Dark heart of the American dream
It's the most polluted state in the planet's most powerful country. Ed Vulliamy
goes into George Bush's backyard to reveal how big oil got in bed with big
politics and the price paid by the little people

Sunday June 16, 2002
The Observer

There is a perverse beauty to the landscape arraigned below the iron bridge
where Highway 255 strides the Houston Ship Channel: great towers of light and
fire as far as the eye can behold; sinewy steel piping, plumes of smoke and
flame twinkling into a Texas twilight coloured by a shroud of pollution hanging
from the sky. The awesome prepotency of this smokescape is no illusion, for this
is an epicentre of power, oil capital of the Western world and the most
industrialised corner of the United States. It is also the capital of a power
machine perfected in Texas, elevated to rule the nation and now unchallenged
across the planet. A machine that operates in perpetual motion - an equilibrium
of interests - between industry and politics. LaNell Anderson, former Republican
voter, businesswoman and real-estate broker who lived many years in this land of
smokestacks and smog, calls it 'vending-machine politics: you puts your money in
and you gets your product out'.
    'We don't see ourselves as a dynasty,' said George Bush Sr as his son launched
the election campaign that won him the current presidency, raiding father's
Rolodex to do so. 'We don't feel entitled to anything.' And yet at no point in
the past 50 years - the half-century since 1952 which defines the modern age -
has there not been a Bush in a governor's mansion (in Texas or Florida), on
Capitol Hill or in the White House - and usually more than one of those at a
time. The 'vending machine' is a single family whose tango with the powers which
illuminate this endless horizon of light and flame is a dance around every
corner in the labyrinth of Texan and now national - indeed global - politics.
'Everything they learned when they started out in west Texas,' says Dr Neil
Carman, once a regulator of pollution in the state, 'they applied to the
governor's mansion, the nation and the world... Power in America is not so much
about George W Bush, it's about the people from Texas who put him there.'
    This is the dynasty's throne, the state whose highways are lined with the
spirited advice 'Don't Mess With Texas' (originally the slogan of an anti-litter
campaign). As if litter would make much difference: Texas counts the worst
pollution record in the US, top in the belching of toxic chemicals and
carcinogens into the air, top in chemical spills, top in ozone pollution, top in
carbon-dioxide emissions, top for mercury emission, top in clean-water
violations, top in the production of hazardous waste. Houston overtook Los
Angeles for the coveted title of 'most polluted city' in the early 90s.
    'You are looking at the biggest oil refinery in the world,' indicates LaNell
Anderson. She refers to the edifice that is the 3,000-acre Exxon Mobil plant at
Baytown, near Houston, producer of 507,800 barrels a day. Here begins a story of
both dynasty and destiny, for it was on this spot in 1917 that the Bush family's
oil connection was forged - where the Humble Oil company, which struck black
gold in the Houston suburb of that name, took root, later to be- come the Exxon
behemoth. Humble's founder, William Stamps Farish, went on to become president
of Standard Oil. His daughter became a friend of George Bush Sr and his grandson
William Jr was taken in 'almost like family' (said Barbara Bush) while
campaigning for George Sr's entrée into Washington Senatorial politics in 1964.
Farish Jr claims to have been the first man to whom Bush Sr confided his
ambition to be president one day, and was last year named US Ambassador to
London.
    At first, Anderson welcomed the benefits to a community of the 200 oil-related
industries relocated to the Houston area by the time she and her second husband
set up home in a suburb wedged between Exxon and the Lyondell chemical plant.
Neither she nor he had any history of disease in their families. But in 1985,
her husband's daughter gave birth to a girl, Alyssa, with a rare liver disease -
she died aged six months. In 1986, Anderson's mother became ill and died of bone
cancer a year later. The following year, Anderson and her sister were diagnosed
with rheumatoid arthritis, as was a granddaughter in 1992, and an older sister
with Crohn's disease. In 1991, her father died from emphysema; a year later the
mother of Alyssa gave birth to a son immediately diagnosed with severe asthma.
Anderson connects the litany of disease with mishaps by her industrial
neighbours. She paraphrases their attitude thus: 'If someone doesn't like it,
they can sue us if they can - and since we have more money than God, we will
win.'
    A thumbnail sketch of politics and the environment in the United States today
depicts oil as the lifeblood running through every vein of an administration
forging ahead with its energy policy. The White House has just been forced to
disclose (after being faced with a Congressional subpoena) that it drew up a
national energy plan based on increased production without regard to the
environment or conservation, having failed to consult with anyone other than its
friends among the producers themselves, notably the disgraced Enron. This
despite the fact that an energy crisis in California last summer caused most
analysts to draw the opposite conclusion, stressing the need to curb a
gas-guzzling America.
    At the hub of this turning wheel of influence is Vice President Dick Cheney,
fresh into office from his post as chief executive of Halliburton, the world's
second-largest oil-drilling services company, where he netted a personal fortune
of $36m in the year before leaving, with help from contacts accumulated while
serving under George Bush Sr. Just last week, however, Halliburton joined Enron
in coming under investigation by the Securities and Exchange Commission for the
same system of publishing inflated revenues - 'aggressive accounting' - for
which Enron has become a synonym for shame. These alleged misdeeds took place
during Cheney's directorship. The company also faces a floodtide of civil
lawsuits over asbestosis_ unless a model can be found (as has been established
in Texas) to make such resort to the law nigh impossible for anyone without
money.
    The entwinement of the Bush dynasty with the energy barons of Texas has
apparently humble beginnings, in the Lone Star State's wild west, on the plains
around Midland and Odessa. This is barren land across which dust devils fly and
trains rumble like iron snakes. This is where George Bush Sr was sent by his
father, Senator Prescott Bush, to a trainee job with the International Derrick
and Equipment Company, a subsidiary of Dresser Industries, controlled by the
Bush family and selling more oil rigs than anyone in the world. (Dresser later
became absorbed by Halliburton.)
    The world first heard of Odessa on that fateful day in December 1998 when Bush
Jr was governor of Texas and the sky turned black after an 'upset' at the
Huntsman chemical plant literally on the wrong side of the railroad tracks it
shares with poor housing, where Mexicans and blacks live. (An 'upset' is an
unplanned accident releasing pollution, not part of the plant's normal running
procedure, and which does not count in its regulatory tally.) Lucia Llanez, who
lives in this tightly knit community of bungalows between plant and railroad,
will never forget this one: 'It was dark all over; cars on the Interstate
slowing down and putting their lights on because they couldn't see, though it
was day. There was a rumbling like trains that rattled the windows, and people
were going to hospital for watering eyes, allergies and problems breathing. The
cloud stayed two weeks.'
    The story of Huntsman goes back to the days of Bush Sr's arrival, when Odessa
was a town of what retired fireman Don Dangerfield calls 'wildcatters'. In the
40s, the US Air Force bombed deep holes in the giant Permian oil basin in a
search for oil which then attracted a stampede of speculators (including those
from Humble) who would, recalls Dangerfield, 'spend the nights in a hotel, the
End of the Golden West, and gamble their lots in rooms so thick with cigar smoke
you could hardly see'. Among them was a man he remembers well: John Sam
Shepherd, a former attorney general of Texas and member of the White Citizens
Council - a political wing of the Ku Klux Klan - disgraced by a land scandal and
come to seek his fortune out West by setting up the El Paso Products company,
later Huntsman.
    George Bush landed in this mayhem but quickly decamped 20 miles north to
Midland, where new millionaires like him established a country club, a Harvard
and a Yale club, met at the Petroleum Club and played golf on irrigated lawns.
Midland was, recalls Gene Collins, a member of the National Association for the
