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In February 2010 Tom Jiunta and a small group of residents in northeastern Pennsylvania formed the Gas Drilling Awareness Coalition (GDAC), an environmental organization opposed to hydraulic fracturing in the region. The group sought to appeal to the widest possible audience, and was careful about striking a moderate tone. All members were asked to sign a code of conduct in which they pledged to carry themselves with “professionalism, dignity, and kindness” as they worked to protect the environment and their communities. GDAC’s founders acknowledged that gas drilling had become a divisive issue misrepresented by individuals on both sides and agreed to “seek out the truth.”
The group of about 10 professionals – engineers, nurses, and teachers – began meeting in the basement of a member’s home. As their numbers grew, they moved to a local church. In an effort to raise public awareness about the risks of hydraulic fracturing (or “fracking”) they attended township meetings, zoning and ordinance hearings, and gas-drilling forums. They invited speakers from other states affected by gas drilling to talk with Pennsylvania residents. They held house-party style screenings of documentary films.
Since the group had never engaged in any kind of illegal activity or particularly radical forms of protest, it came as a shock when GDAC members learned that their organization had been featured in intelligence bulletins compiled by a private security firm, The Institute of Terrorism Research and Response (ITRR). Equally shocking was the revelation that the Pennsylvania Department of Homeland Security had distributed those bulletins to local police chiefs, state, federal, and private intelligence agencies, and the security directors of the natural gas companies, as well as industry groups and PR firms. News of the surveillance broke in September 2010 when the director of the Pennsylvania Department of Homeland Security, James Powers, mistakenly sent an email to an anti-drilling activist he believed was sympathetic to the industry, warning her not to post the bulletins online. The activist was Virginia Cody, a retired Air Force officer. In his email to Cody, Powers wrote: “We want to continue providing this support to the Marcellus Shale Formation natural gas stakeholders while not feeding those groups fomenting dissent against those same companies.”
The tri-weekly bulletins featured a wide range of supposed threats to the state’s infrastructure. It included warnings about Al-Qaeda affiliated groups, pro-life activists, and Tea Party protesters. The bulletins also included information about when and where groups like GDAC would be meeting, upcoming protests, and anti-fracking activists’ internal strategy. The raw data was followed by a threat assessment – low, moderate, severe, or critical – and a brief analysis.
For example, bulletin no. 118, dated July 30, 2010 gave a low to moderate threat rating in reference to public meetings that anti-drilling activists planned to attend, and suggested that an “attack is likely… and might well be executed.” The threat assessment was accompanied by this note: “The escalating conflict over natural gas drilling in Pennsylvania may define local fault lines and potentially increase area environmentalist activity or eco-terrorism. GDAC communications have cited Northeastern Pennsylvania counties, specifically Wyoming, Lackawanna and Luzerne, as being in real ‘need of our help’ and as facing a ‘drastic situation.’” Another bulletin referenced an August 2010 FBI assessment of the growing threat of environmental activism to the energy industry. Because of Pennsylvania’s importance in the production of natural gas, ITRR concluded, an uptick in vandalism, criminal activity, and extremism was likely.
Although the Pennsylvania scandal caused a brief public outcry, it was quickly brushed aside as an unfortunate mistake. In fact, the episode represents a larger pattern of corporate and police spying on environmental activists fueled in part by the expansion of private intelligence gathering since 9/11.
By 2007, 70 percent of the US intelligence budget – or about $38 billion annually – was spent on private contractors. Much of this largesse has been directed toward overseas operations. But it is likely that some of that money has been paid to private contractors – hired either by corporations or law enforcement agencies – that are also in the business of spying on American citizens. As early as 2004, in a report titled “The Surveillance Industrial Complex,” the American Civil Liberties Union warned that the “US security establishment is making a systematic effort to extend its surveillance capacity by pressing the private sector into service to report on the activities of Americans.” At the same time, corporations are boosting their own security operations. Today, overall annual spending on corporate security and intelligence is roughly $100 billion, double what it was a decade ago, according to Brian Ruttenbur, a defense analyst with CRT Capital.
The surveillance of even moderate groups like GDAC comes at a pivotal time for the environmental movement. As greenhouse gas emissions continue unchecked, opposition to the fossil fuel industry has taken on a more urgent and confrontational tone. Some anti-fracking activists have engaged in nonviolent civil disobedience and the protests against the Keystone XL tar sands pipeline have involved arrests at the White House. Environmentalists and civil libertarians worry that accusations of terrorism, even if completely unfounded, could undermine peaceful political protest. The mere possibility of surveillance could handicap environmental groups’ ability to achieve their political goals. “You are painting the political opposition as supporters of terrorism to discredit them and cripple their ability to remain politically viable,” says Mike German, an FBI special agent for 16 years who now works with the ACLU.
The Pennsylvania episode is not an isolated case. The FBI and Americans for Prosperity (AFP), a Koch Brothers-backed lobbying group, have both taken an interest in anti-drilling activists in Texas. In the fall of 2011, according to an investigation by The Washington Post, the FBI was digging for information on the leader of Rising Tide North America, a direct action environmental group, because of his opposition to hydraulic fracturing (Rising Tide has also been active in organizing protests against the Keystone XL pipeline). Ben Kessler, a Texas-based activist, told the Post that the FBI had received an anonymous tip to look into his activities. The agency also showed up at the office of Kessler’s philosophy professor, Adam Briggle, who teaches an ethics course that covers nonviolent civil disobedience and the history of the environmental movement. Briggle, who has been involved in organizing residents to impose tougher regulations on gas drilling in Denton, Texas, told the Post that, “it seemed like a total fishing expedition to me.”
About a month after he was approached by the FBI, Briggle received a notice from his employer, the University of North Texas, asking him to turn over all emails and other written correspondence “pursuant to City of Denton natural gas drilling ordinances and the ‘Denton Stakeholder Drilling Advisory Group,’” an organization Briggle founded in July 2011 whose mission is similar to that of GDAC. The university had received a request under the state’s Public Information Act and Briggle was forced to hand over more than 1,300 emails. He was later told that the request had been made by Peggy Venable, Texas Director of Americans for Prosperity.
Rising Tide activists had speculated that the anonymous tip came from one of the gas companies active in the region. Although there was no way to prove a connection between the FBI’s investigation and AFP’s mining of Briggle’s emails, both were viewed within the activist community as acts of intimidation. Briggle says, “The message is, you’re being watched.”
During the last decade the FBI and, to a lesser extent, corporations have elevated the threat of eco-terrorism to a top priority even as environmentally motivated crimes have declined. In 2005, John Lewis, an FBI deputy assistant director, said the animal rights and environmental movements were “one of the FBI’s highest domestic terrorism priorities.” In the post-9/11 era, the outsourcing of intelligence gathering to private companies has ballooned, the bar for investigating domestic threats has been lowered, and a premium has been placed on information sharing with the private sector. “What changed after 9/11,” the ACLU’s German says, “was the lowering of the threshold for FBI investigations and the promulgation of these radicalization theories that while specifically written about Muslim extremists – the same theory that people move from ideas to activism to terrorism – justified increased surveillance against activists and against people who were just part of the environmental rights movement but had no association with violence or criminal acts.”
Since 9/11 accusations of eco-terrorism have proliferated and a number of individuals and groups have been prosecuted under new laws, which have profoundly impacted the radical environmental movement. The broad crackdown and subsequent fear and paranoia that swept through activist circles have been referred to as the “Green Scare.” “The shift was gradual,” Will Potter writes inGreen is the New Red: An Insider’s Account of a Social Movement Under Siege, “slowly merging the rhetoric of industry groups with that of politicians and law enforcement.”
In public, corporations have amplified the threat of eco-terrorism to influence legislation, such as the Animal Enterprise Terrorism Act. In private, meanwhile, they have hired firms to spy on environmental groups. About a month after 9/11, for example, the crisis communications firm Nichols Dezenhall (now Dezenhall Resources) registered a website called StopEcoViolence.com (now defunct), which served as a sort of faux watchdog group and source for media outlets including The New York Times. Around the same time, Dezenhall – described by Bill Moyers as the “Mafia of industry” – was involved in corporate espionage. Along with two other PR companies, Dezenhall hired a now-defunct private security firm, Beckett Brown International, to spy on environmental activists. One of the targeted groups was Greenpeace. In 2011 Greenpeace filed a lawsuit charging that Dow Chemical, Sasol (formerly CONDEA Vista), the PR firms, and individuals working for Beckett Brown International (which was founded by former Secret Service officers) stole thousands of documents, intercepted phone call records, trespassed, and conducted unlawful surveillance. In a story for Mother Jones, James Ridgeway revealed that the security firm obtained donor lists, detailed financial statements, Social Security numbers of staff members, and strategy memos from several groups, and, in turn, “produced intelligence reports for public relations firms and major corporations involved in environmental controversies.” (In February a Washington, DC court ruled that the claims of trespass and misappropriation of trade secrets could proceed.)
