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If bitumen doesn't flow well...

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Posted by MidlandMike on Sunday, February 16, 2014 9:39 PM

Dilbit (suitable for pipeline) is 28% dilutent.  Railbit is 17% dilutent.  Reference Fred Frailey, Trains Mar. 2014.  I'm not sure what you mean by "five-year economics of building a pipeline", but pipelines usually want a 20 year commitment from shippers before they will build it.

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Posted by daveklepper on Monday, February 17, 2014 12:33 AM

Euclid

I suggested an idea of a better way of rail shipping bitumen, based on the premise that shipping raw bitumen by rail would save money by avoiding the following:

1)    The cost of adding and removing diluent.

2)    The cost of shipping the added weight of the diluent.

3)    The cost of return shipping the diluent back to the origin for a new shipping cycle.

The logistics of this is based on what I have read and what Fred Frailey has said in his blog, and (I assume) in his recent article in Trains magazine. 

Rail tank cars require less diluent than a pipeline, if the bitumen is heated in order to get it to flow out of a tank car.  My suggestion involves the use of a special railcar and unloading process that does not require heating the raw bitumen to get it out of a tank car.  Therefore, this process avoids the costs associated with diluent; and it speeds up the unloading process.  I do not know if speeding up the unloading process saves money.  Much of that process is the time and money spent to heat the bitumen, and even when unloaded more quickly, the bitumen still needs to heated for refinery processing. 

However, according to posts by Greasemonkey, my idea for special cars is pointless because diluent needs to be in the load before and after the rail trip.  So nothing can be saved by eliminating it from the rail trip.  In fact he says removing it for the rail trip would actually add cost because it would have to be reintroduced after the rail trip.

I believe that this information from Greasemonkey is incorrect because it conflicts with many references that I have read, including the information from Fred Frailey.  For example, here is a reference that supports my understanding of the advantage of rail shipping without diluent, and clearly refutes the information from Greasemonky:

From the linked article:

Moving to pure bitumen by rail if pipelines are constrained
Pure bitumen rail movements today are not happening because the necessary infrastructure for shipping pure bitumen does not exist. Moving pure bitumen requires specialized equipment in Alberta, such as heated tanks connected by heated pipelines, modifications to rail on-loading facilities, heated rail cars, and units for removing diluent (diluent is added to the bitumen in the extraction and processing steps, this needs to be removed before shipping pure bitumen). In the USGC specialized rail off-loading facilities are also needed. The advantage today of moving dilbit, rather than pure bitumen, by rail is that it does not require as much unique rail infrastructure as pure bitumen. However, by moving dilbit by railcar producers are making part of the investment needed for supporting pure bitumen movements.

The rationale, so far, for not investing in the pure bitumen transport option is that most oil sands producers are assuming that sufficient pipeline capacity will become available in a few years. In order to receive a payback on building pure bitumen railing infrastructure, producers must anticipate its use over a longer time frame—perhaps five years. However, if producers anticipate that new pipeline capacity will not keep pace with oil sands growth, we expect that they will make investments in more efficient rail transport, including equipment for moving pure bitumen. These investments would narrow the gap between the economics of transporting oil sands by pipeline and by rail.”

 

http://unconventionalenergy.blogs.ihs.com/2013/09/10/oil-sands-bitumen-a-unique-case-for-rail-economics/

Based on Euclid's idea, but modified so that NO SPECIAL RAIL EQUIPMENT NEED BE REQUIRED, I wish to return to an idea that I did not expect to see realized, namely, the development of an all-oil-product plastic, to form containers into which pure bitumen can be shovled or whatever, filled, and then sealed airtight witih heat with covers of the same material, strong enough to be stacked, sized to fit on a fork-lift truck, allowing use of regular intermodal containers, with the containers simply merged with the bitumen at the refinary, and the refinary producting the new containers sent back in the intermodal containers that broght the bitiumen to the refinary.

Others can tell me if this idea is practical.

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Posted by Greasemonkey on Monday, February 17, 2014 1:37 AM

Euclid
However, according to posts by Greasemonkey, my idea for special cars is pointless because diluent needs to be in the load before and after the rail trip.  So nothing can be saved by eliminating it from the rail trip.  In fact he says removing it for the rail trip would actually add cost because it would have to be reintroduced after the rail trip.