Advancement of Colored People in Odessam 'one of two towns in America with a
Rolls-Royce dealership and more millionaires per head than anywhere'. This was
where Bush Sr built his oil fortune, launched a political career on its
shoulders and raised his son George W Bush in the art and language of power he
now feigns not to speak. The story of how Bush Sr constructed his empire is well
known, as is that of how his son George W was groomed to follow in his
footsteps. Less widely broadcast, however, are the depths and intricacies of a
system the Bush family built in bonding with the energy industry, as the
dynastic machine elevated its methods from Odessa to the Senate, the governor's
mansion in Austin, the oil centres of Houston and Dallas, the White House and
thereafter the globe.
    Neil Carman has a professorial air to him that belies the sharpness of the
surgical blade with which he tries to operate on 'Toxic Texas'. Originally a
plant biologist, he was an investigator for the Texas Natural Resources
Conservation Commission (TNRCC), responsible for issuing permits for agreed
levels of pollution and enforcing environmental law. In 1989, he took on the
General Tire and Rubber Company for 'systematic violations'.
    The firm hired a lobbyist, Larry Feldcamp, from the Baker Botts law firm whose
senior partner, James Baker III, was secretary of state to then president George
Bush Sr and who later, as an attorney, secured the delivery of the state of
Florida for Bush Jr during last year's election recounts. Baker Botts advertises
itself as a 'full service firm', counting Shell, Mobil, Union Carbide, Huntsman,
Amoco on its books. The other law firm indivisible from the energy lobby and the
Bush fiefdom is Vinson & Elkins, which acts for both Enron and the Alcoa
aluminium giant, whose former chief executive Paul O'Neill is now US Treasury
Secretary. Between these law firms and the regulatory body supposed to face them
down, says Dr Carman, 'there's a revolving door. Feldcamp's place was taken
recently by the most active attorney on the oil scene, Pamela Giblin - one of
the TNRCC's first appointees.'
    Carman resigned because 'all they had to do was hire people like Feldcamp and
you were off the case. They did not deny permits - they must have issued 50,000
permits for air pollution during my time and refused only two, on occasions when
the public raised hell. And they don't revoke them - it's not like drunk
driving: if you get caught, they just keep reissuing. They used to refer to
these places as "industrial areas", as if that meant they were outside the law.
I called them "sacrifice zones".'
    There is another problem, unique to Texas: the 'grandfathering' rule.
Grandfathering dates back to the Texas Clean Air Act of 1971, exempting existing
installations from compliance with new regulations. The idea was that they would
be modernised or become obsolete and close. In the event, firms found that not
being obliged to spend on pollution control gave them a competitive edge, and
nearly three decades later, grandfathering accounted for more than 1,000 plants
and 35 per cent of all pollution in Texas. Nevertheless, in the early 90s, the
TNRCC began to toughen its stance in accordance with a more aggressive federal
approach to pollution by the new Clinton administration. Then, in 1994, Texas
went to the polls to elect a new governor - 'And when Bush took over,' says
Carman, 'everything changed.'
    Two groups based in Austin - Texans for Public Justice (TPJ) and Public Research
Works (PRW) - crunched the statistics on the wave of money on which George W
Bush sailed into the governor's mansion. It was what Andrew Wheat of the TPJ
calls 'something unheard of in Texas or anywhere else: $42m on two campaigns'.
Grandfathered polluters poured $10.2m into the campaign coffers between 1993 and
1998, led by what PRW calls the 'dirty 30', including Exxon, Shell, Amoco, Enron
and the Alcoa aluminium giant. Bush himself received $1.5m from 55 grandfathered
companies, led by Enron, with a handsome $348,500 top-up from the man he calls
Kenny Boy - Kenneth Lay, the company's chief executive, currently under criminal
investigation.
    Wheat's analysis of the new governor's 'personal time' shows a revolving door
for campaign donors and the energy industry. Andrew Barrett, Bush's in-house
environmental policy advisor, began daily visits to the TNRCC in preparation for
the appointment of new commissioners: Ralph Marquez, lobbyist for the Texas
Chemical Council and former executive of the Monsanto chemical firm, and Barry
McBee, attorney with the law firm Thompson & Knight, a major contributor to Bush
funds with a host of oil-industry clients.
    Legislation based on the notion of 'self-regulation' followed: a law enabling
companies to audit their own pollution records provided they reported them, in
exchange for which there would be absolute protection from public disclosure.
Big oil was delighted, as a memo obtained by an environmentalist group, the
Texas SEED Coalition, illustrated: a record of a gathering in June 1977 at Exxon
in Houston by 40 representatives of the Texas oil and gas industries - written
by one of their number - said 'the "insiders" from oil and gas believe that the
governor's office will persuade the TNRCC to accept whatever program is
developed between the industry group and the governor's office'.
    It was not until Bush became president that, in its 2001 state legislature,
Texas finally decided to rein in the 'grandfathered' plants. A bill gave them
until 2007 to come into line with federal law or shut down. Even then, there was
a legal challenge to the TNRCC's science from the Houston Business Partnership,
recently entrusted with millions in federal money to clean up the Gulf
coastline. The partnership is a high-octane chamber of commerce, throwing up a
few familiar names: Exxon, Conoco, Enron, James Baker's law firm Baker Botts -
and George Bush Sr.
    Most important of all - and best hidden - was Bush's programme for Tort Reform.
It was this that his father's advisor Karl Rove (dispatched to steer Bush's
presidential campaign and now the White House itself) insisted the new governor
make his hallmark, and this is potentially the dynasty's greatest gift to big
oil. Put simply, Tort Reform means making it harder for citizens to sue
corporations. TPJ calculated that business interests specifically isolating Tort
Reform on their political agenda poured money into Bush's gubernatorial
campaigns. Soon after being elected governor, says Andrew Wheat, Bush declared
Tort Reform an 'emergency issue'.
    This meant appointing a judge to the Texas supreme court whom President Bush is
tipped to bring aboard the Supreme Court in Washington (to which, some say, he
owes his presidency). Alberto Gonzalez wrote a decision soon after his
appointment to the Texas court which made it all but impossible for citizens to
bring class actions. 'The result,' says Shawn Isbell, a lawyer working on
environmental cases, 'is that it will simply be too expensive to bring cases
against the corporations.'
    Another ruling, says Sandra McKenzie, the lawyer who fought a long and bitter
battle against the Formosa Plastics firm, stipulates that 'anyone trying to
prove a personal chemical injury had to show that other people in a similar
situation had suffered the same reaction, according to a study in a published
journal'. The new precedents, says McKenzie, 'changed the laws to establish a
no-compromise, "take no prisoners" approach by the Bushes'.
    In 1989, George Bush presented the Governor's Award for Environ mental
Excellence to the Valero chemical refining company. Foremost in the minds of the
proud executives at the ceremony in Austin's luxury Four Seasons Hotel was their
'refinery of the future' at Corpus Christi, on the Gulf, at the far end of the
coastal strip that runs through Houston to the Louisiana border.
    Alfred Williams gets a better view of the refinery of the future across the
freeway from the garden of his mobile home than Governor Bush did from the Four
Seasons. He can smell it better too - the inimitable stench on the muggy delta
air that signifies the cooking up of cheap crude-oil 'feed stock' to produce its
chemical by-product and treating the neighbourhood to a dose of sulphur dioxide.
    When Williams, an ex-Vietnam Marine, moved here in 1972, 'this was all
farmland'. He now delivers an impassioned requiem for his garden, with its peach
trees dead or buckling over. The light of a quicksilver moon catches the plume
of sulphur along what they call Refinery Row.
    'I'm in my golden years,' he reflects. 'But I can't sell my house because no
bank will give a loan without 40 per cent down. And they won't relocate me, as
I'd do if they offered.
    'It started with having to wipe residue from off of my car. Then the iron on my
rooftop here started to get corroded, and the trees were dying. Sometimes I have