More recently, according to a report in The Nation, the agricultural giant Monsanto contracted with a subsidiary of Blackwater, the private security firm, to gather intelligence on and possibly infiltrate environmental groups in order to protect the company’s brand name. “This is the new normal,” says Scott Crow, an author and longtime environmental activist who was the subject of FBI and corporate surveillance for close to eight years beginning in 1999.
While the above cases involved corporations hiring private security firms to carry out black-ops against environmental groups, the Pennsylvania scandal may be the first time that a state agency has contracted with a private security firm to gather intelligence on lawful groups for the benefit of a specific industry. Although the ITRR bulletins were produced for the Pennsylvania Department of Homeland Security, they were shared with PR firms, the major Marcellus Shale companies, and industry associations. For members of GDAC and other anti-drilling organizations, the revelations were profoundly troubling. Not only were they being lumped together with groups like Al-Qaeda, but the government agencies tasked with protecting the people of Pennsylvania were, in their view, essentially working for the gas companies. If a moderate group like GDAC wasn’t safe from the surveillance-industrial complex, it seemed nobody was. “These systems and this type of collection is so rife with inappropriate speculation and error – both intentional and unintentional – that your good behavior doesn’t protect you,” German says.
Tom Jiunta, the founder of GDAC, says the ITRR bulletins had a chilling effect. Attendance at GDAC meetings declined and some members left the group altogether. Organizers assumed that their phones had been tapped and that their emails were being monitored, a common perception among anti-drilling activists. At meetings they would leave their cell phones outside or remove the batteries. Jiunta, who has a podiatry practice in downtown Kingston, began to take different routes to work because he was worried about being followed. “We kind of assume that we’re being watched,” he says. “Even now.”
Indeed, the intelligence gathering continues. Although the state canceled its contract with ITRR, the company still works for the natural gas industry, according to GDAC attorney Paul Rossi. “An employee with one of the gas companies has told me that he is willing to testify that ITRR is still conducting operations for the gas companies and they are focusing in on environmental groups,” Rossi says. (In 2010 GDAC filed a lawsuit against the Commonwealth of Pennsylvania and ITRR on First Amendment grounds. Because it’s a private company or a “non-state actor,” the judge ruled, claims against ITRR were dismissed. The terms of a settlement with the state have not been reached. ITRR did not return requests for comment.)
Like many of the activists I spoke with, Jiunta underscored the fact that he’s never been drawn to conspiracy theories. GDAC’s code of conduct was designed to weed out those whom Jiunta described as “wackos.” Jiunta admits that he was pretty naïve when he first got involved in anti-drilling activism; he would print out large stacks of information on fracking to bring to state senators, who politely told him not to waste their time. Now, his faith in the role of government has been shattered. “People worried about being on a watch list,” he told me. “It was shocking.”
In the wake of the surveillance scandal Pennsylvania Homeland Security Director James Powers resigned and the state terminated its $103,000 no-bid contract with ITRR. Then-governor Ed Rendell called the episode “deeply embarrassing” and a one-day Senate inquiry was held. In testimony before the committee, Virginia Cody, the retired Air Force officer who had become a critic of gas drilling, said: “For the first time in my life, I do not feel secure in my home. I worry that what I say on the phone is being recorded. I wonder if my emails are still being monitored.”
The hearing sought to answer questions about how the contract was awarded, why citizen groups exercising their First Amendment rights were included, and, crucially, who received the information. Powers explained that the information was distributed to various chemical, agricultural, and transportation companies mentioned in the bulletins. At least 800 individuals were on the distribution list. In the case of gas drilling activism he explained, “It [the bulletins] went to the security directors of the Marcellus Shale companies and DEP (Department of Environmental Protection).”
This is only partially true. A list of the individuals and groups who received the bulletins shows that industry associations and PR firms that have nothing to do with protecting the state’s infrastructure were also included. For example, one of Powers’s key contacts on Marcellus-related activity was Pam Witmer, then head of the Bravo Group’s energy and environmental practice as well as president and CEO of the Pennsylvania Chemical Industry Council, a business advocacy group. The Bravo Group is a public relations and lobbying firm based in Pennsylvania. Its clients include Chief Oil and Gas, Southwestern Energy, and People’s Natural Gas, all of which are deeply invested in Marcellus Shale production.
The anti-drilling movement is an “insurgency,” a PR specialist with Anadarko Petroleum says.
The Marcellus Shale Coalition, an industry lobbying group, was also on the distribution list. In 2010 the coalition signed a $900,000 lobbying contract with Ridge Global, a private security firm founded by Tom Ridge, former head of the Department of Homeland Security under George W. Bush. As part of its energy consulting services Ridge Global offers “advisory support for natural gas and other infrastructure security.” Ridge is just one of many former security officials who now have private consulting services. Others include John Ashcroft, Michael Chertoff, and Richard Clarke.
The blurring of public and private spying is what Dutch scholar Bob Hoogenboom calls “grey intelligence.” In a 2006 paper of the same name, Hoogenboom noted that in addition to well-known spy agencies like MI6 and the CIA, hundreds of private organizations involved in intelligence gathering have entered the market to meet corporate demand. “The idea was to do for industry what we had done for the government,” Christopher James, a former MI6 officer who founded Hakluyt, a private intelligence company whose clients have included Shell and BP, told the Financial Times. Many corporations now have their own private intelligence networks, or “para-CIAs,” to gather information on consumers, critics, and even their own shareholders. Walmart, for example, has an office of global security headed by a one-time CIA and FBI official with a staff that includes former State Department security experts. As Eveline Lubbers writes in her recent book, Secret Manoeuvres in the Dark: Corporate and Police Spying on Activists, “Because these business firms hire former spies and analysts from the ranks of government, the informal links with government intelligence increase.”
This is a global phenomenon. Corporations in Europe and Canada have also spied on environmental groups. In 2006 French energy giant EDF, the world’s largest operator of nuclear reactors, hired Kargus Consultants, a private intelligence gathering agency run by a former member of the French secret service, to spy on Greenpeace. Kargus hacked into a lead Greenpeace organizer’s computer and compiled a dossier on the organization’s European campaign strategy. In 2011 a French court fined EDF 1.5 million euros and sent two of its employees to jail on charges of illegal spying.
Although it was not raised at the Pennsylvania Senate hearing, the ITRR bulletins also were shared with the Royal Canadian Mounted Police (RCMP). In January a Montreal paper reported that the RCMP itself has been tracking anti-shale gas activists in Quebec. The Critical Infrastructure Intelligence Team, a branch of the RCMP, produced two reports that described the possibility of Canadian activists collaborating with “extremist” groups in the US, such as Earth First! and Occupy Well Street – an offshoot of Occupy Wall Street opposed to fracking. According to Jeff Monaghan, a researcher with the Surveillance Studies Center at Queen’s University in Ontario, the Canadian government likely shares intelligence with the energy industry. Since at least 2005 the Canadian government has held biannual intelligence briefings to share sensitive information with the private sector. In 2007 Gary Lunn, former Minister of Natural Resources, admitted his agency had helped more than 200 industry representatives obtain high-level security clearances. “This enables us to share information with industry and their associations,” Lunn said at a pipeline security forum.
Similar arrangements have been uncovered in the UK. In 2009 it was revealed that the British police and the Department of Business, Enterprise and Regulatory Reform had provided information about Climate Camp demonstrations to E.ON, the company that runs the Ratcliffe-on-Soar power station. E.ON also hired private security firms like Vericola and Global Open to spy on protesters; both companies are staffed by former intelligence agents.
The specter of environmental extremism has been used to justify information sharing between law enforcement and the private sector. Last year, Joe Oliver, Canada’s Minister of Natural Resources, warned that environmental groups “threaten to hijack our regulatory system to achieve their radical ideological agenda.”
“It’s the new politics of the petro-state,” Monaghan says. “Anything that’s remotely linked with direct action or nonviolent civil disobedience is being described as extremism, which is the new code word of security agencies.”
The fossil fuel industry’s targeting of its critics goes beyond mere surveillance. Natural gas drilling companies have also flirted with using the dark arts of psychological warfare, or “psy ops.” In comments recorded by an anti-drilling activist at a 2011 natural gas conference in Houston and leaked to CNBC, Matt Pitzarella, director of corporate communications at Range Resources, said Range had hired “several former psy ops folks” with experience in Iraq and Afghanistan. “Having that understanding of psy ops in the Army and in the Middle East has applied very helpfully here for us in Pennsylvania [sic],” Pitzarella said.
