Crunching the Numbers: Energy Source Externality Accounting

Nick’s discussion and commentary below follows an inquiry from an academic team conducting research on externality costs. The inquiry asked to identify peer companies that either externalize the smallest or largest proportion of their costs. Externalities were defined as, “costs incurred by third parties, such as local communities, due to a company’s business operations that are not borne by the company itself.”

In his response to the inquiry, Nick suggests externality accounting is first performed across different sources of energy and power generation prior to assessing peers or competitors within a specific type of energy. Nick subsequently compares the externality costs between the natural gas industry versus the wind and solar industries.

Properly Sequencing Externality Accounting

Externality accounting is a useful tool when applied objectively, but one that is often misapplied and mishandled by those looking to dial in desired outcomes. Many fail to appreciate the sequencing of externality screening is crucially important when assessing entities across the energy industry.

Before assessing peers or competitors within a specific type of energy (such as natural gas), one should first apply externality accounting across the different sources of energy and power generation.

Thus, I propose a context of peer/competitor that is a level higher than, and a precursor to, what you proposed in your request.

The first cut of externalities should be done on an energy source-versus-energy source basis. In other words, domestic natural gas compared to wind or solar energy sources.

Society must screen options of energy sources within the wider portfolio first, and then set policy and investments to reflect the math of the externality accounting. First figure out the best energy source, as dictated by externality accounting.

After the first cut, or filtering, by energy source, one can then turn attention to different players within individual energy sources.

Getting the externality accounting/ranking for discrete energy sources (natural gas versus wind or solar) right is much more important than, and is a prerequisite to, screening or ranking individual players within an energy source (CNX Resources versus our natural gas competitors).

Many, including those in academia and government, have failed miserably to perform the rudimentary externality accounting and ranking of different energy sources. That leads to wrong-headed energy and climate policies resulting in dire consequences seen everywhere these days. Conditions will only worsen until this failure is corrected.

So, for the purpose of your inquiry and the discussion that follows, I am the natural gas industry, not just a player within it. And my peers/competition are the wind and solar industries, not another peer in the natural gas industry.

CNX Resources

CNX Resources is not a typical public energy company. We occupy a unique space in both the industry and region we call home.

We are nearly 160 years old – Abe Lincoln was president when we were incorporated. We manufacture natural gas in the northern Appalachian basin (PA/OH/WV/VA). The Appalachian basin “accounts for nearly one-third of all U.S. dry natural gas production,” and looks to be the second largest natural gas field on the planet. We operate in the Marcellus and Utica shales, we collect coal mine methane, and we operate midstream pipeline and processing infrastructure.

At CNX, our sustainable business model is simple: Tangible, Impactful, and Local. We’ve embraced the role as a regional innovator driving Appalachia’s socio-economic revitalization through local talent, homegrown energy, and breakthrough technologies.

We don’t apologize for what we do for society, we proudly celebrate it.

If our industry were to disappear tomorrow, society would come to a complete halt and humans across the planet would suffer greatly. That might not be what the experts or the environmental movement warrant, but that is certainly the engineering reality.

CNX recently unveiled its Appalachia First vision, which lays out many of the key themes I discuss below. Please learn more about our vision at www.positiveenergyhub.com. The site includes an approximately 45-minute presentation where I further discuss Appalachia First, which can be best summed up as “produce it here, use it here, first.” I think you will appreciate some of the policy positions.

Natural Gas

There are a few, crucial scientific and engineering realities that are often ignored when assessing the externalities of domestic natural gas.

Natural gas is the most cost-effective form of energy in the United States, providing consumers, businesses, and homeowners savings in energy costs that total in the hundreds of billions of dollars annually. Rampant inflation has caught everyone’s attention these days; the most effective means to curtail general inflation is to simply allow natural gas to provide cheap energy so that energy inflation, and by extension general inflation, is mitigated.

Natural gas is the superior solution to immediate and material greenhouse gas emission reductions. Domestic natural gas has and can continue delivering these benefits while maintaining power grid reliability during the dark days of winter and dog days of summer.

Power grid reliability cannot be underscored enough. From college campuses to homes, from hospitals to emergency responders, and from government buildings to other businesses and facilities, America needs power all day and night, 24/7, 365 days/year.

Environmental Benefits of Natural Gas

Today, much attention is focused on methane emissions. Natural gas produced in Appalachia has the lowest methane intensity (0.09%) of all major U.S. oil and natural gas-producing basins, according to Clean Air Task Force data. Additionally, Rystad Energy analysis of CO2 intensity performance “brings Appalachia to the top quartile among all oil and gas fields globally” with the firm expecting the basin to “improve further in its CO2 intensity dimension in the next three to four years.”

When natural gas competes with alternative energy sources in a free market, emissions drop, and environmental quality improves. As natural gas-fired electric generation topped 40% of the total grid, power sector emissions dropped by nearly the same, per the U.S. EPA. “The decrease in coal-powered electricity generation and increase in natural gas and renewable energy electricity generation contributed to a decoupling of emissions trends from electric power generation trends over the recent time series,” the agency wrote in its April 2022 inventory.

