternative, the Grapevine, also has steep grades that agency officials have said would require extensive tunneling and viaducts, both of which would be very expensive.

Newly released progress reports engineering firm URS Corp. sent the rail authority in fall 2013 raise concerns about a stretch of more than four miles southeast of Tehachapi near Oak Creek Road where the mountain grade is greater than 3.5 percent. That exceeds the rail authority’s self-imposed limit of 3.5 percent average grade for sections measuring about four miles.

The worries evident in those reports aren’t necessarily limited to the difficulty of going uphill. Just as formidable, observers say, is the challenge of going down a steep mountain….

Alley, the project spokeswoman, dismissed the notion that a 3.5 percent incline would stop the project, noting high-speed rail in Germany crosses 4 percent grades.

The Bakersfield Californian article is more than a little slanted against the project’s choice of Tehachapi over the Tejon Pass route. It argues that the reasons for choosing Tehachapi were political – a desire to appease Palmdale, which had threatened to sue, and a desire to appease the developers of the Tejon Ranch project.

But that wasn’t the full story of the California High Speed Rail Authority’s decision to reject a Tejon route. First of all, Prop 1A – which the HSR opponents sued to uphold – includes Palmdale in the alignment. So choosing an I-5 alignment via the Tejon Pass would violate Prop 1A.

Second, the I-5/Tejon alignment brings its own uncertainties, including grade. Clem Tillier’s research – which, it must be stated up front, led Clem to conclude that that Tejon is the better choice – does indicate that the maximum grade for that alignment is 3.5%. That’s coming close to the level of concern that the HSR opponents voiced about the Tehachapi route, though not quite at 4%. Clem and others have pointed out that estimates prepared in 2012 suggested that Tejon was up to $5 billion cheaper than a Tehachapi alignment, but that’s before any detailed engineering had been done for that tunnel-heavy route, and it doesn’t include lost revenue from abandoning the half a million people living in the Antelope Valley.

The Bakersfield Californian report has certainly fueled a renewed call to examine and choose the Tejon option. Personally I’m just fine with going via Tehachapi, in order to serve Palmdale, on the basis of the idea that HSR should go where the people are. But if a Tejon option is chosen, I could probably live with it, assuming that questions about ridership and revenues absent a Palmdale alignment are answered. And of course, the plan to connect LA to Las Vegas with high speed rail currently assumes a connection at Palmdale.

We’ll see if this new attack gets any traction. Everything I can see suggests that the Tehachapi option remains the solid choice of the Authority, but until construction begins one can probably never completely rule out a switch to Tejon, however unlikely it may seem.