At the same conference, Matt Carmichael, a PR specialist with Anadarko Petroleum, referred to the anti-drilling movement as an “insurgency” and advised industry representatives to download the US Army/Marine Corps Counterinsurgency Manual. “There’s a lot of good lessons in there and coming from a military background, I found the insight in that extremely remarkable,” he told his colleagues.
The oil and gas industry has good reason to feel besieged. Opposition to fracking, especially, is on the rise. New York State has in place a moratorium against the drilling technique, and legislators in California are considering a similar ban. A white paper prepared by FTI Consulting, a DC-based PR firm with ties to the shale gas industry, recently warned, “Environmental activists are looking to undermine the strategies and operations of energy companies.… Adding to the activists’ momentum is the fact that a growing number of mainstream shareholders are supporting their proposals.” But given the absence of any physical attacks against drilling company assets, the industry’s view of its opponents smacks of paranoia. In August 2012, iJET International, a private security firm founded by a former National Security Agency operative, issued a risk assessment of anti-drilling protests in New York State. In one of its daily intelligence bulletins distributed to corporate clients the firm observed, “Protests against hydraulic fracturing have gained considerable momentum over the past few months…While most demonstrations have been peaceful, participants say they are hoping to intensify actions in hopes of disrupting operations at targeted facilities.”
The US Army Counterinsurgency Manual that was offered as suggested reading for shale gas industry representatives includes an appendix on Social Network Analysis, defined as “a tool for understanding the organizational dynamics of an insurgency.” In an age of digital networks and online activism, this often means using data-mining software, cyber surveillance, and in some cases outright computer hacking to track opposition groups.
At the 2011 natural gas conference in Houston the CEO of Jurat Software, Aaron Goldwater, gave a presentation on the subject of data mining and stakeholder intelligence. In his presentation he emphasized the importance of knowing the communities you work in, of tracking and mapping relationships, and compiling a sophisticated database that includes all offline and online conversations. He pointed to the military as a model. “If you look at the people who are experts at it, which is the military, the one thing they do is gather intelligence,” he told the audience.
Corporations have already taken advantage of network forensic software to keep tabs on their own employees. The new technology, which allows companies to monitor an employee’s activity down to the keystroke, is one of the fastest growing software markets. There is a fine line, however, between data mining – which is perfectly legal though largely out of view – and cyber surveillance, or hacking.
While it is difficult to prove hacking, many activists are convinced their computers have been tampered with. Kari Matsko, a professional software consultant and director of the People’s Oil and Gas Collaborative in Ohio, says her computer was hacked after she began to push for tougher regulation of the natural gas industry.
Matsko got involved in environmental activism after hydrogen sulfide gas was released from a well site near her home. In 2008 she started helping a group of citizens who had filed a lawsuit against one of the larger energy companies in Ohio on grounds of nuisance violations and loss of property value. She spent many months doing research and collecting files related to the case, some of which she described as damning.
Because of her profession Matsko has very strong computer security and says that prior to working on oil and gas issues she had never had problems with malware. But while assisting with the lawsuit Matsko’s computer was attacked by a sophisticated virus. Matsko was able to remove it and everything seemed fine. About a month later, though, she unsuccessfully tried to open the computer folder that contained the sensitive files related to the lawsuit. The files were either missing or corrupted. “I remember I was so terrified by it that I didn’t even tell people unless it was in person,” she says.
Other activists have described similar cyber security-related issues. Around the time the ITRR bulletins were made public, Jiunta told me, members of GDAC experienced persistent problems with their computers. “Everybody was getting suspicious,” he says. “I had computer issues. Some are still having issues.”
John Trallo, a 61-year-old musician and guitar instructor whose communications were also featured in the ITRR bulletins, has been an outspoken critic of shale gas development for several years. In 2007 Chief Oil and Gas offered him a signing bonus of $1,400 to lease his mineral rights. Trallo, who lives in a modest two-story home in northeastern Pennsylvania, refused. He’s been fighting the industry ever since.
“This is something that’s bigger in my life than I ever wanted it to be,” he says. “Five years ago, when I first started getting involved in this and I started talking to people, I would say to myself, ‘these people are a little crazy.’ Five years later I sound like them.”
Immediately after the intelligence bulletins were made public Trallo’s computer became nearly unusable. Documents were corrupted and irretrievable; photos were disappearing and programs wouldn’t work. A relatively new machine with a high-end operating system, Trallo had it serviced at a Best Buy in nearby Muncy. He was told by the Geek Squad at Best Buy that a highly sensitive program that acts like a Trojan Horse had been installed on his computer. According to Trallo, “They said that the program monitors every key stroke, every email, everything you do on the computer.”
Nearly all of the activists I spoke with said the Pennsylvania Homeland Security revelations, while giving them pause, had not changed their behavior. They continue to speak out, to attend public meetings, and to push for greater oversight of the industry. Still, “it leads to some scary possibilities in the future,” says Eric Belcastro, an organizer with the Community Environmental Legal Defense Fund. “I don’t sit around being paranoid about this stuff. I just try to do what I have to do and get along with my life. But I admit the playing ground is rough and I think people need to be careful.”
Even as corporations expand their surveillance of citizen-activists, they are seeking to obstruct public oversight of their own behavior. It’s a bit like a one-way mirror of democratic transparency – with corporations and law enforcement on one side looking in and activists on the other.
Pennsylvania is a case in point. In early 2012 legislators there passed “Act 13,” a set of amendments to the state’s Oil and Gas Act, which essentially stripped local municipalities of the authority to regulate drilling activity through zoning ordinances and other measures. The law also requires doctors who treat patients exposed to fracking chemicals to sign a confidentially agreement before receiving information about the substances. The gag rule would prevent them from sharing that information with the patient or even other doctors (GDAC’s current president, Dr. Alfonso Rodriguez, is challenging this provision).
Learn more. Over at The Progressive, Matthew Rothschild has an article detailing how law enforcement agencies have spied on Occupy activists.
Earlier this year, a bill was introduced into the Pennsylvania legislature that would make it a felony to videotape farming operations in Pennsylvania – so-called “ag-gag” legislation that has already passed in Utah and Iowa, and has been introduced in several other legislatures. Many of the ag-gag bills draw on language crafted by the American Legislative Exchange Council’s (ALEC) “Animal and Ecological Terrorism Act.” (In recent years ALEC has received considerable support from the natural gas industry). Section D of the ALEC bill defines an animal or ecological terrorist organization in broad terms “as any association, organization, entity, coalition, or combination of two or more persons” who seek to “obstruct, impede or deter any person from participating” not only in agricultural activity but also mining, foresting, harvesting, and gathering or processing of natural resources.
The proposed law has many anti-drilling activists worried. If such language were included in the bill (it is currently in committee and will be revised before it comes to the floor) it would greatly limit the ability of residents to photograph or video well sites, compressor stations, and pipeline development – all of which could be considered part of the “gathering or processing of natural resources.”
“It’s clearly legislation that could be easily expanded in any particular case to include folks like me who do whatever we can to get as close to some of these sites as we are able,” says Wendy Lee, a philosophy professor at Bloomsburg University who regularly photographs the industrial impacts of gas drilling and then posts them on her Flickr page.
Lee says that among anti-drilling activists there is a sense that 2013 is a do-or-die year. The state Supreme Court is set to rule on the constitutionality of Act 13. As the drilling boom moves into ever more populated areas, activists are gearing up for more focused organizing and larger nonviolent protests. With tens of thousands of wells yet to be drilled, at least this much is clear: The industry will be watching closely.
2013, Biological warfare, Brookhaven National Laboratory, chemical attack, Chemical warfare, Department of Homeland Security, DHS, July, New York, New York City, New York City Police Department, NYPD, Perfluorocarbon tracer, PFTs, radiological attack, S-SAFE, simulation, subway system, summer, Weapons of Mass Destruction, WMD
A subway-borne chemical attack is one of those theoreticals that require the willful ignorance of regular passengers—for most of us, it’s just better not to think about it. Not so for the NYPD, which yesterday announced a plan to test how a chemical or radiological attack would spread through the city’s 200-odd miles of subway, by pumping an invisible gas through the system this summer.
The Subway-Surface Air Flow Exchange, or S-SAFE, has actually been in the making for over a year—that’s how long it takes to plan a fake airborne toxic event in a city of almost two million. Led by Paul Kalb, the principal investigator on the $3.4 million Department of Homeland Security-funded grant, the group will track the movement of small amounts of Perfluorocarbon tracers (or PFTs) through the five boroughs on three days in July. “The study will show us the worst case scenario,” he explained over the phone today. “It’ll be a close representation of how particles from a bioweapon or dirty bomb could move through the air.”
What, exactly, are PFTs? They’re a completely odorless, invisible, and non-toxic type of gas that happens to have incredible staying power, making it perfect for tracking purposes (it’s even been used to trace counterfeit money). It also has a high vapor pressure, so it can pass through fabric and objects-and it’s easy to detect, because it isn’t found in nature.