to come inside because my eyes are burning.'
    Williams filed a civil suit against Valero, steered by attorney Shawn Isbell.
The court in Corpus denied Williams class action status in accordance with the
zeitgeist, but Isbell managed to discover how the refinery of the future was so
poorly crafted that Valero had (unsuccessfully) sued the companies which had
built it. She also found out how the Texas system of overlooking 'upsets' works.
Since 1994, Valero had suffered more than 480 'upsets', but the TNRCC records
each set of emissions separately - for example, Valero's sulphur-dioxide
emissions for 1977 show up on the commission's website as 166.4 tons, while the
reality including 'upsets' is closer to 700 tons. Nevertheless, says Isbell,
'I've seen the TNRCC go harder after a pig farmer than I have after these kinds
of companies.'
    Williams keeps a notebook by his phone to record the 'upsets' over the road. He
reports them to the TNRCC. But, he says, 'I call them rainbows: they are shut at
night and on the weekend when the sulphur is released, and they only come when
the storm has come and gone.'
    Cornelius Harmon is a cab driver in Corpus, and takes a drive along Refinery
Row, down a road he calls the 'buffer zone'. It divides a wasteland of former
housing - where those relocated because of pollution by another plant, Koch,
once lived - from the mostly black and Hispanic community of Hillcrest. 'Are you
gonna tell me,' posits Harmon, 'that the hand of God Almighty drew a line down
this road and He says: "Over yonder side is contaminated and this side is fit
for folks to live ?" And what have we got here? Well, I'll be doggone if it's
not a school, with children playing in the smell. The people who run these
things, they give our kids a new pair of sneakers and go to church and think
they're going to heaven. But at the pearly gates, they're going to find St Peter
in his Afro saying: "Whassup cuz? Seems like you're trying to get into the wrong
place."'
    Time came for destiny to fulfil itself, for the son to stand for the high office
in Washington which the Bush dynasty and its backers saw as having been usurped
by Bill Clinton. The story of what carried George W Bush to the White House is
well known: the most ruthlessly efficient campaigning machine ever assembled -
by Karl Rove - with all the family's best connections filling a treasure chest
that broke all records. As they returned to number-crunching in Austin, Texans
for Public Justice and Public Research Works found little to surprise them save
the machine's speed and efficacy. Within a month, Bush had raised hundreds of
thousands of dollars, with Enron leading the field and two law firms giving
$146,900 - most prominently Vinson and Elkins, attorneys to Enron and the Alcoa
aluminium giant, and James Baker's company, lawyers to the oil industry.
    When Bush came to pick his cabinet, almost all pivotal positions went to Bush
Sr's inner sanctum, apart from the posts of commerce secretary (Don Evans,
longtime buddy of Bush Jr's and a fellow Midland oil man) and treasury secretary
(Paul O'Neill, currently touring the globe with Bono of U2, and former chief
executive of Alcoa, the world's biggest producer of aluminium).
    Alcoa held a stockholders meeting to send O'Neill off with a torrent of eulogies
and an annual pay packet worth $36m, but three speakers spoiled the party. Two
were trade unionists from O'Neill's troubled plant at Ciudad Acuna in Mexico,
challenging the chief executive's claim that conditions at their factory were so
good 'they can eat off the floor'. The third was the soft-spoken Texan Ron
Giles, drawing attention to the biggest of the state's 'grandfathered' polluters
- the Alcoa smelting plant at Rockdale. If the Rockdale plant were a single
state, it would count 40th for pollution among the 50 in the union, belching
more than 100,000 tons of toxins in 1997.
    The smokestacks of the largest aluminium smelter in North America fit
incongruously into the pastoral ranch land northeast of Austin. And they seem
especially odd as backdrop to the 300-acre ranch where Wayne Brinkley's family
has raised cattle since the late 1800s, but over which hangs a stench wafting
across the moonscape of Alcoa's lignite mine.
    Brinkley looks as much the Texan as President Bush in his boots and Stetson -
'Only difference is,' he says, 'I am one, and Bush is not.' In his office is a
hog, stuffed and mounted, and an awesome collection of vintage knives and
firearms. On his desk is a survey by the independent Research Analysis
Consultations group showing that concentrations of magnesium, calcium and
aluminium register 'very high' around Brinkley's barn, and sodium and titanium
over his fields. 'My son had cancer when he was just a young kid,' he says in a
voice like sandpaper. 'They tried to buy us out. They keep offering various
deals saying I can't talk to anyone about this for 35 years, and then they
changed it to forever. But why should I leave? My family's been here 100 years;
they've been here 50. They should do it by the book, and keep it clean for the
rest of us.'
    Alcoa continues regardless, feted by Wall Street for 'dazzling' returns. But in
the last light of a warm evening, quiet rebellion stirs in the community room of
a little town called Elgin. A group of local people, Neighbors for Neighbors,
have obtained records that show Alcoa to be cheating, making improvements to its
production plant worth some $45m without parallel investments in pollution
control. As a direct result of the Neighbors' exposé, the company was
investigated by a TNRCC with no place to hide this time.
    Neighbors for Neighbors, enjoying statewide coverage and acclaim for its pluck,
is itself suing the company. Billie Woods, Neighbors' president, says that Alcoa
has responded by pressing ahead with its plans for a new lignite mine that would
carve up 15,000 acres of farmland. The company has also made court applications
to enter and search the homes of Neighbors activists. The request was denied,
but the matter moved the usually conservative Daily Texan newspaper to demand:
'Stop the Alcoa Gestapo!'
    Yesterday Texas, today Washington, tomorrow the world. With Bush family business
back home in the US presidency, it now moves, in the form of the father, to the
apex of global finance. The Carlyle Group defines the next phase of power: a
Washington-based private equity fund with a difference. It is headed by Frank
Carlucci, former CIA director and defense secretary under Ronald Reagan and
lifelong friend of George Bush Sr. Bush (also once director of the CIA) sits
next to Carlucci on the board with a portfolio specialising in Asia and does not
hesitate to communicate with his son on concerns of regional relevance to
Carlyle such as Afghanistan or the Pacific Rim. Bush Jr was once chairman of a
Carlyle subsidiary making in-flight food.
    On Carlucci's other flank is the ubiquitous James Baker III. Chairman of Carlyle
Europe is John Major. The group's new asset management is headed by Afsaneh
Beschloss, former treasurer of the World Bank. Carlyle has grown quickly to be
worth some $12bn, specialising in energy and defence, with particular attention
to the oil-producing Gulf states. Among its most eager investors is Prince
Bandar, Saudi ambassador to Washington and his father Prince Sultan, the
kingdom's defence minister. The group's most spectacular recent coup was to reap
$400m in a stock sale of its subsidiary United Defence Industries, maker of the
Crusader artillery system which most military experts argued was redundant, but
which won $470m in development money from the Pentagon and whose future in the
US arsenal still hangs in the balance after a series of recent meetings between
Carlucci and Defence Secretary Donald Rumsfeld. Within a month of 11 September
last year, Carlucci was meeting with Rumsfeld and his deputy Paul Wolfowitz, and
10 days later offered an assessment which exactly predicted the endless-war
scenario: 'We as Americans,' he said, 'have to recognise that terrorism is more
or less a permanent situation.'
    'What's the secret?' chided William Conway, a co-founder of the group. 'I don't
think we have any secrets. We are a group of businessmen who have made a huge
amount of money for our investors.' 'I never bought into this conspiracy theory
about the Bush family, the energy companies or the Carlyle Group,' says Michael
King, seasoned political editor of the Austin Chronicle , who has observed the
phenomenon for decades. 'It is perfectly clear what they're aiming at from what
they do in public: managing the global economy to their own advantage, and doing
a pretty good job of it.'
    On 11 September, while Al-Qaeda's planes slammed into the World Trade Center and
the Pentagon, the Carlyle Group hosted a conference at a Washington hotel. Among
the guests of honour was a valued investor: Shafig bin Laden, brother to Osama.