Consider the specific example of the PJM power grid. Power sector emissions declined 11% year-over-year as natural gas grew to 44% of PJM’s total capacity. And, Pennsylvania had the highest absolute decline of energy-related CO2 emissions of any state between 1990 and 2018, with emissions falling as natural gas became the state’s largest electricity source. The data and facts are unequivocal, yet rarely heard.

Economic Benefits of Natural Gas

The environmental gains tied to natural gas come with additional economic and job creation benefits.

Natural gas development across Appalachia has breathed new life into forgotten Rust Belt communities and brought the building trades and apprentice programs to full employment.

Careers paying family-sustaining wages offer on-ramps to the middle class for young adults in urban and rural communities who are not able or wanting to attend college. Manufacturing, which relies on reliable and cheap energy inputs, is experiencing a resurgence across Appalachia and the Midwest, creating a downstream benefit to the natural gas industry. These create huge, positive externalities.

Investment and growth in the natural gas industry grows tax base for governments and communities. Today governments are desperate for sustainable endeavors and economic sectors that pay their fair share of tax. You won’t find another industry in Appalachia that pays more of a fair share of tax than the natural gas industry.

And natural gas is the catalyst that accelerates and de-risks the integration of next-generation technologies, such as hydrogen, into our economy. That creates optionality for innovation, a serious and positive contributor to the externality math.

Bottom line: there’s never been a better climate jobs program than the shale gas revolution. Performing an objective and clinical externality accounting would prove it.

Intermittent Wind and Solar Energy Sources

Now, let’s discuss the externalities of wind and solar.

The most fundamental misunderstanding about wind and solar is the myth that they present a zero carbon footprint. That is simply not true, not by a long shot.

Carbon footprint must be assessed on a life cycle, scopes 1-3, basis. It doesn’t matter to the atmosphere where the CO2 is emitted in the life cycle of making and running a wind turbine or solar panel; just because there is not a significant emission once in place does not mean there is a zero carbon footprint.

To accurately account for the carbon footprints of wind and solar, the supply chain of how wind and solar power ‘happen’ must be traced:

First, massive environmentally destructive mining must occur in Russia, China, and Africa for the metals and materials comprising wind turbines and solar panels. That presents a huge carbon footprint and large CO2 emissions.
The raw mining products must be processed to purify them, which also requires huge inputs of carbon power and the associated CO2 emissions.
Then components need manufactured in factories, often in China, that are carbon-powered.
Manufactured components are then shipped thousands of miles on carbon-fueled planes, trains, ships, and trucks to arrive in places like America.
Trees and land must be cleared to site pads and concrete will be used to build the pads for the turbines and panels, emitting more carbon dioxide.
New transmission lines must be run to every wind turbine and solar panel block/array, requiring the felling of more trees to create the rights-of-way and the manufacturing of the new power lines, adding to the CO2 emission tally.
Backup and reliable sources of generation will be required for when the sun isn’t shining or the wind isn’t blowing, which will typically be carbon-based power generation (often coal) creating more carbon dioxide emissions.
- There is no such thing as a wind- and solar-only grid, because both sources of electricity are intermittent (battery storage cannot be scaled to serve as backup and it has a carbon footprint worse than wind and solar).
- It’s also worth noting the double-building and maintenance of power generation units increases costs to consumers.
In seven to 10 years, you need to perform this process all over again, because the turbines become obsolete and must be scrapped (there is no way to recycle wind turbine blades) and solar panel efficiency declines year after year. The repeat of the cycle doubles the carbon footprint.

There is also the impact on surface land that wind and solar have to add to the externality analysis. For a 100% wind- and solar-powered U.S. grid, wind and solar farms would have to occupy 300 million additional acres of land beyond what’s used to power our economy today. That’s building solar and wind farms across land areas equivalent to Arkansas, Iowa, Kansas, Missouri, Nebraska, and Oklahoma, according to Bloomberg analysis of Princeton data. A ridiculous non-starter of course, yet no one seems to acknowledge it as such.

Negative externalities exist with the aforementioned disposal of turbines and panels beyond their useful lives. Wind turbines can’t be recycled and are “piling up” in landfills, according to Bloomberg. Solar panels contain hazardous materials which must be disposed of properly or risk environmental damage; most environmentalists would consider it hazardous waste (until you told them it was from solar).

Today, consumers want their eggs to come from cage free chickens, their tuna to be caught with dolphin friendly nets, their straws to be biodegradable, their detergents to not use chemicals harmful to water ecosystems, and their jewelry to have gems that are conflict-free.

Yet there is not a home in America today with rooftop solar that can say with certainty those panels were not partially manufactured by either child- or slave-labor. The human rights abuses tied to the murky global supply chains of wind and solar are egregious. Yesterday we were concerned about blood diamonds; today the concern should be about blood solar. The externality cost of human rights abuses in the manufacturing of wind and solar is sobering.

And there is no wind turbine in America today that can warrant it does not kill scores of birds and bats, many of them endangered. Offshore wind farms near New York and New Jersey are being constructed in the middle of endangered whale habitat, and, wouldn’t you know it, but dead whales are now washing up on beaches in New Jersey and New York. Yesterday we were worried about saving the whales and the bald eagle; today the worry should be how wind turbines lay waste to whales and eagles. Energy production that proves deadly to sensitive species and habitats should be reflected in an externality analysis.