The march to tyranny has picked up fierce momentum in the state of New York, where the criminal Cuomo administration is now issuing subpoenas that demand psychiatrists turn over ALL their records to the state, reports AmmoLand.com.
This is just the first step for the New York government‘s “HIPAA” committee, whose sole purpose is to “illegally obtain and access the private medical records of potentially millions of NY State Residents.”
Regardless of your views on firearms ownership, such actions are absolutely chilling. It puts the government in the position of violating doctor-patient confidentiality for the purpose of the state determining who suffers from “mental health” problems that the state uses to justify almost any action it wishes to take.
In 1989, Dusty and Tamera Hagy bought 81 rural acres in Jackson County, West Virginia. Twenty-one years later, the Hagys sued four natural gas drilling firms alleging the natural gas wells drilled on their property in 2008 contaminated their drinking water and caused physical harm.
The Hagys’ water contamination lawsuit demonstrates how the natural gas industry has built a near-perfect “federal legal exemption’s framework” that when combined with lax or absent state regulations and the legal system’s high costs, inherently approves of citizen collateral damage with no restitution.
The consequence of this framework is that the burden of proof is placed on plaintiffs who, at best, are forced to settle with natural gas companies, thereby sealing the case from public scrutiny, scientific examination and legal precedence. Because the Hagys didn’t sign a non-disclosure agreement with the natural gas companies involved, their legal case gives the public a rare window into how fracking lawsuits play out in reality.
Natural gas is a critical resource. Fifty percent of American residences use natural gas. Natural gas is seen by some as a bridge fuel essential to the U.S.’s strategy to gain energy independence from foreign oil imports. Yet we must ask ourselves: Is the current fracking system one we should support? Are changes needed to level the playing field for all parties involved in fracking? Can fracking be done safely?
The land man cometh
Dusty and Tamera Hagy unwittingly fell into the fracking trap the day they bought their land in 1989. “We loved our 81-acre property, it was our life. We had paid off the mortgage and spent a lot of money fixing the place up. We raised our two boys there, buried our animals there and were planning to give our boys some property,” said Dusty Hagy.
Mineral rights, fracking chemicals and natural gas federal environmental laws were all Greek to the Hagy family before a pleasant Equitable Production Company representative visited the couple in October 2007.
Equitable Production Company’s representative informed the Hagys that four natural gas wells were soon to be drilled on their property about 1,000 feet up the hill from their home.
In West Virginia, surface land ownership is separate from mineral rights. Mineral rights are the portion of the profits received from minerals extracted from land. Another party owns the Hagy property’s mineral rights which were granted hundreds of years ago. The Hagy family receives no gas royalties and didn’t sign a formal gas leasing contract, though, they did sign plenty of “papers” believing they did not have a choice.
Fracking starts – trucks, noise, explosions, and chemicals
On Nov. 11, 2007, trucks, back hoes, tree cutters and workers converged on the Hagy property uphill and upstream from their home. Equitable outsourced the drilling to BJ Services and for the next six months the holler, or enclosed valley, was flattened for a six-acre natural gas well pad.
Tamera Hagy describes life during the drilling and fracking: “It was nothing like what I had expected. This was a huge operation that lasted day and night for eight months. Trucks went up and down the road 24/7. The smell of fumes would make you sick. One night we heard something like a giant drill bit drilling and vibrating under our house.”
Dusty visited the well pad often and learned from the job crew that this fracking job wasn’t going smoothly. One worker mentioned that they had hit a lake of water and were moving the rig. Another worker shared in this audio tape #3 how the cement casing “went bad” and was re-cemented. Of the four open and lined fracking wastewater ponds, one overflowed and later broke, spilling the fracking wastewater into the nearby creek that flows from the well pad past the Hagy family’s home. In March 2008, Dusty noticed that another fracking pond’s wastewater was emptied by hose into the woods. After finding foam and oil slicks in the creek next to their well, and then when their large pond turned green, the Hagys knew something wasn’t right.
Dusty lodged a formal complaint with the West Virginia Department of Environmental Protection (DEP) on Nov. 17, 2008. DEP records reveal a gas inspector visited the site at the well’s completion and issued no violations. DEP records also reveal the three natural gas wells began producing gas in July 2008 and the wells today continue to produce about 3,000 m.c.f. of gas per month.
Be careful what you sign
As Dusty describes the Equitable representative, “We liked him, and he was a nice enough guy in the beginning and we believed everything he told us at face value.” Equitable said the natural gas drilling was simple and would cause minimal damage on 1.5 acres. When Dusty asked if fracking used anything dangerous, they were told that only water and sand were used, no chemicals were ever mentioned. A water test prior to drilling supported the Hagy’s belief that their water well was clean and safe.
On Oct. 22, 2007, Equitable paid the Hagys $19,000 to cover surface damages to their land and trees because building a well pad trashes the landscape. “I believed the Equitable guy when he said the check was just for surface damages. My property was valued at nearly $200,000. It was stupid to sign that paper, I should have gotten a lawyer,” explained Dusty. Because the well pads used more than the original 1.5 acres, Equitable paid the couple another $10,000 for damage on an additional four acres.
Later in 2008, Dusty learned the papers they had signed to receive the payments were actually damage release contracts attempting to exempt Equitable, and all drilling providers, from any and all damages associated with the drilling. “Other than shooting the family dog, this ‘contract’ covered near everything,” said Dusty Hagy.
Family gets sick—headaches, rashes and vomiting
The family drank, bathed and cooked with their well water from November 2007 to November 2008 during the gas well drilling and fracking. Ironically, the Hagy family had boasted about their pristine well water and even after their adult sons moved out, the boys brought jugs of well water back to their homes.
The Hagys began to notice changes to their water in early 2008. Their water volume was dropping and the water’s color changed from clear to brown. Often black particles were floating in water drawn from their well. Despite overwhelming evidence otherwise, Equitable never reported any issues that would impact the Hagys’ well water.
Adding to the changing water quality, both Dusty and Tamera said they were oddly tired, and woke up with “bad headaches, like a hangover.” Both smelled an “acid” odor in the house and their eyes would burn in certain rooms.
The Hagys didn’t put “two plus two together” until their youngest son went to his family doctor in Columbus, Ohio in October 2008. Their son had complained of nausea and was spitting up blood. His doctor treated him for acid reflux, a disorder he’d never experienced before, and suggested he stop drinking his parent’s well water. The son’s symptoms disappeared soon after he discontinued drinking his parent’s well water.
Tamera Hagy developed a rash that her primary care physician diagnosed as contact dermatitis, a skin inflammation caused by a foreign source. Expert medical testimony in court documents reveal the Hagys’ health symptoms mirrored chemical exposure.
Water tests reveal drinking water was bad and Hagys vacate property
Based on their complaints, Equitable re-tested the Hagy water well on Nov. 8, 2008 and their water had clearly changed. The turbidity, or murkiness, was six times greater post drilling (0.5 to 3.2) and iron, manganese and calcium levels increased significantly (Dusty replaced one hot water heater during this time due to calcium build-up).
Water tests conducted later also revealed arsenic, lead, barium and Bis(2-ethylhexyl)phthalate, an organic compound linked to fracking wastewater. The radon levels of the Hagy well were 1,233 pCi/l with the maximum contaminant level set at 300. When those radon levels were compared to area wells, the Hagy’s radon in their drinking water was markedly higher than eight local U.S. Geologic Survey wells in the area.
However, the water tests conducted before and after drilling were limited and included no tests for known fracking chemicals or volatile organic compounds.
In November 2008, Equitable told the couple, “the water was bad” and to stop drinking the well water and the company began supplying bottled drinking water.
On Jan. 13, 2009, Dusty and Tamera vacated their home and have never moved back. “We thought we were going to die,” said Dusty Hagy.
Relations with Equitable were getting tense; Dusty even began recording phone conversations. Repeated requests for a list of the chemicals used in fracking went unanswered.
Equitable admits “your water’s been affected because of our drilling process.”
Dusty Hagy assumed Equitable would fix the water issue based on phone conversations (audio tape #1) with his Equitable representative who stated on the phone:
“ … for whatever reason the water’s been affected because of our drilling process. But the horizontal portion of it I don’t think had anything to do with it. Something we did had something to do with it. We have done something to the water, and no one was doubting that, but it wasn’t the horizontal part. I’m not doubtin’ that fact and I don’t think anybody’s doubtin’ that, the horizontal portion wouldn’t affect it.”
Equitable offered to drill a new water well which the family declined because they believed the aquifer itself was contaminated. This belief stemmed from a neighbor’s claim that 30 of his animals had died in 2008 during the gas drilling. Plus, Equitable tied any restitution to the couple signing an non-disclosure agreement, or gag order, meant to silence the Hagys and negate any future claims.