THANKS: COULTHART.

-------- Original Message --------
Subject: Viridian Note 00316:  Hubbert's Peak
Date: 11 Jun 2002 23:34:02 -0000
From: Bruce Sterling <bruces@well.com>

(((I have  received this elegantly composed rant
from Eric Hughes,  who often favors us with his perorations.)))

Hubbert's Peak, The Impending World Oil Shortage
by Kenneth S. Deffeyes
Princeton University Press, 2001

Reviewed by Eric Hughes

One of my favorite Matt Groening cartoons is near the
beginning of the Love is Hell series, where he recommends,
next time you are think about doing something shameless,
just consider "how long you're going to be dead".  Below
that is a timeline, stretching to infinity in both
directions, with a small black dot in the middle labeled
"you are here."
    The same illustration might well have been captioned
"how long you're not going to be mining oil from the
ground."
    This last weekend I had the great pleasure of reading
*Hubbert's Peak*, a book on the global petroleum industry.
The author is a recently-retired geologist who taught at
Princeton for thirty years, worked in the oil industry
before that, and grew up in the middle of Kansas oil
fields.  The man is pure oil-intelligentsia, a category I
was not previously familiar with.  The book contains a
wealth of detail, not exhaustive and dry detail, but
selective and illuminating detail.
    The purpose of the book is to make and justify a
prediction about the year of maximum world oil production.
His precedent is a 1956 prediction by M. King Hubbert (a
former colleague of his) that U.S. oil production would
peak in the early 1970's.  The actual peak was 1970.
    Let's cut to the chase.  Deffeyes's prediction is
2004.7, plus or minus a couple of years.  As he says
immediately thereafter: "There is nothing plausible that
could postpone the peak to 2009.  Get used to it."
   I'm not going to summarize the argument; that's the
content of the book.  I will summarize, though, the
subject elements that lead up to the argument: initial oil
formation, the geology of its deposits, prospecting,
drilling and extraction, and the statistics of oil fields
and their discovery.  He then spends a couple of chapters
on Hubbert's argument, and another couple on the future.
It's a relatively slender book, only about 200 pages.
It's plenty to make his point, without overflowing into
boredom.
    One of the delights of the book is the author's sense
of humor.  At one point in the text he presents a
particular way of doing a graph that he's proud of.  Fifty
pages later, in an endnote, he makes the following
comment: "Here in the back of the book, where my editor
isn't likely to look, we can derive the equation."  This
combination of enthusiasm and restraint in the exposition
is one of the charms of the book.
    Another appreciation I got from this book is the
difference in the dynamics between oil and gas production.
They are intertwined in terms of their discovery and
production techniques, but their drilling and markets are
divergent.
    Oil is found primarily in the "oil window" of 7,500
and 15,000 feet; gas is found below those depths.  Both
are sources of combustion energy, but they aren't direct
replacements.  In order to switch, capital has to be
invested, which takes a while.  The oil peak really
matters, since it's not possible to immediately transition
to natural gas or any other energy source.
    It is easy to question individual assumptions and
intermediate conclusions in the argument.  That's not
really the point, though.  The conclusion that Deffeyes
draws is both very narrow and quite robust.  His only
point is to estimate the year in which the most oil will
be taken from the ground worldwide.  He is not making a
prediction about oil prices, about how many years of oil
there are left, nor of any number of other questions about
the dynamics.  What's interesting is that under many
variations of the model and permutations of the
assumptions, the peak year doesn't really budge.
    The model is robust against variations in reserve
estimates.  As recently observed on this list, total
reserves depend a lot on the prevailing oil price.  This
observation, though, doesn't change the estimate of the
peak year of production.  Discoveries lead production by
about 11 years.  This reflects the capital investment
cycle and the time needed to get into production.
     As oil prices rise, existing reserves come into
economic viability, but still with a lag time, and that
lag time is longer because many of these sources require
technology transfer in addition to the capital spending.
As a result, there may well be some local upswings in
production after the peak, but total world production will
never reach its maximum again.
   Along the lines of other critiques, Thomas Gold's idea
of deeply buried hydrocarbons does not change this
prediction of the oil peak.  First, Gold is speaking
primarily of methane, the principal component of natural
gas.  Even the partial replenishment referenced in
Viridian Note 00314 was "very light oil and gas."  The oil
window goes down only to 15,000 feet because below that,
it's too hot for long-chain hydrocarbons to be stable.  So
even if Gold is right about oil and gas being produced by
microbes from raw organic materials embedded in the earth,
that doesn't change the timing of the oil peak.  Deep
drilling for oil is poppycock; deep  drilling gets you gas, not oil.
    This is a science book, not an economic or political
tract.  Deffeyes makes no political predictions, but he
does observe that political disruption is inevitable.  The
U.S. oil crisis of the early 1970's was precipitated by
the peak of U.S. oil production in 1970.  Prior to that,
fluctuations in U.S. demand could be satisfied by simply
pumping more American oil.  After the American peak, the
excess demand could only be met with overseas oil.  Once
OPEC realized this, there was a "crisis".
    The disruptions that will happen after a world oil
peak will be even more interesting, as in the curse about
"interesting times."  Excess demand is going to be met by
rationing; some will simply have to go without.
Previously, demand could be met by shifting the source of
supply.  This time there is no more source of supply
anywhere.  The few years after the peak will  be particularly
disruptive, since during that time many  profound assumptions
about the way the world works will be  proven wrong.
Bad investment decisions will be revealed  in hindsight,
and one should expect an orgy of finger-pointing.
    Deffeyes mentions a potential flashpoint:  "You
guessed it; several islands stick up in the middle of the
South China Sea, and the drilling rights are claimed by
six different countries."  These, as I recall, are the
Spratly Islands.  The claimants, just to give an idea of
the touchiness of the situation, are China, Taiwan,
Vietnam, Malaysia, Brunei, and the Philippines.  Control
of the islands is currently divided between the six
disputants.
    After a world oil peak, oil prices will go inevitably
upward for some years, continuously increasing the stakes.
This is an unstable situation that may well lead to war.
If this sounds alarmist, it's worth considering the Middle
East, the single largest oil region in the world.  Ask
yourself if the U.S. would have much political interest in
a Middle East without oil fields.
   I have painted a pessimistic picture of the medium-term
future.  The long-term future, while not worked out, has
no such negative necessities.  For one, there's plenty of
oil left after the peak of production; it's just going to
get rarer and more expensive.  The taps won't all turn off
at once.  There is plenty of time to develop a successor
energy infrastructure.  Note that I didn't say
"alternative energy infrastructure."  There won't be
anything alternative about the successor energy regime.
   Right now everything is an alternative to oil.  Soon
these other sources will become the main ball game.  I was
gratified to read about the large remaining natural gas
reserves.  Reformation of natural gas is the best
immediate source of fuel hydrogen, and there's plenty of
it.  Making the transition to a hydrogen economy will
cost, but it will certainly be possible.
    On balance, I'd consider this book a Viridian must-
read.  It's a wake-up call, a particular Viridian
competence.  Every important opinion needs enthusiasts as
promoters.  I'll be promoting the lesson of Hubbert's
peak; please do likewise.