Wind and solar require tax subsidy that exceeds total subsidy of natural gas, coal, or oil by orders of magnitude. When you add up the various programs and subsidies to favor wind and solar, the tally will register in the hundreds of billions of dollars (or perhaps even in the trillions of dollars), depending on what time frame you choose. Those valuable dollars could be invested elsewhere and should be added as an externality cost.

There are serious geopolitical externality costs tied to wind and solar. China’s control of the solar panel supply chain has ballooned to 84% over the past decade, with the country also controlling the bulk of critical minerals production and processing necessary for battery storage. This is a critical risk that presents energy security, supply chain, and national security concerns that manifest as negative externalities.

Wind and solar aren’t keeping pace with global energy demand, falling 165 exajoules short of needed capacity, according to the 2022 BP Statistical Review of World Energy. Growing global energy demand requires massive scale that cannot be met with wind and solar under the laws of physics.

When wind and solar inevitably fail to deliver at scale due to their engineering realities, energy security in places like Europe necessarily falls back to carbon-based fuels from places like Russia. That emboldens despots to use the gifted energy leverage to warmonger, as in the case of Ukraine. Climate policies and the resulting flawed reliance on wind and solar are the root causes of the war in Ukraine. The policies created a de facto EU reliance on Russian energy. What’s the externality cost of Russia in the Ukraine? Whatever it is, add it to the negative externality tally for wind and solar.

Add it Up

Tabulating the externality impacts of energy provided through natural gas and comparing it to those for wind and solar will present a trio of decisive and obvious conclusions:

All economic activity and forms of energy have carbon footprints; there is no such thing as truly zero carbon power or a zero carbon economy.
Natural gas offers the best net externality balance within an energy portfolio. Its externality benefits are substantial and diverse while its externality costs are modest.
Wind and solar present a massively negative net externality cost to society, particularly when the attempt is to deploy them at scale.

These three conclusions are opposite of what is warranted by the environmental movement, and many in government and academia. Climate and energy policies are set that ignore the math. We share a duty to correct that.

U.S. natural gas production set a new record in 2021
https://www.eia.gov/todayinenergy/detail.php?id=54200

Benchmarking Methane and Other GHG Emissions of Oil & Natural Gas Production in the United States https://www.catf.us/resource/benchmarking-methane-emissions/

“International analysis finds Marcellus best in carbon dioxide intensity”
https://www.bizjournals.com/pittsburgh/news/2021/04/23/rystad-energy-international-analysis.html

Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2020
https://www.epa.gov/system/files/documents/2022-04/us-ghg-inventory-1990-2020-data-highlights.pdf

China’s Greenhouse Gas Emissions Exceed Those of All Other Developed Countries Combined
https://www.scientificamerican.com/article/chinas-greenhouse-gas-emissions-exceed-those-of-all-other-developed-countries-combined/

Net-Zero America: Potential Pathways, Infrastructure, and Impacts
https://netzeroamerica.princeton.edu/the-report

Wind Turbine Blades Can’t Be Recycled, So They’re Piling Up in Landfills
https://www.bloomberg.com/news/features/2020-02-05/wind-turbine-blades-can-t-be-recycled-so-they-re-piling-up-in-landfills#xj4y7vzkg

Statistical Review of World Energy
https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

The West and China: A Rabbit That Has Been Hypnotized by a Snake

Twain famously observed how history doesn’t repeat, but that it tends to rhyme. America and the West learned a hard lesson during the Cold War when the preeminent communist power of the day attempted to sedate the free world into a geopolitical slumber using an ingenious approach.

Today, we are making an uncannily similar mistake, this time with the modern-day communist power of China. If we don’t heed the historical rhyming and lessons that come with it, troubled times are certain.

The 1950s and the Geopolitical Sedative of ‘Peaceful Coexistence’

In early 1956 Soviet ruler Nikita Khrushchev delivered a secret speech to the Twentieth Party Congress. In it he unveiled the new official state policy of ‘peaceful coexistence,’ which the Soviet Union would apply when dealing with its rival, the West.

Peaceful coexistence was packaged to be appealing to western Europe and the United States. The concept advertised a future where communist nations in the Soviet sphere could live alongside western democracies, without fear of constant strife and with an eye toward reducing tensions.

Of course, the Soviet Union’s and Khrushchev’s true intentions with the application of peaceful coexistence were quite different than what was promoted to the West. Behind the rhetoric of détente sat the long-term twin objectives of lulling the West into a false sense of security and of laying the groundwork to decisively vanquish democracy. Peaceful coexistence was in many ways a marketing campaign to produce the opposite result of its name.

The Soviet propaganda machine got fully behind the promotion of peaceful coexistence.

Countless influential individuals in the West, including the powerful in European and American governments, took the bait hook, line, and sinker. Peaceful coexistence was quickly embraced by the elite and expert classes.

The few who early on saw peaceful coexistence as a sham were initially labeled as narrow-minded and backward thinking. Until the Soviets brutally invaded Hungary later in 1956. Russian tanks in the streets of Budapest immediately clarified that peaceful coexistence was nothing but a ruse to buy time, gain advantage, and outmaneuver the West.