Hagy family sues drilling firms
As this phone conversation (audio tape #3) with Equitable reveals, once the family sought legal representation in March 2009, all contact with Equitable stopped. Bottled water deliveries and hotel payments stopped. While the couple searched for a rental home, they lived in their un-heated camper. On a positive note, once they vacated their home, their negative health symptoms dissipated.
The Hagys sued Equitable Production Company, BJ Well, Halliburton and Warren Drilling in October 2009. In short, even with the taped calls, drilling records, photos, videos and water tests, the Hagys’ lawsuit was “dismissed” in August 2012. Judge Goodwin’s opinion stated, “The case presents no genuine issue of materials fact for a jury to determine.” The lawsuit is in the appeals process and the litigation costs to date are $175,000.
How does this happen?
Though the Hagys’ lawsuit appears to provide evidence of water contamination, their dismissed lawsuit supports the claim, “There are no known cases of drinking water contamination from fracking,” often touted by pro-fracking groups.
This claim isn’t true, at least 4 confirmed cases of water contamination exist:
- 1987 Parson’s Family, W. Virginia — Outcome: settled.
2011 Paradise Road, Bradford County, PA — Outcome: settled.
- 2012 Fiorentino vs. Cabot Oil, Dimock, PA — Outcome: settled.
- 2012 PA. DEP, Bradford County, PA — Outcome: settled.
Why so few confirmed cases and no case tried before a jury?
More than 40,000 shale gas wells have been drilled since 1996 and at least 825 serious fracking complaints have been lodged, yet only 40 fracking lawsuits have been filed. To date, a jury has never heard a fracking lawsuit.
- The natural gas industry is regulated on a state-by-state basis because of the federal legal exemptions granted to the industry.
- Predatory, private contracts signed between firms and individuals favor gas companies.
- The U.S. legal system’s high litigation costs dissuade lawsuits.
How the “the Big 7” exemptions play out in reality
The natural gas industry is exempted from seven major federal environmental laws. These laws in their simplest forms are intended to protect people, places, water and air. The U.S. Environmental Protection Agency (EPA) is tasked with enforcing these laws. Because the natural gas industry isn’t regulated by the U.S. EPA at the federal level because of the legal exemptions, natural gas drilling is regulated on a state-by-state basis.
The chart below outlines the seven federal environmental laws exemptions, with many exemptions dating back decades.
The latest three exemptions were strategically written into the 1,500 page Energy Policy Act of 2005 and are now infamously named the “Halliburton loophole.” These three short paragraphs focused on eliminating water pollution oversight and also eliminated the strict environmental reviews that federal projects must undertake.
When these exemptions are combined, the benefits to natural gas industry are: no federal EPA oversight therefore pushing fracking regulation to the state level, no scientific testing, no environmental studies, no health and geologic studies and no liabilities for drillers of chemical releases into waterways and air.
The 2005 Energy Policy Act’s strategy was to provide the U.S. with “an abundant, domestic and affordable sources of fuel.” Since 2005, the gas industry has been unhampered by federal regulations and the newer shale gas drilling has grown quickly; U.S. natural gas from shale reserves has grown from one percent to 35 percent of the U.S. supply. This new supply of 8.5 trillion cubic feet of gas has forced natural gas prices down by 50 percent, even spurring coal-based electrical plants to convert to natural gas.
The coffin nail: Toxic Release Inventory exemption
The least known exemption though, the 1986 Toxic Release Inventory of Emergency Planning and Community Right-to-Know Act, may offer the natural gas industry the biggest shield from liabilities and the greatest obstacle for parties alleging fracking water contamination.
In response to the Bopal, India disaster, when Union Carbide released a harmful gas into an urban area which killed more than 20,000 people, Congress required industries to list harmful chemicals on the Toxic Release Inventory to the EPA. The EPA collects and then disseminates that information to the public and local governments.
Yet, oil and gas companies were exempted from the Toxic Release Inventory, therefore chemical disclosure is different for each of the 29 fracking states. To boot, shale gas production, or fracking, is concentrated in relatively gas-friendly states: Texas, Louisiana, Pennsylvania, Arkansas, West Virginia, Colorado and North Dakota, listed in order of gas production volume.
According to an in-depth National Resources Defense Council report which compares today’s hodgepodge of state-level fracking regulations, no state requires full chemical disclosure. Even new regulations in Texas, the largest shale gas producer, require chemical reporting but do not require “proprietary” chemicals to be listed which can account for 50 percent of the chemicals used in one fracking. The report also concludes that state reporting is inconsistent and significant portions of data are missing altogether.
Adding to the lack of chemical disclosure, only two states (West Virginia and Colorado) inform residents about new wells before drilling. This means that in 27 states, residents are not notified of new drilling, making it impossible to conduct comprehensive (and expensive) water testing before the drilling.
How exemptions play out in the law-can you prove what you drank?
In 2007, Equitable wasn’t legally required to disclose the chemicals used in the fracking, therefore no doctor, no person or group knew what chemicals to test for or what caused the foam in the creek, the color changes in the pond or the compromised water well.
Though water tests revealed the Hagy property drinking water had changed since the drilling had occurred, the tests were not apples-to-apples comparisons. During the lawsuit’s evidence discovery process, the natural gas firms finally furnished the list of chemical used on the Hagy property which verified the fracking chemicals used weren’t “just water and sand,” as quoted by the Equitable contact.
The absence of verifiable chemical data is displayed in Judge Goodwin’s opinion and order to grant a motion for Summary Judgement, which in layman’s terms means the Hagy lawsuit was dismissed. The burden of chemical exposure proof was placed on the plaintiffs, “to demonstrate amount, duration, intensity and frequency of chemical exposure.” A catch-22.
Gas leases and contracts: The devil’s in the fine print
Adding to the chemical disclosure catch-22 is that most gas leases heavily favor natural gas drillers. In 2011, The New York Times analyzed more than 110,000 shale gas leases and concluded; over half of gas leases provide landowners no restitution in the event of harm, most exclude any explanation of potential harm and a majority of leases include automatic contract extensions that require no landowner approval. Natural gas wells can produce for decades and gas lease contracts can be automatically renewed in perpetuity. Many leases include clauses mandating that damage disputes be heard in arbitration outside of the legal system.
The door-to-door leasing agents who represent gas drillers, a.k.a. landmen, are tasked with getting natural gas leases signed by landowners. Feedback from many landowners is that landmen are very persuasive, personable and often mis-represent facts. These revealing talking points pages were reportedly found by a Ohio homeowner who had been visited by a West Bay Exploration’s leasing agent. The talking points, marked confidential, give sales agents advice to, “not talk about the anti-fracking documentary Gasland, to not discuss chemicals or fracking and to speed up the lease signing before people think about the drilling.”
Many natural gas leases border on predatory in nature as it appears the gas leasing process relies on the ignorance of rural, landowners to enter into binding, private contracts with natural gas drillers.
The Hagys claim they were absolutely unaware they had signed a damage release waiver, twice even. “The Equitable representative sat right on my porch and said the cash was a small payment for the trees and land damage. It wasn’t until November 2008 that I even found out I supposedly had signed away any rights,” said Dusty.
These two damage release forms inadvertently signed by the Hagys have reared their ugly heads during the lawsuit process as another reason Equitable and BJ Services claim they are not liable for any water, health or property damage; the companies claim the Hagys signed away any rights to liabilities and restitution.
Suing a gas company—expensive and grueling
“Fracking has been the tragedy of the commons—freedom to a common, brings ruin to all,” according to Maxwell Kennerly, a trial lawyer at The Beasley firm in Philadelphia. Legally it’s been impossible for plaintiffs to precisely pinpoint exactly what happened underground or link exact chemicals to a situation when those chemicals aren’t divulged and the drilling process isn’t accessible. Any lawyer taking these cases has to be prepared to put their own money and resources on the line to be a trailblazer.”
The first legal team hired by the Hagy family in 2009 dropped the Hagys’ case one year later. During that year the family lost valuable time in conducting water tests and gathering evidence. Their current lawyer, Kevin Thompson, of the Law Offices of Thompson Barney in Charleston, West Virginia, has taken the case on a contingency fee basis. The Hagy family has paid no out-of-pocket expenses. The lawsuit’s litigation costs to date top $175,000.
Lastly, there is an emotional toll for using our legal system to get restitution; it’s a grueling process according to Dusty Hagy. “It’s been hell. For over two years, we’ve been reliving this awful experience. In the back-of-our-minds we realize this may be all for nothing. My wife and I feel we had our most important asset stolen from us, the drinking water that makes our property a place to live, not just 81 acres for animals. It feels like the whole system is stacked against us.”
Where are the Hagys?