Eric Hughes

From June 13 NEW YORK TIMES:

Rolling Stone, Struggling for Readers, Names Briton as Editor
By DAVID CARR

Rolling Stone, a magazine that all but defined the American countercultural
epoch, yesterday named a British managing editor schooled in the racy ways of
contemporary English men's magazines. The appointment signals the end of Rolling
Stone's history as a publisher of epic narratives and literary journalism, in
part because the owner, Jann Wenner, believes that today's young reader has
little patience for long articles.
    The new editor, Ed Needham, comes from the English-owned FHM (For Him Magazine),
whose two-year-old American version is the nation's fastest-growing magazine.
Its circulation is now more than a million, bigger than that of Esquire or GQ.
    Rolling Stone, meanwhile, has struggled to keep its readers and advertisers. in
the face of competition from magazines like Entertainment Weekly and the music
magazine Blender. Mr. Wenner has decided on a gamble that his storied magazine —
which has published Tom Wolfe and Hunter S. Thompson among others — can be
reconfigured for a new kind of reader. The current audience for Rolling Stone
has grown up on "Fear Factor," not "Fear and Loathing in Las Vegas."
    And in a world saturated with media choices, many editors have concluded that
the words in magazines are often beside the point, as some of the more
successful publications like Maxim communicate visually with funny charts,
outrageous photos and articles that are increasingly little more than captions
on pictures. Mr. Wenner seems to agree.
    "There is so much media around," said Mr. Wenner, who retains the title of
editor. "Back when Rolling Stone was publishing these 7,000 word stories, there
was no CNN, no Internet. And now you can travel instantaneously around the
globe, and you don't need these long stories to get up to speed."
    "We cover change, and we have to change in response to the times," Mr. Wenner
added, saying that the fundamental mission of the twice-a-month magazine would
not be altered, but the execution would.
    While he said he would not turn Rolling Stone into a a so-called laddie
magazine, Mr. Needham promised that he would reintroduce the element of surprise
to the 35-year-old publication. Mr. Needham emphasized that there would still be
feature articles, just that they would be shorter and better illustrated.
    "All the great media adventures of the 20th century have been visual," said Mr.
Needham, 37, who grew up in Cambridge, England. "Television, movies, the
Internet, they're all visual mediums, and I don't think people have time to sit
down and read. The gaps in people's time keep getting smaller and smaller, and
the competition is getting more intense. It's one of the facts of media life."
    Another editor recently hired by Mr. Wenner, Bonnie Fuller, is applying those
lessons to US Weekly. Ms. Fuller's celebrity magazine has become a circus of
photos, gossip and fashion faux pas, and is finding early success on the
newsstand, according to officials of Wenner Media.
    In April, when Mr. Wenner dismissed Robert Love, who had been at the magazine
for 20 years and managing editor for four and a half years, he made it clear
that he was looking for a less wordy approach to help stem Rolling Stone's
slide.
    Its ad pages fell more than 25 percent from 1999 to 2001, hit hard by the
continuing flight of tobacco ads from youth-oriented magazines. (Through the
first five months of this year, however, it has rebounded slightly, by 2.4
percent.) Its circulation has remained flat at about 1.25 million, but its
newsstand sales — a barometer of a magazine's vitality with readers — fell
nearly 10 percent in the last half of 2002 compared with the period in 2001,
according to the Audit Bureau of Circulations.
    Some of those readers and advertisers have moved to magazines like Blender,
which has used short pieces, provocative writing and humorous headlines and
captions to stand out in a crowded marketplace with music magazines like Vibe
and Spin. The magazine, which is owned by Dennis Publishing, which also produces
Maxim, promises advertisers that it reaches 350,000 paying readers with each
issue. Beginning with its August issue, Blender's issues will increase from
every other month to 10 times a year.
    Rolling Stone is also facing stepped-up competition from Time Inc.'s
Entertainment Weekly, which recently initiated a monthly music supplement called
Listen2This.
    The issue of reviving Rolling Stone is a critical one for the privately held
Wenner Media, which publishes Men's Journal in addition to Rolling Stone and Us
Weekly. The music magazine has historically served as a cash machine to finance
Mr. Wenner's other endeavors. To fight a growing perception that Rolling Stone
could be the next Playboy — a hugely successful magazine that has lost its
salience in a new cultural context — Mr. Wenner has decided to embrace changing
readership habits rather than to outrun or ignore them.
    The magazine has been graphically updated by its new art director, Andy Cowles,
who previously worked at Q, a British music magazine. But it still has a
tendency to lavish attention on aging rockers like Mick Jagger.
    Mr. Wenner remains unapologetically involved in the editorial affairs of Rolling
Stone, although company executives and editorial staffers say he has given wide
latitude to Ms. Fuller at Us Weekly as she remakes the magazine into a
star-driven weekly for women. Mr. Wenner said that Mr. Needham would be given
similar permissions to remake the magazine he founded.
    "He has great qualities. He has a demonstrated track record as a modern magazine
packager and those trumped everything else," Mr. Wenner said.
    Reached in Colorado, Mr. Thompson, whose articles defined the early version on
the magazine, was among those surprised by Mr. Wenner's hiring of Mr. Needham.
"It seems as if he's in dire straits. Has it really come to that?" he said.
    Others think the choice of Mr. Needham makes sense.
    "It seems when people are trying to develop media vehicles for young people,
they are going for the shorter attention span," said Lawrence Teherani-ami a
media director at Wieden & Kennedy, an advertising agency that represents
companies like Nike. "I don't think there is anything inherently wrong with
that. I just hope that Rolling Stone keeps its heritage of being the source of
great reporting on youth culture."
    Mr. Needham studied American literature at Sussex University but came of age
professionally and personally in the laddie magazine world of England. After
working as a freelancer, he became deputy editor of the British FHM in 1996 and
editor in chief in 1997. The owner of FHM, the British publisher EMAP, then
selected him to edit a new American version of the magazine.
    Despite Dennis Publishing's having a three-year head start with Maxim, FHM has
rapidly found reader and advertiser acceptance with the classic laddie
fundamentals of pictorials of relatively obscure celebrities, jokes and
tutorials on how to be a modern man.
    "The overlap between FHM is pretty slender — Britney Spears and Jennifer Lopez —
but I respect the magazine enormously," Mr. Needham said of Rolling Stone. "It's
a magazine that is very faithful to its traditions, perhaps to a fault, and
there has to be a bit more crafting of the magazine to make it a success on a
very brutal newsstand."