Peaceful Coexistence Redux: Modern China and the West

China has been promoting its own brand of peaceful coexistence for decades. It is masterfully good at it; China today is much more persuasive, effective, and patient than the Soviets ever were in the 1950s.

China’s version of peaceful coexistence has successfully permeated just about every institutional pillar of modern western society.

Academia, having a seemingly incurable ideological soft spot for communism and its cousin socialism, needed little coaxing to jump on the peaceful coexistence bandwagon. Colleges have been eagerly pocketing Chinese money to fund a broad spectrum of research and programs. Universities compete to take on as many full-tuition-paying Chinese nationals as possible in undergraduate, graduate, and postdoctoral slots. Individual professors, departments, and universities across higher education are hopelessly conflicted and financially indentured to China.

The capital markets have behaved badly under the influence of peaceful coexistence. The largest investment houses, banks, and private equity firms assessed the growth prospects of China, and happily poured trillions of dollars into the communist economy. Much of that economy is designed to pilfer technology from the West, further militarize the communist nation to better prepare for conflict with the West, and to build strategic industries that aim to destroy competition in the West. Ironically, the biggest capitalists in the free world have willingly funded a regime that exists to destroy capitalism.

Big business, specifically global corporations, saw over a billion potential new Chinese customers for products. They quickly became transfixed with peaceful coexistence, to where companies began acting illogically.

Major US airlines refuse to acknowledge the nation of Taiwan on their global maps resting in the seat pockets of their planes, for fear of upsetting China.

Tech firms grant Chinese state security access to user personal data that they would never dream of providing to US authorities.

Peaceful coexistence coupled with over a billion potential viewers have hypnotized western media and entertainment. The Chinese Communist Party acts as director, editor, and producer of most major Hollywood films these days. And marquee athletes and professional sports franchises are much more comfortable deriding their home nations and ticket-buying customers than they are speaking truth to the power that is China.

The western environmental movement fully embraced peaceful coexistence and commits the most egregious acts of aiding and abetting China. Much of this knowing collusion falls under the flaw and folly of ‘tackling climate change.’

Environmentalism used anti-science ideology and nonsensical concepts of zero-carbon and renewable energy to drive policy mandates, subsidies, and protections for products with supply chains controlled by China.

Environmentalism is proving to be a geopolitical trump card for China: eradicating American energy independence brought on by the shale revolution and replacing it with a certain energy dependence on China.

Politicians, not always the sturdiest of moral fortitude and discipline, were often easy marks for China’s brand of peaceful coexistence. Outwitted and outmaneuvered presidents, popes, and climate czars engage China with visions of world peace/détente, new members of the religious flock, and climate accords. These western leaders bring back nothing of substantive value from the negotiating table, yet they readily cede value on the most vital of issues.

The biggest error politicians and state bureaucrats make when dealing with China is assuming discrete issues can be segregated from China’s grand strategy residing under its umbrella of peaceful coexistence. Our self-anointed climate czar pretends we can put fundamental differences aside in a winner-take-all competition, so that we can agree on setting targets for future atmospheric concentrations of carbon dioxide. China sees that miscalculation and happily utilizes it to secure more advantage and advance its strategic objectives. That gives Code Red a new meaning.

A Wake Up Call from Sun Tzu

Communism remains the gravest threat to individual rights and human quality of life. It desires to destroy the free world, bring what is left into its orbit, and grow its power. The approach attempting to achieve these aims is insidious and steadfast. It follows the ancient strategic teachings of Sun Tzu and the principles of Choho No Jutsu.

There is no art higher than that of destroying the enemy’s resistance without a fight on the battlefield.

Subvert anything of value in the enemy’s country. Implicate the emissaries of the major powers in criminal undertakings; undermine their position and destroy their reputation in other ways as well, and expose them to the public ridicule of their fellow citizens.

Do not shun the aid of even the lowest and most despicable people. Disrupt the work of their government with every means you can.

Spread disunity and dispute among the citizens of the enemy’s country. Turn the young against the old. Use every means to destroy their arms, their supplies, and the discipline of the enemy’s forces.

Debase the old traditions and accepted gods. Be generous with promises and rewards to purchase intelligence and accomplices. Send out your secret agents in all directions. Do not skimp with money or with promises, for they yield a high return.

Act with Moral Superiority to draw the trust of the enemy’s people, in this way you gain the enemy’s own people as an ally against him.

Does reading that send a chill down your spine?

Global leaders of the communist ideology do not intend compromise, reform, or peaceful coexistence. That was the reality during the Cold War with the Soviets, and it remains the reality today with China.

China understands that the elite in the free world desperately want to believe communism desires compromise and reform. That desperate want is our biggest weakness.

The phrase ‘a rabbit that has been hypnotized by a snake’ is taken from the memoirs of German World War II and Cold War legendary spy chief Reinhard Gehlen, The Service.

America Needs a Third Party

I’m a big believer in America; where it came from, what it stands for, and its future potential. The United States is far from perfect, in both its history and its present. Yet it still represents the best social, political, and economic system to respect and nurture the individual.