Interestingly, the Hagys and 70 of their neighbors who live on a 5-mile stretch of Sugar Creek Road have petitioned Southern Jackson County Public Services to extend public water service to their homes at cost of $2 million. The project is on an 5-year waiting list and there is no guarantee it will ever be completed. According to Karl Vielhaber, general manager for the Southern Jackson County Public Service, the property owners have petitioned for municipal water because most claim their water wells are contaminated from gas drilling. Most of the homeowners haul water to their homes from a coin operated water source.
Dusty and Tamera have moved to a new property with a mortgage, and they still own their vacated property. Equitable’s three natural gas wells still produce gas today and may for years on the Hagys’ vacant property.
The winners and losers
A clear winner in fracking so far is natural gas industry. Fracking cases settled out-of-court provide critical benefits for the gas industry because the settlements include “gag orders” so that injured parties can not discuss the case and its contents. Financially, settlements reduce liabilities for natural gas firms by eliminating unpredictable jury awards. More importantly, settlements help the industry maintain their public relation’s campaign to the media, elected officials, the financial industry and the American consumer that natural gas drilling is clean and safe.
American consumers are also winners in the fracking story. According to the Energy Information Administration, residential gas prices are about 50 percent less than the 2008 natural gas price peak.
Fracking’s losers are the private landowners who have been negatively impacted by fracking and may or may not have received proper restitution. Collectively, the public loses as closed settlements shut down any learning, studies or analysis needed to create uniform industry best practices and build legal precedence for future cases.
Based on evidence and public pressure, Congress finally approved the U.S. EPA to conduct scientific fracking studies. The final study will be available for peer and public review December 2014.
Fracking regulations are slowly developing. The Obama Administration announced federal regulations mandating methane capturing at well sites. State legislatures are slowly developing new rules with Pennsylvania creating some of the toughest legislation over wastewater recycling and charging per well fees to pay for damages. But, as the Center for Energy Economics and Policy’s website and National Resourced Defense Council report illustrate, fracking regulation is complicated and convoluted.
What can you do?
Stories like this can often leave readers with an uneasy question: “What can I do?” Hear are a few ideas.
- Contact your federal and state elected officials. Your state elected officials are key as fracking is exempt from federal regulation and it seems Washington is struggling to make any changes with pretty much anything. Sending a quick email to your state delegates and senator with a link to this post takes 30 seconds and alerts your elected officials that fracking is on your radar screen. Make your opinion on the current process known.
- Choose a fracking group from below that matches your point of view and sign-up for their newsletters. Add them to your twitter feed or friend on facebook to keep abreast of new regulations and issues. If you’re a Flipboarder, add fracking to your list.
- The groups below often include easy “call-to-actions” where your voice can be heard. Interestingly, all but a few people in these groups and grassroots organizations are volunteers.
New York: Damascus Citizens for Sustainability
If you’re interested in reading the natural gas industry’s point of view, Energy in Depth is their policy and communications group.
All photos taken by Dusty Hagy except the photo and story below is from the West Virginia Surface owner’s Right’s Organization.
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I live in the beautiful state of Wisconsin, with the exception of the bone-chilling cold during January and February! One of my state’s senators sent me a letter informing me that, in short, mining here can be done safely with minimal environmental impact.
There is no such thing as “safe mining!” The two words when put together are polar opposites of each other. I like my idea better, so I emailed it off to him! You can do the same with all of your state’s elected officials, including your governor, by sending them a clear, resounding message that it is (way past) time to divest from dirty, finite energy and invest in cheaper, clean, renewable energy starting today! Our climate is screaming for help, and we can no longer let our legislators promote their hidden, greed-laden agendas!
Here is a copy of a brief letter that I just sent off to Senator Cullen:
Martial law declared in New England
Facing up to one year in jail and a $1000 fine for merely driving their own cars on public streets and highways, citizens in various areas within the New England region have been hit with executive orders, threatening residents with criminal penalties if they leave their homes and attempt to drive during the current snowstorm.
Using the color of law to impose demands on the public that can only be seen as a massive overreach of power, individuals inConnecticut, Rhode Island and Massachusettsthus far have been issued bans on driving in those areas.
The only exceptions, according to R.I.’s WPRI, are the news media, public safety vehicles and public works vehicles and workers that includes contract personnel, government officials on official business, utility company vehicles and workers, health care workers who travel to and from work in order to provide essential health services, travel necessary to maintain and deliver critical private sector services such as energy, fuel supplies, financial systems and critical commodities and travel to support business operations that provide critical services to the public, including gas stations, food stores and hardware stores.
Massachusetts Gov. Deval Patrick also signed an executive order banning all non-essential motor vehicle travel statewide beyond 4 p.m., believed to be the first such travel ban since the blizzard of 1978, according to the Associated Press.
Connecticut’s Gov. Dannel P. Malloy imposed a travel ban of his own Friday on the state’s limited access highways and deployed National Guard troops around the state for rescues or other emergencies.
Thus far, authorities in other areas in the region, such as New York, have not stated if they will be following suit. It is also unclear as to how long the executive orders stand or if it is even legal to impose such demands on the public’s right to travel freely, regardless of the conditions.
Many residents in the area have openly expressed being surprised by the “overreaction,” seeing the executive orders as completely unnecessary, considering New England and surrounding areas are used to seeing snow storms of similar magnitudes almost every season.
An original investigative report by Earth Focus and UK’s Ecologist Film Unit looks at the risks of natural gas development in the Marcellus Shale. From toxic chemicals in drinking water to unregulated interstate dumping of potentially radioactive waste that experts fear can contaminate water supplies in major population centers including New York City, are the health consequences worth the economic gains?
Marcellus Shale contains enough natural gas to supply all US gas needs for 14 years. But as gas drilling takes place, using a process called hydraulic fracturing or “fracking,” toxic chemicals and methane gas seep into drinking water. Now experts fear that unacceptable levels of radioactive Radium 226 (and deadly Radon too) in gas development waste.
Fracking chemicals are linked to bone, liver and breast cancers, gastrointestinal, circulatory, respiratory, developmental as well as brain and nervous system disorders. Such chemicals are present in frack waste and may find their way into drinking water and air.
Waste from Pennsylvania gas wells — waste that may also contain unacceptable levels of radium — is routinely dumped across state lines into landfills in New York, Ohio and West Virginia. New York does not require testing waste for radioactivity prior to dumping or treatment. So drill cuttings from Pennsylvania have been dumped in New York’s Chemung and other counties and liquid waste is shipped to treatment plants in Auburn and Watertown New York. How radioactive is this waste? Experts are calling are for testing to find out.
New York State may have been the first state in the nation to put a temporary hold on fracking pending a safety review, but it allows other states to dump toxic frack waste within its boundaries.
With a gas production boom underway in the Marcellus Shale and plans for some 400,000 wells in the coming decades, the cumulative impact of dumping potential lethal waste without adequate oversight is a catastrophe waiting to happen. And now U.S. companies are exporting fracking to Europe.
The beginning of the year has traditionally been a time of optimism when we all look forward to the exciting things that are going to happen over the next 12 months. Unfortunately, there are a whole bunch of things about 2013 that we already know are going to stink. Taxes are going to go up, good paying jobs will continue to leave the country, small businesses will continue to be destroyed, the number of Americans living in poverty will continue to soar, our infrastructure will continue to decay, global food supplies will likely continue to dwindle and the U.S.national debt will continue to explode. Our politicians continue to pursue the same policies that got us into this mess, and yet they continue to expect things to magically turn around. But that is not the way that things work in the real world. Bad decisions lead to bad outcomes. Instead of realizing that what we are doing is not working, our “leaders” continue to give us more of the same. As a result, there are going to be a lot of things about 2013 that will not be great. Sticking our heads in the sand and pretending that everything will be “okay” somehow is not going to help anyone. We’ve got to make people understand exactly what is happening and why it is happening if we ever hope to see real changes.
The following are 16 things about 2013 that are really going to stink…
#1 Taxes Are Going To Go Up
Even if a fiscal cliff deal is reached, some taxes will still go up next year. And if no deal is reached, there will be a whole bunch of different tax increases in 2013.
According to CBS News, these tax increases would be very painful for the middle class…
If lawmakers fail to work out any sort of deal, there will be severe long-term consequences for the economy: According to the Tax Policy Center, going off the “cliff” would affect 88 percent of U.S. taxpayers, with their taxes rising by an average of $3,500 a year; taxes would jump $2,400 on average for families with incomes of $50,000 to $75,000. Because consumers would get less of their paychecks to spend, businesses and jobs would suffer.
#2 The Middle Class Is About To Be Scorched By The Alternative Minimum Tax
Of more immediate concern for the middle class is the Alternative Minimum Tax. Many Americans have never heard of the AMT, but it is truly one of the worst things about our tax code.