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Have a SIMPLY TSFAT event in your community and give yourselves a breath of fresh air!!"

Heads I Win, Tails I Win
By ROGER LOWENSTEIN

Every year, in an annual rite of spring, SBC Communications discloses the
principles that it follows in setting pay for its top executives.
    As with all companies, this information is contained in the annual proxy
statement, and as is also common, SBC purports to follow some basic credos of
American business.
     A sprawling Baby Bell with headquarters in San Antonio, SBC says its aim is to
attract and retain high-quality executives, those who will ''enhance the
profitability'' of SBC. And its foremost principle in achieving this goal is to
''align the financial interests of SBC's executives with those of SBC and its
shareholders.''
    This is an all-American notion, just as SBC is an all-American company. Though
not as well known as AT&T and MCI, SBC provides the dial tone in the Southwest,
California, the Midwest and Connecticut -- that is, to one in three Americans.
SBC is typically American in one other respect: somewhere along the way, its
stated compensation principles became little more than platitudes.
    For the purpose of examining a single C.E.O.'s compensation, I picked SBC for
its unspectacular qualities. It is profitable and professionally managed, and
its C.E.O. is well regarded in his industry. Like many C.E.O.'s, he pursued a
bold growth strategy for much of the 90's, had some good early years and more
recently gave back much of his gains. In the last three years, his stock has
fallen 27 percent -- more than either the Standard & Poor's 500 or the stocks of
his Baby Bell peers. But the rate at which the boss was compensated kept
growing.
    SBC's chief executive is Edward E. Whitacre Jr. A 60-year-old, 6-foot-4 lifer in
the Bell system, he was hired by the old Southwestern Bell back in 1963 for a
job that included hammering fences. He has been the boss since 1990 and now
rakes in an annual sum that salaried executives a generation ago could scarcely
dream of. Last year, the third year in a row in which SBC's share price
declined, Whitacre received the largest pay package of his career -- one with a
present value of $82 million.
    SBC is not, by present standards, a compensation horror story. Ed Whitacre's
record bears little resemblance to the catastrophes overseen by others in his
industry, like the lavishly paid C.E.O.'s employed by Lucent, AT&T and WorldCom.
Nor did Whitacre preside over an Enron-style scandal or pocket tens of millions
before taking his company into bankruptcy, as Linda Wachner did at Warnaco.
    Whitacre exemplifies how the system itself is shot through with hypocrisy. And
because his tenure is long, his collected proxies offer a view of the system's
gradual corruption. Over his 12 years as C.E.O., while Whitacre reaped a
fortune, his stockholders have done precisely average. Their return from
appreciation and dividends is 11.5 percent a year -- a notch below the S&P 500,
at 12.8 percent, and a sliver higher than its peer companies.
    Executive pay has been soaring for two decades, but over the last couple of
years, as many big companies have seen their stock pummeled, the
pay-for-performance rationale that was supposedly driving these packages has
been exposed as a fraud. Moreover, as executive pay has grown ever more
dependent on share prices, the incentive to manipulate earning reports and
thereby boost shares has also increased.
    The superinflation of executive wages began in the 1980's. Following a dismal
decade for stocks, corporate boards began focusing more on their share prices.
This was largely defensive: low stock prices spawned a takeover wave. The best
defense against a T. Boone Pickens or a Carl Icahn was to get your stock out of
their reach.
    ''Promoting shareholder value'' became watchwords of corporate America, as if
that hadn't been the duty of management all along. Boards wanted to make
executives think like entrepreneurs. The model became Silicon Valley, where
companies motivated the troops by liberally dispensing options (and where many
entrepreneurs became fabulously wealthy). The beauty of options, to corporate
boards, is that they don't count against the income statement. They are like
Monopoly money. Of course, the more you issue options, the more you dilute the
value of existing shares, but in the bull market of the 1990s, this was neatly
obscured.
    Ed Whitacre's cash take, at first, was relatively stable -- in 1992, he got $3.1
million; two years later, $4.4 million. But as SBC grew, Whitacre was rewarded
with options that gave him the chance to earn a small fortune over many years.
For instance, in 1994 Whitacre received options entitling him to buy 161,739
shares, at the price prevailing in 1994, over the next decade. So if, for
instance, the stock doubled, Whitacre stood to make $6.6 million; if it tripled,
he would make $13 million.
    That didn't completely align his interests with those of cash-paying
shareholders, because Whitacre had nothing to lose if the stock went down. Also,
a 10-year fixed-priced option -- the standard variety in corporate suites --
entails something of a freebie, because even if Whitacre did only a mediocre
job, the stock was likely to rise somewhat. (Even a portfolio of Treasury bonds,
vintage '94, would have nearly doubled.)
    So Whitacre's options would reward him not just for the part of the stock's rise
that reflected superior performance, but also for the part that reflected what
might be termed normal business progress, or progress at the rate of risk-free
Treasury bonds.
    Meanwhile, in industry circles, Whitacre was winning a name as a tough and
effective leader with an L.B.J.-like aptitude for cajoling regulators. He was
especially renowned for his skill at lobbying to keep long-distance companies
out of local services, a monopoly. He also pushed SBC into sexy new terrain,
like wireless, long distance and the Internet.
    Profiles described Whitacre as hard-working, not given to publicity and
uninterested in corporate frills. While he maintained a ranch near Marble Falls,
Whitacre wore business pinstripes to work, not cowboy boots.
    He also developed a strong interest in stock options. In 1994, SBC's stock price
was virtually flat. But the following year, Whitacre got a fresh -- and
substantially larger -- batch of options. Though the shareholders received a
poor return, Whitacre was granted a fresh start.
    Now that he was getting huge annual grants, the arithmetic subtly changed. To
become rich, Whitacre merely had to raise the stock above its level of any
particular year. Since stocks fluctuate, some of his grants would tend to be at
depressed prices, meaning that his ''option'' to get wealthy became a virtual
certainty. The frequency of the awards thus undermined the principle of pay for
sustained long-term performance. By turns, a system designed to motivate became
one to simply enrich.
    In 1995, SBC shares rose sharply; in 1996, they fell. And in the following year,
Whitacre got what was then his biggest option grant ever, 345,000 shares. Those
1997 options didn't merely give Whitacre a fresh start; they handed him a golden
carrot for getting the stock back to where it had been. They were paying him for
treading water.
    The other way his pay changed was that his board began to grant significant
compensation aside from options. In 1995, Whitacre got $4.9 million. In 1996, an
off year for SBC, he got $6.6 million. In 1997, the total rocketed to $15.7
million. Including options, the total for that year was $21 million. These sums
were distributed over seven different categories: salary, bonus, ''other,''
restricted stock, options, long-term incentive plan and ''all other.'' This
seven-pocket approach served two purposes. First, the dollars that Whitacre
received in any one category were only a fraction of the total, minimizing the
appearance. Secondly, the board determined the total for each category by
different yardsticks, as if each were independent of the other. He would get