But most sense something is very wrong with where the nation is heading. Look around at our national political leaders from both parties of late, is the best we can do? America needs a course correction.

Drastic change is not needed. The nation should not radically tear itself down and then rebuild itself into something perceived to be better abstractly but likely will be much worse. Keep the Electoral College, don’t stack the Supreme Court, defend the Bill of Rights, and preserve the free market.

But our political system is in dire need of new blood. Two parties have enjoyed a stranglehold on governance for too long. Where they were once different shades of similar ideals, today the two parties have split orbits to where they represent extremes that cater to the minority fringes and leave little for the large middle.

The Primary Problem

Primaries are mostly to blame for the current polarization of the two-party power cartel. A moderate Democrat has no chance when running against a proud leftist in a primary. A traditional Republican today may be dead-on-arrival when going up against a hard-right opponent.

Although moderates typically represent the strongest candidates to win the general election, today’s leadership in the Democrat and Republican parties, coupled with the primary election process, tends to kill off moderates before the general election.

The opposing party funds this dynamic, making it worse. How many times in the past decade have we seen one party funding commercials for the other party’s most extreme candidate in the primary election? The hope, of course, is that the extremist wins the primary, which will make it easier for the opposing party’s extremist to win the general. Experience has shown the logic works.

The dynamic also creates a talent drain in candidates. Many moderates with distinguished careers in politics have decided to step down rather than face a primary drubbing. Too many high-potential candidates never start political careers because of the radicalization of the primary party process.

People used to say to run for office you have to be nuts. Today, to successfully run for office you must be nuts, and extreme in ideology.

The General Conundrum

When candidates representing the extremes of each party prevail in the primaries, the choices in the general election leave much to be desired for moderate voters. If a moderate wants their vote to count and voice heard, they must choose the lesser of two perceived evils.

That gives an advantage to the leftist Democrat candidate in the general election. The leftist promises the world to voters and lavishes special interests with handouts, from universal income to college loan forgiveness. It’s hard to run against candidates who act as a political Santa Claus, where every day is Christmas, and the credit card bill never comes due.

To vanquish such an opponent, one needs sound ideas and a sensible platform that appeal to run-of-the-mill Americans. That hasn’t exactly been the descriptor of many Republican candidates these days, who obsess on their own form of cultural control, just from a different direction than their leftist opponents.

Between primary and general elections, moderate voters are bombarded with shrill messages from each extreme side. Messages get amplified beyond the campaigns, because each end of the spectrum enjoys its own major media outlets who are more than happy to stoke the partisan flames.

The moderate voter sees two options as election day approaches: someone whose extreme leftist views disturb but who offers the voter free stuff, and someone else whose extreme hard-right views frighten and who offers no free stuff. The exhausted moderate often ends up voting for the former, or perhaps simply staying at home and not voting at all.

The Remedy

The fix to our current political conundrum is surprisingly simple. What we need today is a third national political party. One where the Constitution is respected, individual rights reign supreme, government is minimal but covers its necessary responsibilities, the free market is unshackled, and fiscal discipline is exercised.

That description fits neither the Democrat nor Republican platforms of today. And these two parties have enjoyed a stranglehold on the presidency since 1852. Perhaps it is time to shake things up and fill the great middle void space that many Americans associate with.

Choice is good. Three options at the ballot box are better than only two. Particularly when the current two have radically evolved to the extremes.
The best fit for a third choice is libertarian. There are two classic strains of libertarianism.

The first is the purer and more extreme, the Ayn Rand view. Where all government intervention is a form of coercion, coercion of the individual is immoral, and thus government tends to be immoral. Government is not to be minimalized as much as it is to be eradicated. Government should not prevent or subdue individual choice, even if such choice might infringe on the rights of others.

The second strain of libertarianism is more practical, the Milton Friedman view.[1] Where government should still be minimized to maximize freedom of the individual to choose, but where government protects the ability of others to do the same. Individual choice remains paramount, but it must not infringe on the rights of others to follow their own values.

This second strain of libertarianism, when properly framed, would be attractive to many moderate voters today. Government out of our bedrooms and classrooms, the state spending only what it takes in, the shrinking of the Orwellian administrative state, releasing the Darwinian free market, and protecting individual rights and the Constitution.

A smaller, more nimble government focuses on the bare necessities of national defense, protecting rule of law and property rights, and preventing the infringement of individual rights. Taxpayers realize an honest-to-goodness rate of return on their investment.

Reversing the Slide

A third political party embracing a practical libertarian ideology would be an instant success in America. It’s not a break from western republican democracy, it’s a restatement of it. Many Americans would listen to the platform and rightly think, “well, yeah, isn’t that the way it’s supposed to be?”

Perhaps the biggest benefit to this third, new political party would be the inevitable moderation of the Democratic and Republican parties. The middle, a voiceless space today, would become relevant once again and demand that the extremes evolve toward the moderate middle or face the consequence of losing power.

A third party occupying the middle and embracing practical libertarianism would reform the primary election process without tearing it down. The leftist would struggle to make it through a Democratic primary. The hard-right nationalist is placed on the eccentric fringe of the Republican party.

