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For many years, I have been telling the faithful readers of this column that energy is a political issue. Now the proof is in. Look at President-elect Trump's cabinet selections (and I didn't say you must like him or them, but just take a look!):
Secretary of State--Rex Tillerson, CEO of Exxon; Energy Secretary--Rick Perry, former Governor of Texas; EPA head--Scott Pruitt, Oklahoma Attorney General. All people with a heritage in the energy industry. On top of that, his nominee for Secretary of the Interior is Rep. Cathy McMorris Rogers, who has pushed for drilling rights on Native American lands.
Again, I didn't say you have to like it, but this is the evidence. And here at Paperitalo Publications our policy is to be apolitical, but prudent, watching for the signs of things to come.
So what does this tell us? It may not be time to abandon your coal-fired boilers just yet. That does not mean the time to abandon them is not coming--and soon--but it just may not be right around the corner.
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2016 Light Green Machine Institute Conference Presentations available in the White Papers Library!
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I have told you for several years to be careful about abandoning energy assets, for energy is certainly political and today's fuel du jour may not be the fuel selection tomorrow. We could once again see a situation in which the relative prices between fuels flip and what was economical today is not economical tomorrow.
Of course, some of you must consider energy usage in another light: you are in grades where your customers watch your business closely and demand your energy consumption match the narrative to which they subscribe. That is an economic decision for you, too--you'll lose your customer base if you don't follow their perceptions of what a responsible corporate citizen should do.
Now, more than ever, the essential point is this: energy usage does not follow the rules of engineering economics in the long run. The relative position of energy costs and, to some extent, the availability of particular forms of energy fluctuate widely on a year-to-year basis.
This means you cannot make long-term plans for energy sources for your mill. An example from the past--who is burning bunker oil in their boilers now? However, in the 1970's I remember mills converting boilers to burn this because it was the only economical fuel in plentiful supply for certain types of existing boilers. At the same time, entire residential neighborhoods were built without natural gas service lines because natural gas was in limited supply and no one believed it would ever be plentiful again. During that period, I owned two houses with heat pumps that were built in such neighborhoods.
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Join Jim Thompson on the 2nd Annual Papermakers Mission Trip to Guatemala, 22 - 29 July 17. Build houses, talk about the pulp and paper industry. For more information, email jthompson@taii.com with "Guatemala" in the subject line.
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I suspect if you put your 2017 energy budget together in October, you will be revising it in February. There are at least two things that have happened since then that will make you do this. The first is the election, of course. The second is the recent OPEC accord.
Energy became an issue within six months of my graduating from university in 1973. It has been an issue ever since, with ever-changing parameters from availability to cost to environment to public perception. It does appear that it will not retreat into the background any time soon.
We have a simple one question on our quiz this week. You may take it here.
For safety this week, fire burns and electricity can kill you. Sometimes we need to be reminded of this.
Be safe and we will talk next week.
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Nip Impressions has been honored for Editorial Excellence by winning a 2016 Tabbie Award!
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You can own your Nip Impressions Library by ordering "Raising EBITDA ... the lessons of Nip Impressions."
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