millions out of one pocket for overall leadership, millions out of another for
directing some special event like a merger and still more to ''retain'' his
future services.
    In 1997, for instance, Whitacre got $8.7 million as a ''special retention
grant.'' The most curious aspect of that award was that in 1998 Whitacre
received another retention grant, this time of $12.5 million. He has received
comparable awards in every year since, as if he were somehow both an
indispensable captain and a notorious flight risk.
    Whitacre also benefited from a permissive redundancy. Every year, he got a
''long-term incentive'' -- in 1997 it was $2.2 million -- rewarding him for the
rise in the stock over a three-year stretch. This just duplicated the effect of
his options.
    In 1997 as well, the board awarded Whitacre a $3.3 million ''bonus,'' largely
for his ''excellent leadership'' in fashioning a merger with Pacific Telesis
Group. This mimicked a national trend of awarding bonus pay for work once
considered to be part of the job. After all, if the Telesis merger turned out to
be a success, Whitacre would presumably benefit via his stock options. And if
the merger was too new to bear fruit for stockholders, why was the board
rewarding Whitacre ahead of the people whose returns his were supposed to
reflect?
    His total package, including the present value of options, soared to $29 million
in 1998 and $25 million the following year. But in 2000, the board was forced to
admit that various officers, including Whitacre, had failed to meet their yearly
targets. Accordingly, his bonus was cut by 25 percent to a mere $4.5 million.
    Nonetheless, Whitacre got a 32 percent hike in salary. The multipocket approach,
a staple of the consultants who design packages for SBC and most other big
corporations, thus put the lie to the appearance of risk; if Whitacre was
punished from one pocket, he was promptly redeemed from another. Indeed, the
board doubled his options award, raising the total compensation for 2000 to a
present value of $29 million. The total kept on rising.
    Increasingly, the board's human resources committee, which deals with
compensation, cited metrics related to SBC's size or general reputation but not
necessarily to its profitability or long-term stockholder returns. Though SBC's
returns had outpaced those of other Baby Bells in Whitacre's early years, in the
last five years they were 20 percentage points lower. And that is the period
when Whitacre has gotten the bulk of his pay. Boards typically take longevity
into account, and SBC is no exception-almost as if the board felt it had to make
up for some suddenly felt neglect when Whitacre was just cutting his teeth.
    In any case, the proxy has found plenty on which to commend the C.E.O. -- for
''transforming SBC from a regional carrier to a national and global
competitor,'' for meeting ''extraordinary challenges,'' for becoming ''one of
the leading chief executive officers in the United States.''
    The directors, who earn $60,000 a year, no doubt believe this; they have been
close to Whitacre and have been endorsing his pay for a long time. He has also
been endorsing theirs. Two of SBC's nominally independent directors -- August A.
Busch III, chairman of Anheuser-Busch, and Charles Knight of Emerson Electric --
run companies for which Whitacre is a director. Most of the other 18 directors
have either served with Whitacre for at least 10 years or were directors of
companies that Whitacre acquired.
    Certainly there was much to admire in Whitacre's bold management. With the world
of telecommunications rocked by technological change and regulatory upheaval,
Whitacre reckoned that to sit still was to invite slow decimation. He followed
the Telesis merger by acquiring Southern New England Telecommunications
Corporation in 1998 and Ameritech, a giant rival, in 1999 -- a blockbuster $62
billion combination.
    It is not clear that the merger strategy was wrong or that a better strategy was
at hand. But the telecom industry was increasingly unattractive. Technology was
reducing the cost of service, and rivals were snapping up slices of SBC's former
monopoly. While SBC's revenues grew to $40 billion, the empire ranging from
Capetown to Hartford with nearly 200,000 employees, most of its cash flow was
being consumed by reinvestment, and its growth was starting to sputter.
    For the last four years, SBC's net income growth has been anemic. On closer
examination, the picture was worse. Corporations with overfunded pension plans
are allowed to book some of the excess as profit, even though the money never
reaches the shareholders. In the late 1990's, as the stock market boomed, SBC's
plan, like many, became overfunded, allowing SBC to pad its net income. In 2000,
this contributed $1.1 billion, 14 percent of its total. Then, in 2001, SBC's
green eyeshades raised the rate at which they assumed that the pension plan
would appreciate in the future -- by a full percentage point. Since the market
was then in meltdown, this was a curious decision. In fact, according to a study
of 50 big pension plans by Milliman USA, SBC raised its rate by more than any
other company (most didn't raise it at all). In real dollars, SBC's plan lost
money last year. But since its assumed rate of appreciation was higher, so was
the contribution to income. Last year it equaled $1.45 billion -- 20 percent of
SBC's so-called bottom line. In setting pay levels, SBC says the board
distinguished between telephone revenue and pension plans. The stock market
presumably did not.
    SBC's proxies have repeatedly cited 1996, the year of the Telecommunications
Act, as the start of Whitacre's transformation. In 1996, SBC earned $1.73 a
share (split-adjusted). Even if you accept SBC's reported profit for 2001 at
face value, its per-share earnings, adjusting for a stock split, have grown by
only 4 percent per annum over that entire span.
    So how did SBC's board justify an $82 million package for 2001? The proxy cited
Whitacre's ''solid financial results,'' as well as SBC's strong balance sheet,
the ''extraordinarily challenging'' market conditions and Whitacre's status as a
''leading'' C.E.O., deserving of a salary and bonus in the 75th percentile of
his peers.
    There is nothing unusual in this. Most companies justify their pay levels
according to peer groups; all believe their own C.E.O. deserves to be in the
upper echelon; and each thus helps to ratchet up the scale for all. Until
recently, Verizon, a rival Baby Bell, had two C.E.O.'s, each of whom received
$14 million last year in addition to at least $14 million apiece in options
value. Whether SBC or Verizon got more for the C.E.O. buck becomes a senseless
debate; indeed, at such levels, all attempts to rationalize pay become
meaningless.
    After reporting this article from public filings, I called SBC for comment. Jim
Ellis, the general counsel, took strong exception to the idea that his boss is
overpaid. ''If he's a poster boy, it isn't for abusing the system or being off
the reservation,'' Ellis maintained. SBC's performance, he said, ranked in the
top third of a group of 20 companies examined by the board, yet his pay was less
than the median of that group. Ellis added that Whitacre ''has done exceedingly
well in positioning the company not just for growth periods but for down
periods.''
    The C.E.O.'s most recent package included a Bunyan-size options grant of 3.6
million shares. That was partly ''to assure his continued presence,'' Ellis
said. The present value of these options, according to the compensation
consultant Pearl Meyer & Partners, is $61 million. In effect, the board turned
the stock's decline to Whitacre's advantage, since it chose a time when the
stock was down (and options were cheap) to give him four times as many shares as
when the stock was at its peak. Of course, Whitacre will have to turn the stock
around to cash in on the award. But if he does, he will reap an immense fortune
-- tens of millions of dollars -- merely for recapturing the ground that his
shareholders had already lost.
 