Reasonable and compelling candidates organically sprout up from Republican and Democratic primaries. Coupled with the libertarian choice, citizens and taxpayers are in a better place no matter who prevails in the general election.

Cartels and Their Vacuums

Imagine if consumers had only two cola drinks to choose from, call them P and C. Over time, each option evolved to an opposite extreme. Brand P became laced with cocaine and extremely unhealthy, and brand C removed all sugar and caffeine to where it became nothing but tasteless, colored water.

If those two choices held cartel power and were protected from competition, no other product options would manifest. Many consumers would stop drinking cola beverages. If a new option was introduced with the features of what coal drinks used to offer, it would become an immediate commercial success.

Nature abhors a vacuum. But American politics have created an impressive vacuum and preserved it for too long. That’s to be expected with concentrated cartels, in business and politics. Time to break the cartel and create more choice.

President Biden recently bragged, “Milton Friedman isn’t running the show anymore.” So true, no matter if Democrats or Republicans hold power. And so sad, because if Milton Friedman’s libertarian views were running the show today, America would be in much better shape.

Few of us desire to practice politics. But all of us want to choose from the very best of options when it comes to selecting our political leaders. That’s what the Founding Fathers envisioned and that’s what we deserve.

Let’s get what we deserve.

1. Watch the video TAKE IT TO THE LIMITS: Milton Friedman on Libertarianism on YouTube to hear an explanation of ‘consequentialist’ libertarianism from Milton Friedman.

Nick Deiuliis’ CNX Q3 2022 Earnings Call Remarks

The following is a summary of Nick Deiuliis’ introductory comments from CNX Resources’ Third Quarter 2022 Earnings Conference Call, held Thursday, Oct. 27, 2022.

I want to provide a few thoughts regarding the macro backdrop and how CNX is continuing to uniquely position itself not just amongst energy companies, but also amongst the broader equity markets.

During the second quarter call, we discussed in depth the world’s growing demand for responsible energy development and how natural gas sourced from the Appalachian basin is an essential catalyst fuel in delivering that future. We laid out our vision of Appalachia as the heart of a sustainable energy revolution, and we discussed the numerous opportunities CNX is developing to leverage our existing asset base and core competencies to create significant free cash flow opportunities for our shareholders beyond our core gas development activities.

Today, however, I want to pivot back to the core of our investment thesis and the actions we are taking to position CNX for long-term per share value creation in the face of increasing uncertainty on three main fronts.

First, during the third quarter, the macro-economic backdrop in the US has continued to become more uncertain as inflation continues to erode purchasing power, interest rates have risen sharply, and equities valuations have declined. Despite this challenging backdrop, CNX was able to execute an attractive long-term debt refinancing that further extended our maturities profile and thereby unlocked additional degrees of freedom with respect to our capital market activities. Our combination of consistent quarterly free cash flow generation, extensive available liquidity, and our long debt maturity runway uniquely positions CNX to take further advantage of any deepening valuation disconnects that might occur in either the equity or debt markets.

Make no mistake about it, CNX is well positioned to continue to play offense in this type of environment.

The second area of uncertainty that featured prominently during the third quarter is the continued inability of our elected representatives to achieve consensus on interstate pipeline permitting reform. Without a meaningful acknowledgment of energy realities from Congress, the natural gas industry continues to be unable to unlock the full potential of US shale to serve the obvious energy demand centers here in the US.

Despite Washington continuing to ignore rational energy policy for the time being, CNX is one-of-one who has positioned itself to work in this potentially capacity constrained world. So, while Appalachia awaits future pipelines to be built, CNX will continue to focus on executing our maintenance of production plan to generate an annuity-like stream of significant free cash flow regardless of where we are in the commodity cycle. In addition to our organic base development plan, we will leverage our extensive legacy asset base to create new free cash flow growth opportunities through our New Technologies efforts and deep dry Utica development. We will clinically allocate this incremental free cash flow to create long-term per share value growth.

The third and last area of uncertainty that I want to highlight is the pricing volatility in the natural gas markets, and what we experienced during the third quarter is a reminder of just how volatile the commodity markets are, as well as how difficult they are to predict. However, CNX is uniquely positioned to respond to this uncertainty through its consistent programmatic hedging strategy and its basin-leading cost structure derived from its midstream ownership.

These two strategic differentiators significantly lower risk and provide long-term free cash flow visibility throughout all phases of the commodity cycle. This de-risked approach creates opportunity for significant long-term per share free cash flow growth even if lower natural gas price scenarios were to materialize.

So, the CNX story is simple, yet unique. It is a story about keeping our head down and executing our sustainable business model plan over an extended time-period time to generate sustainable per share value. Most companies do well when gas prices are high. What makes CNX unique is our ability to still thrive when prices are low, and things get tough. Our sustainable business model does not rely on gas prices staying high or on accurately predicting the future, which we all know is impossible; but instead, it is based on building a business that works in whatever the future holds. We are over two and a half years into executing this plan across many different macro backdrops, and Q3 adds another successful quarter to our track record.