If Congress does not act, and right now it does not look promising, millions of middle class households will see a massive increase in their tax bills for 2012.
According to one analysis, households that are forced to pay the AMT will end up paying an extra $3,700 in taxes…
Unless Congress acts by the end of the year, more than 26 million households will for the first time face the AMT, which threatens to tack $3,700, on average, onto taxpayers’ bills for the current tax year. Because those people have never paid the AMT, they have no idea they are in its crosshairs — put there by a broader stalemate over tax policy that has kept Congress from limiting the AMT’s reach.
Do you have an extra $3,700 sitting around to send to Uncle Sam?
If not, you had better contact your representatives in Congress and scream like crazy about passing a fix for the AMT. They have always gotten it done before, but this year there is so much animosity between the Republicans and the Democrats that nothing may end up getting done.
#3 The Economy Will Continue To Get Worse
Despite all of the talk in the mainstream media and from our politicians that our economy is getting better, the truth is that the U.S. economy continued to decline in 2012. If you doubt this, just read the 75 statisticsin this article.
And there are a whole host of signs that the economy is starting to slow down even more as we enter 2013. For example, consumer confidence in the United States has experienced its largest two-month drop in over a year, and retail sales during the holiday season turned out to bequite disappointing.
#4 Good Paying Jobs Will Continue To Be Shipped Out Of The United States
Thanks to decades of “free trade agreements”, workers in the United States must directly compete for jobs with hundreds of millions of workers on the other side of the globe that live in countries where it is legal to pay slave labor wages.
We continue to see millions of jobs being shipped out of the country and our politicians stand by and do nothing.
Most Americans have no idea how this emerging one world economic system works. The beautiful product that you buy at the big retail store may have been made by someone working in some of the most horrific conditions imaginable.
A 42-year-old woman named Julie Keith recently found this letterinside a box of Halloween decorations that had been made in China…
“If you occasionally buy this product, please kindly resend this letter to the World Human Right Organization. Thousands people here who are under the persecution of the Chinese Communist Party Government will thank and remember you forever.
People who work here have to work 15 hours a day without Saturday, Sunday break and any holidays. Otherwise, they will suffer torturement, beat and rude remark. Nearly no payment (10 yuan/1 month).
People who work here, suffer punishment 1-3 years averagely, but without Court Sentence (unlaw punishment). Many of them are Falun Gong practitioners, who are totally innocent people only because they have different believe to CCPG. They often suffer more punishment than others.”
But both political parties continue to tell us how wonderful it is that we are trading with communist China. They see no problem with the fact that good paying jobs that used to be performed in America are now being performed by slave laborers on the other side of the planet. And most Americans continue to support this system by filling their shopping carts with lots of stuff that has “made in China” stamped on it.
#5 Small Businesses Will Continue To Be Destroyed
At the same time, small businesses all over America are being strangled to death by taxes and regulations. Just consider the following numbers from a previous article…
We are told that the economy is supposed to be “recovering”, but the number of “startup jobs” at new businesses has fallen for five years in a row. According to an analysis of U.S. Department of Labor data performed by economist Tim Kane, there were almost 12 startup jobs per 1000 Americans back in the year 2006. By 2011, that figure had fallen to less than 8 startup jobs per 1000 Americans.
How is our economy ever going to thrive if we keep killing off our small businesses?
#6 Hunger And Poverty Will Continue To Explode To Unprecedented Levels
As the U.S. economy bleeds jobs and loses small businesses, the number of Americans living in poverty continues to explode.
Here are some numbers to show to people who still don’t understand how desperate the situation is…
-Families that have a head of household under the age of 30 have a poverty rate of 37 percent.
-According to U.S. Census data, 57 percent of all American children live in a home that is either considered to be “poor” or “low income”.
#7 The Number Of Americans On Food Stamps Will Continue To Increase
If the economy is recovering, then why does the number of Americans on food stamps continue to soar?
As I wrote about yesterday, about 17 million Americans were on food stamps back in the year 2000.
Today, more than 47 million Americans are on food stamps.
Does anyone want to explain to me how that is a sign that things are getting better?
Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps.
How much worse do things have to get before people realize that what we are doing is not working?
#8 Millions Of Americans Are About To Lose Their Unemployment Benefits
During this economic crisis, an unprecedented number of American families have been relying on unemployment benefits in order to stay afloat.
Well, if no agreement is reached in Washington D.C., millions of Americans will shortly lose those benefits…
Three million Americans may become unwitting casualties of the political war in Washington over the fiscal cliff.
Since 2008, the federal government has funded extensions of the unemployment insurance offered by states, more than tripling the amount of aid available to the unemployed in some areas. But the program is expensive, with the Congressional Budget Office estimating it would cost $30 billion to extend it through 2013. President Barack Obama wants to extend the benefits for another year, but Congress has already pared back the program, and Republicans insist it represents the kind of largesse Washington can no longer afford.
#9 Our Infrastructure Will Continue To Rot And Decay
The United States once had the most beautiful infrastructure in the entire world. Our highways, bridges, airports, railroads, sewer systems and electrical grids were the envy of the entire planet.
Well, now we don’t even have enough money to repair what we already have, so our infrastructure will continue to rot and decay in 2013…
Highways and bridges will need $2.5 trillion in upgrades if they are to survive for another 50 years — a must-do to keep commerce thriving. And that figure doesn’t even take into account the airports, railroads, subways, sewage-treatment plants, waterworks, levees, electric grids, pipelines, and all of those other expensive systems that people ignore until they break down.
#10 Many Of Our Major Cities Will Continue To Be Transformed Into Festering Hellholes
A lot of our major cities are also rapidly degenerating. Detroit is one of my favorite examples, but the same kinds of things could be said about dozens of other major cities all over the country. The following is a brief excerpt from one of my recent articles…
If you can believe it, more than 50 percent of all children in Detroit are living in poverty, and close to 50 percent of all adults living in the city are functionally illiterate. The high school graduation rate in Detroit is down to about 25 percent, and the city has become a breeding ground for gangs and violence. The number of murders in Detroit is already higher than last year, and recently groups of young men toting AK-47s have been running around robbing gas stations. How much worse can things possibly get for Detroit?
#11 State And Local Governments Will Find Ways To Squeeze Even More Money Out Of Us
In case you haven’t noticed, state and local governments all over the country are bleeding cash and are desperate for money. In 2013 you can expect them to continue to find more ways to squeeze even more money out of all of us. Here is one example…
Over the course of 2013, the District government will add 134 traffic cameras to its network, more than doubling the size of a system that generated $85 million in revenues for the city in its last fiscal year.
Police spokeswoman Gwendolyn Crump told The Washington Examiner that the city will intensify its camera-based efforts to cite motorists for speeding and stoplight violations while also adding cameras to detect other moving violations.
#12 Drug Cartels Will Continue To Easily Cross Our Borders And Terrorize Our Citizens
The federal government continues to refuse to protect our borders, and that means that drug runners and gang members will continue to pour into the United States.
Down in the Southwest, many ranchers are being absolutely terrorized by these criminals. The following is from a recent NBC News article…
Just before nightfall, 73-year-old rancher Jim Chilton hikes quickly up and down the hills on his rugged cattle-grazing land south of Tucson, escorting two U.S. Border Patrol agents.
He wants to show them the disturbing discovery he made earlier in the day: a drug-smugglers’ camp on his private property. Stacked together under a stand of trees are blankets, jackets, food, water, binoculars and bales of marijuana from Mexico wrapped in burlap. The smugglers, themselves, are nowhere in sight and are believed to have fled the area, which is about 10 miles north of the Mexican border.
Chilton has had his house burglarized a couple of times and his family regularly encounters groups of armed drug smugglers coming across from Mexico…
Their cattle fences are frequently cut and paths heading north from Mexico cross their property. Beckham says a smuggler even fired shots at him while he walked his land with a U.S. Border Patrol agent. Several illegal border crossers have also approached his house at night–one even reaching his hand into their bathroom window.
“Several years ago, one of my children was taking a shower and had a gentleman reach into the shower while he was in there, and he came out screaming, absolutely refusing to take a shower for the next couple months.”
But even if you don’t live along the border, all of this still affects you. According to government figures, Mexican drug cartels are actively operating in more than 1,200 U.S. cities right now. They are probably hard at work in the community where you live.
So what is the Obama administration doing to fix the problem?
In fact, the Obama administration is actually encouraging people to come to the U.S. and become dependent on the system. If you can believe it, there is actually a website run by the Department of Homeland Security that teaches immigrants how to apply for welfare benefits once they get into the United States.
#13 Social Decay Will Continue To Accelerate
All over America we are seeing signs of social breakdown. Here is yetanother example…
A woman sleeping on a street bench outside a drug store was doused with an accelerant and set on fire early Thursday morning in Van Nuys.