Roger Lowenstein, the author of ''When Genius Failed,'' writes frequently for
the magazine and is working on a book about the dot-com bubble.

Who sold all the pies?  Not Germany or Argentina that's for sure.

The Pie World Cup is hotting up with most of the first round games now
finished and its good news for the English (Steak & Kidney), Irish (Irish
Stew)and French (Beef bourguignon) but sadly not such good news for the
Germans (Sour Kraut)and Argentineans (Corned Beef Hash) who are both
definitely out.

The classic French Beef Bourguignon side has proved itself the classiest act
so far, thrashing the Uruaguan rabbit pie & the disappointing Danish bacon
tart and has even overcome a very strong Senegalese Chicken Yasser which
qualifies in 2nd place from group A.

England have started strongly with Steak & Kidney beating both an
experimental Argentinean Corn Beef line up and an over fancy Swedish Salmon
and Dill combo.  They play the Nigerian Spinach & Peanut stew tomorrow to
decide who goes through in first position. England are hot favourites but
the Nigerian is proving itself one of the tournament surprises, performing
well particularly in front of the vegetarians who are showing the increased
power in this pie world cup.

The tournament has been organised by the Spitalfields based Square Pie
Company who are making special pies for each of the teams in the world cup.
The national pies are on sale on the day the teams play in the first round
in the football world cup with each pie sale counting as goal and the best
two pies from each group going through to the next round and so on until the
World Pie Final on 30th June. The company normally offers a range of 12
types of hand made freshly baked quality pies served with mash and gravy.

The German Sour Kraut & pickle is booking its flight back to Berlin despite
today's great victory over the critics favourite the Cameroon's Lamb &
quince tart which beats it into the 2nd round with a better pie difference,
just avoiding the need to draw shallots to decide who goes through.

Don't pie for me Argentina. The gamble on playing a solid but old school
corned beef hash has backfired on the Argentineans with thrashings by both
England and Nigeria meaning their competition is over and its just a wooden
spoon playoff with the Swedish salmon and dill tomorrow.

The experimental Hot Dog pie from host nation Korea hasn't really cut the
mustard with only one point so far and lost surprisingly yesterday to the
USA's New England Clam Chowder.

The Spanish Chorizo Sausage is performing well and looks sure to make mince
meat from the expensive yet under performing South African Wild Boer.

Group H - the so called group of death - has been the closest fought of the
lot with the unfancied Tunisian Chicken and Olive Emshel coming from behind
to lead the group with narrow victories over both the fancied Belgium Moules
& Hoergarden and Russias Pork Stroganoff. Fridays game against Japan's Beef
Terryaki wil decide who goes through .

Full results and qualifying pies can be seen at www.squarepiecompany.com
which has pie results updated daily.

"The pie enjoys a long and illustrious heritage with football and we want to
strengthen that relationship", say co-founders Martin Dewey & Sean Hegarty,
"From now it's not about 'Who ate Them' - but more about 'What's in Them'
as we only use the best ingredients in our pies'.

The world cup pies, as well as the company's traditional range, are on sale
from the Square Pie Shop, South East Corner Spitalfields Market, off
Bishopsgate 5 mins from Liverpool St Tube and are served with quality mash,
peas and gravy if you want.  The shop open between 11.00 and 3.00pm weekdays
and all day Sunday as well as early opening for breakfast pies when England
are playing.

The market has put up an enormous 6 metre screen right next to the shop and
is showing all the games live.

For more info please email info@squarepiecompany.com or call Martin Dewey on
0208 980 2051.

Full World Cup Line Up

Argentina               Corn Beef Hash
Belgium                 Moules in hoergarden
Brazil                  Fejuda - pork and bean cassoulet
Cameroon        Lamb & quince tart
China                Filou parcel of crispy duck
Costa Rica              Chicken & yellow squash with apricots
Croatia              Shopski - lamb shank in red wine with sweet peppers
Denmark                 Bacon Tart
Ecuador                 Trout tart
England                 Steak and kidney
France               Beef bourguignon
Germany                 Bratwurst & Sour kraut
Italy                   Tricolore tart with avocado, mozarella and tomato
Japan                Chicken terryaki
Korea          &nbs