I’ll wrap up my commentary with some final thoughts on our social impact. As we’ve discussed before, CNX’s sustainable business model is not only focused on creating value for our shareholders, but also on creating tangible and impactful value in the local communities in which we’ve operated for the last 150+ years.

I wanted to take the opportunity to highlight the kick-off of the second class of young men and women who are entering the CNX Mentorship Academy this fall.

As a reminder, this initiative is focused on exposing students in our underserved urban and rural communities to the myriad of career opportunities that exist within not just the energy industry but also throughout the region. These young adults are the foundation of tomorrow’s economy, and we are excited to build upon the success of last year’s class and to continue to provide a unique corporate engagement model for others in the region to follow. This fits right into CNX’s vision for the region as we wait for pipes to get built out of the basin.

There is no reason to wait to bring demand and manufacturing into our regions, which will help lift communities out of poverty by creating long-term manufacturing jobs, all while lowering global carbon emissions and improving the economy.

Additionally, in furtherance of CNX’s overarching aim to creating tangible and impactful value for our local community, another effort we’ve engaged in is “The HQ at CNX.” The HQ as we call it was created to provide office space in our headquarters building for non-profit, charitable, underserved, and underrepresented organizations to elevate and thrive their business while enabling collaboration with like-minded business individuals. We view it as the living embodiment of our Foundation – to find the diamond in the rough that might not receive attention from the establishment but is doing the important, hard work on the ground in our communities.

That’s what CNX is after – investments we can make that produce returns not only for our company but for the wider region. For generations, this region has fed CNX with unmatched talent and CNX has in turn fed the region with jobs, investments in our communities, and quality of life derived from the product we bring to market. That virtuous circle that is part of the fabric of our legacy lives on today through initiatives like our Foundation, Mentorship Academy, and HQ concept.

The HQ initiative is well underway, and we’ve gotten in half a dozen co-workspace tenants, which include a local non-profit career development association, a regional non-profit mentorship organization, a small local university, and two female-owned for-profit businesses (one a social media/marketing firm and the other a deli). We are excited for the opportunities ahead for the HQ to help reinforce our overall tangible, impactful and local value add philosophy.

Click here for more information on CNX Resources’ third quarter 2022 results.

When a Blinded 1930s Writer Saw the 2022 Future

Aldous Huxley, the English author, was blinded for nearly two years by infection when he was a teenager. Despite his ailment and lingering poor eyesight, Huxley managed to produce a dystopian classic with a precise vision that gazed ninety years into the future. His masterpiece, Brave New World, predicted with frightening accuracy modern society in the 21^st century.

Huxley penned Brave New World in 1931 and published it in 1932, years before Orwell’s 1984. The dystopian worlds offered by each classic share similarities but also present sharp contrasts. Despite 1984’s rightful acclaim, one might argue Brave New World scores more direct hits when it comes to comparing its society to that of modern-day America.

Brave New World envisions a society run by a global bureaucracy that practices a kinder, gentler totalitarianism. There is a strict caste system of elite alphas at the top down through lowly epsilons at the bottom. Humans are no longer born, but instead are manufactured, in labs with predetermined outcomes and castes. Complex yet aimless entertainment and the drug soma are applied as tools to numb and train those in society to be passive and submissive. God no longer exists, and everyone worships Henry Ford and makes the sign of the T. Monogamy has been replaced with promiscuity.

A World of Parallels to Today

Seven eerily prescient parallels exist between Huxley’s Brave New World and today.

First, Huxley brilliantly illustrated how constant but hollow leisure in society does not lead to increased culture. A popular saying in Brave New World is “never put off till tomorrow the fun you can have today.” Games like obstacle golf are encouraged to the point of participation being a civic duty, and the games are designed to be complicated and constantly updated. The complexity helps promote continuous and hollow consumption, so that people are kept busy by both playing the games and making the equipment to play the games with. Self-cheating is encouraged.

The connections to today are striking. Instant gratification prevails over long-term achievement. Americans now have an obsession on consumerism with the constant acquiring of more stuff. Consider the exponential growth in mindless entertainment such as VR and gaming. And our everybody-gets-a-trophy/don’t-keep-score/cheat-until-caught culture.

Second, Brave New World informs us as to how science is the enemy of the totalitarian state when left unhindered and must be tightly controlled and distorted by the state so that it can become a useful instrument.

Science is a crucial piece of the strategy in keeping society in line, but scientific progress was purposely frozen with the advent of the world state. Science and the muzzling control of it are the prices of stability. Science propaganda is practiced at colleges, and one believes things because they were conditioned to believe them. The culmination is science becomes a cook-book orthodoxy that is never challenged. The effort is managed by the state in a 60-story building that houses the Bureau of Propaganda and the College of Emotional Engineering.

The mirroring to today’s world is obvious.

Science has morphed into political science. The scientific method has been replaced by scientific consensus. We are told when the science is settled and are instructed to obey. Questioners and dissenters of popular views or of accepted science in the university culture get labeled as heretics and deniers. Although most literary critics interpret Brave New World to warn of the danger of science, I interpret something subtly but crucially different: the danger of the state suppressing and commandeering science.