Witnesses told police that a man poured liquid — possibly a beverage containing alcohol — on the sleeping woman at about 1 a.m. outside a Walgreens store near Van Nuys Boulevard and Sherman Way. He lit a match and ran from the location, witnesses told police.
Who would just run up and set a woman on fire?
Sadly, this is not an isolated incident. For many more examples like this, please see this article: “20 Shocking Examples Of How Sadistic And Cruel People Have Become“.
We need to admit that we have a major problem on our hands. Violent crime in the United States increased by 18 percent in 2011, and another huge increase is expected when the numbers for 2012 come out.
America is changing, and not for the better.
#14 Global Food Supplies Will Continue To Dwindle
Did you know that for six of the last eleven years the world has consumed more food than it has produced?
As a result, global food reserves have reached their lowest level in almost 40 years.
So what is going to happen if the world continues to eat more food than it makes?
Let us hope that there is not another major drought in 2013. If there is, we could be looking at a very serious food crunch.
#15 Wall Street Will Continue To Resemble A Giant Casino
Our financial system seems to have not learned any lessons from the financial crash of 2008.
Instead of admitting their mistakes, they just continue to engage in even more reckless behavior.
Today, there are four major U.S. banks that each have more than 40 trillion dollars of exposure to derivatives.
At some point that house of cards is going to collapse and we will be facing a derivatives crisis of unprecedented magnitude.
Will it be in 2013?
#16 The U.S. National Debt Will Cross The 17 Trillion Dollar Mark
In 2013, our national debt will blow past the 17 trillion dollar mark and start heading toward 18 trillion dollars.
How stupid can we possibly be?
During the first four years of the Obama administration, the U.S. national debt has grown by about as much as it did from the time that George Washington took office to the time that George W. Bush took office.
It really takes something to match more than 200 years of debt accumulation in less than four years.
But our politicians don’t seem to care about all of this debt. They will continue to steal more than 100 million dollars from our children and our grandchildren every single hour of every single day. That is beyond criminal, and yet the American people don’t seem to care.
What in the world has happened to this country?
Of course not everything about 2013 will be bad. Personally, I am looking forward to an exciting year. I have a new book that will be coming out, and my family is blessed and healthy. I would like to wish all of you a very blessed 2013. Things may be falling apart all around us, but that doesn’t mean that we can’t have a great year even in the midst of all the chaos.
The Coming Derivatives Panic That Will Destroy Global Financial Markets
When financial markets in the United States crash, so does the U.S. economy. Just remember what happened back in 2008. The financial markets crashed, the credit markets froze up, and suddenly the economy went into cardiac arrest. Well, there are very few things that could cause the financial markets to crash harder or farther than a derivatives panic. Sadly, most Americans don’t even understand what derivatives are. Unlike stocks and bonds, a derivative is not an investment in anything real. Rather, a derivative is a legal bet on the future value or performance of something else. Just like you can go to Las Vegas and bet on who will win the football games this weekend, bankers on Wall Street make trillions of dollars of bets about how interest rates will perform in the future and about what credit instruments are likely to default. Wall Street has been transformed into a gigantic casino where people are betting on just about anything that you can imagine. This works fine as long as there are not any wild swings in the economy and risk is managed with strict discipline, but as we have seen, there have been times when derivatives have caused massive problems in recent years. For example, do you know why the largest insurance company in the world, AIG, crashed back in 2008 and required a government bailout? It was because of derivatives. Bad derivatives trades also caused the failure of MF Global, and the 6 billion dollar loss that JPMorgan Chase recently suffered because of derivatives made headlines all over the globe. But all of those incidents were just warm up acts for the coming derivatives panic that will destroy global financial markets. The largest casino in the history of the world is going to go “bust” and the economic fallout from the financial crash that will happen as a result will be absolutely horrific.
There is a reason why Warren Buffett once referred to derivatives as “financial weapons of mass destruction”. Nobody really knows the total value of all the derivatives that are floating around out there, but estimates place the notional value of the global derivatives market anywhere from 600 trillion dollars all the way up to 1.5 quadrillion dollars.
Keep in mind that global GDP is somewhere around 70 trillion dollars for an entire year. So we are talking about an amount of money that is absolutely mind blowing.
So who is buying and selling all of these derivatives?
Well, would it surprise you to learn that it is mostly the biggest banks?
These four banks have an overwhelming share of the derivatives market in the United States. You might not be very fond of “the too big to fail banks“, but keep in mind that if a derivatives crisis were to cause them to crash and burn it would almost certainly cause the entire U.S. economy to crash and burn. Just remember what we saw back in 2008. What is coming is going to be even worse.
It would have been really nice if we had not allowed these banks to get so large and if we had not allowed them to make trillions of dollars of reckless bets. But we stood aside and let it happen. Now these banks are so important to our economic system that their destruction would also destroy the U.S. economy. It is kind of like when cancer becomes so advanced that killing the cancer would also kill the patient. That is essentially the situation that we are facing with these banks.
It would be hard to overstate the recklessness of these banks. The numbers that you are about to see are absolutely jaw-dropping. According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives. Just check out how exposed they are…
Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)
Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)
Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)
Bank Of America
Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)
Total Assets: $114,693,000,000 (a bit more than 114 billion dollars – yes, you read that correctly)
Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)
That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.
To get a better idea of the massive amounts of money that we are talking about, just check out this excellent infographic.
How in the world could we let this happen?
And what is our financial system going to look like when this pyramid of risk comes falling down?
Our politicians put in a few new rules for derivatives, but as usual they only made things even worse.
According to Nasdaq.com, beginning next year new regulations will require derivatives traders to put up trillions of dollars to satisfy new margin requirements.
Swaps that will be allowed to remain outside clearinghouses when new rules take effect in 2013 will require traders to post $1.7 trillion to $10.2 trillion in margin, according to a report by an industry group.
The analysis from the International Swaps and Derivatives Association, using data sent in anonymously by banks, says the trillions of dollars in cash or securities will be needed in the form of so-called “initial margin.” Margin is the collateral that traders need to put up to back their positions, and initial margin is money backing trades on day one, as opposed to variation margin posted over the life of a trade as it fluctuates in value.
So where in the world will all of this money come from?
Total U.S. GDP was just a shade over 15 trillion dollars last year.
Could these rules cause a sudden mass exodus that would destabilize the marketplace?
Let’s hope not.
But things are definitely changing. According to Reuters, some of the big banks are actually urging their clients to avoid new U.S. rules by funneling trades through the overseas divisions of their banks…
Wall Street banks are looking to help offshore clients sidestep new U.S. rules designed to safeguard the world’s $640 trillion over-the-counter derivatives market, taking advantage of an exemption that risks undermining U.S. regulators’ efforts.
U.S. banks such as Morgan Stanley (MS.N) and Goldman Sachs (GS.N) have been explaining to their foreign customers that they can for now avoid the new rules, due to take effect next month, by routing trades via the banks’ overseas units, according to industry sources and presentation materials obtained by Reuters.
Unfortunately, no matter how banks respond to the new rules, it isn’t going to prevent the coming derivatives panic. At some point the music is going to stop and some big financial players are going to be completely and totally exposed.
When that happens, it might not be just the big banks that lose money. Just take a look at what happened with MF Global.
MF Global has confessed that it “diverted money” from customer accounts that were supposed to be segregated. A lot of customers may never get back any of the money that they invested with those crooks. The following comes from a Huffington Post article about the MF Global debacle, and it might just be a preview of what other investors will go through in the future when a derivatives crash destroys the firms that they had their money parked with…
Last week when customers asked for excess cash from their accounts, MF Global stalled. According to a commodity fund manager I spoke with, MF Global’s first stall tactic was to claim it lost wire transfer instructions. Then instead of sending an overnight check, it sent the money snail mail, including checks for hundreds of thousands of dollars. The checks bounced. After the checks bounced, the amounts were still debited from customer accounts and no one at MF Global could or would reverse the check entries. The manager has had to intervene to get MF Global to correct this.
How would you respond if your investment account suddenly went to “zero” because the firm you were investing with “diverted” customer funds for company use and now you have no way of recovering your money?
Keep an eye on the large Wall Street banks. In a previous article, I quoted a New York Times article entitled “A Secretive Banking Elite Rules Trading in Derivatives” which described how these banks dominate the trading of derivatives…
On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.
The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.
According to the article, the following large banks are represented at these meetings: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.
When the casino finally goes “bust”, you will know who to blame.
Without a doubt, a derivatives panic is coming.
It will cause the financial markets to crash.
Several of the “too big to fail” banks will likely crash and burn and require bailouts.
As a result of all this, credit markets will become paralyzed by fear and freeze up.
Once again, we will see the U.S. economy go into cardiac arrest, only this time it will not be so easy to fix.