Third, Brave New World exposes the dangers of how the system can institutionalize class and solidify socio-economic barriers. Mothers no longer give birth. Instead, embryos are constructed in the lab and customized through chemistry to manufacture people at the desired caste level. Effectively, children are decanted, from the privileged alphas down to the low-ranking epsilons. Each person is molded by the hereditary and by the environment of the state-chosen caste. Babies are not raised by parents but by State Conditioning Centers and are trained by crude Pavlovian methods to hate flowers and books. The ideal society is described as having the proportion of an iceberg, where 1/9^th sits at the top as elite alphas and the remaining 8/9^ths are toiling below the water line.

Think about how much of this is present today.

Our public education system in major cities virtually guarantees students never realize their full potential. Self-determination as to what one does in life is becoming an increasing rarity because of socio-economic obstacles. Science, math, and reading competency are not the focus of education these days. Instead, the exclusive focus is to deaden the minds of students and create a subservient collective that thinks what it is told to think and believes what it is told to believe. The 1/9^th of elites are the alphas above the water line, while the rest of society is kept struggling below the water line.

Fourth, Brave New World reminds us of the perils of loveless sex and promiscuity. In Huxley’s society, “everyone belongs to everyone else.” Sex is pursued exclusively for physical pleasure and the idea of a dedicated and committed relationship is viewed as savage. The character Lenina (Huxley assigned character names in Brave New World to be plays on despots, scientists, politicians, and business leaders) gets lectured by her friend for not being promiscuous enough. Children are taught “erotic play.” Family, love, and monogamy are pornographic. The word “mother” has become a crude obscenity, so profane that to speak it sparks revulsion.

The similarities to today are obvious. Marriage and the family structure have never been under more duress. Internet porn and lust have replaced personal intimacy and love. Topics that not long ago were discussed in high school sex ed class are now covered in explicit detail in elementary schools. We are learning that free love often ends up in less love.

Fifth, in Brave New World we see what awaits society in a drug culture. The miracle opiate is soma, and it is administered from cradle to grave, with euthanized death set by the state promptly at age 60. Workers are paid in soma to feed their addiction. Soma giveth by arresting the aging process, providing an emotional high, and softening depression during tough times or from harsh realities. But soma also taketh by acting as a poison that kills the person over years of use and eradicating individual thought and free will.

Huxley would be shocked at how the various modern versions of soma afflict Europe and America today. Social media brings mass emotional addiction to children and adults. Fentanyl, heroin, crack, alcohol, and marijuana are consumed legally and illegally to create physical additions that cross all socio-economic levels, as people seek escape from whatever haunts them. Imagery of the physical ideal sets expectations at a young age, leading to more and more medical procedures and treatments to halt the natural aging process.

Sixth, Brave New World paints a society where the individual is erased into the collective and where free will and independent thought are vanquished by totalitarian domination. Imagination and sense of self are dangers. Individual free thinkers who read the banned great works, from the Bible to Shakespeare, are savages of old civilization and are exiled to the wilds. A popular slogan is “when the individual feels, the community reels.” Another one is “everyone works for everyone else.” War is waged against the past, when individual rights were supreme. To be happy, you don’t pick your path; instead you learn to enjoy the path that has been selected for you.

What an accurate portrayal Huxley foresaw of today’s political correctness.

Views of the state are constantly streamed to kids from all directions and across all mediums so that it conforms their minds. There are parallels to today’s cancel culture, where you must tear down anything traditional that would make one think and challenge. College syllabuses delete classic works and public square statues of prominent leaders are removed. Dissenters are not simply ostracized but attacked by the Twitter mob. And meritocracy, attacked as unfair, is replaced with the unethical injustice of equal outcomes.

Seventh and last, Brave New World demonstrates how such a dystopian society is a result of omnipotent and global totalitarian government. The World State motto is “Community, Identity, Stability.” A World Controller determines what information is allowed for public access and consumption, what science is acceptable, and what works are to be locked up and forbidden. The state figured out that social conditioning was much more effective and lasting than brute force when looking to control a population.

These days, global organizations and accords make one wonder if we still live in a republican democracy. The United Nations, World Health Organization, World Bank, and G-20 hold more sway over Americans’ pocketbooks, quality of life, freedoms, and decision-making than the U.S. Congress. The faceless unelected bureaucrat buried within the administrative state holds more power than our elected president. Domestic regulations and international accords take away more of our liberty in 2022 than any legislation or statute.

The Brave New World Outside Our Doors

In conclusion, Huxley provided a valuable service to the human condition. He presented in stark contrast two very different views for the individual and society. Consider two passages from Brave New World as illustrative of the contrast.

First, from the Director, who as representative of the state betrays a hatred for the individual: “The greater a man’s talents, the greater his power to lead astray. Better for one to suffer than many be corrupted. Murder kills only the individual and what is the individual? We can make more of them. Unorthodoxy threatens more than the life of the individual, it strikes at society itself.”

Second, from John the outcast, who didn’t want comfort if it prohibited truth: “I don’t want comfort. I want God, I want poetry, I want real danger, I want freedom, I want goodness. I want sin.”

Huxley, who passed away on the same day JFK was assassinated, warned us that before we start pining for such a brave new world, we should wait till we see it first. My fear is the wait is over and it now sits outside our doors.