I believe that this information from Greasemonkey is incorrect because it conflicts with many references that I have read, including the information from Fred Frailey.  For example, here is a reference that supports my understanding of the advantage of rail shipping without diluent, and clearly refutes the information from Greasemonky:

From the linked article:

Moving to pure bitumen by rail if pipelines are constrained
Pure bitumen rail movements today are not happening because the necessary infrastructure for shipping pure bitumen does not exist. Moving pure bitumen requires specialized equipment in Alberta, such as heated tanks connected by heated pipelines, modifications to rail on-loading facilities, heated rail cars, and units for removing diluent (diluent is added to the bitumen in the extraction and processing steps, this needs to be removed before shipping pure bitumen). In the USGC specialized rail off-loading facilities are also needed. The advantage today of moving dilbit, rather than pure bitumen, by rail is that it does not require as much unique rail infrastructure as pure bitumen.

I'm afraid I'm having a difficult time understanding how the link you provided, which clearly states what I have been saying, clearly refutes the information I've given.

I fully understand that you do not want to admit that I actually know what I am talking about.  That would dash the whole idea that you have for dry shipping a product in a form it does not naturally resort to.  Please note, I am not saying it's not a neat idea, or that I feel rail transport is anything but a good, and feasible method for shipping bitumen.  All I am saying, is that, from my experience in working in the industry, producing this very product, the method you are proposing is simply going to add costs over the existing shipping methods.

As both I, and the quoted article stated, DRUs are required to remove the diluent from the bitumen in order to ship it in a pure form.  Also stated by both myself and the article, is the fact that diluent is required for extraction and processing of the bitumen.  I don't know how I can be more clear on this.  If the bitumen is shipped in a pure form, it needs to be upgraded to a feedstock that is suitable for refining.  This is the processing referred to in the article.  Upgrading IS NOT refining.  Upgrading is what we do in our upgraders, to produce synthetic crude oil. That is the material that is refined into the consumer goods we all know.  Raw, or pure bitumen, cannot be refined.  It must first be upgraded, and that is a process that requires diluent.  To date, there has not been a process developed that can upgrade bitumen into a refineable product that does not require diluent.

Please, feel free to continue to not believe me, that is fully your choice and right.  I feel all I can contribute to this has been set forth, since you have no desire to listen to what I have to say.  I was simply trying to help you understand the way it really works.  I'll now return to my job, producing the product you feel I know nothing about.

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Posted by daveklepper on Monday, February 17, 2014 1:48 AM

Greasemonkey:  The light finally dawned on me:  What you are saying is the the DRU is really required as part of the extraction process to remove the liquid that is required to get the betumen from the sand, liqued that would be a contaminant in the refining process.  So the choice is really between shipping the stuff with the contaminating extraction flued, or shjppng it with DRU.  And the first makes no sense, because you would be shipping garbage along with product.  Whereas shiping with DRU, you are shipping only product useful in the refining process without any garbage.

So Euclid's idea, and my takeoff on it, may be useful  ------but for some other product, not bitumen. 

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Posted by Euclid on Monday, February 17, 2014 3:55 AM

Greasemonkey

Euclid
However, according to posts by Greasemonkey, my idea for special cars is pointless because diluent needs to be in the load before and after the rail trip.  So nothing can be saved by eliminating it from the rail trip.  In fact he says removing it for the rail trip would actually add cost because it would have to be reintroduced after the rail trip.

I believe that this information from Greasemonkey is incorrect because it conflicts with many references that I have read, including the information from Fred Frailey.  For example, here is a reference that supports my understanding of the advantage of rail shipping without diluent, and clearly refutes the information from Greasemonky:

From the linked article:

Moving to pure bitumen by rail if pipelines are constrained
Pure bitumen rail movements today are not happening because the necessary infrastructure for shipping pure bitumen does not exist. Moving pure bitumen requires specialized equipment in Alberta, such as heated tanks connected by heated pipelines, modifications to rail on-loading facilities, heated rail cars, and units for removing diluent (diluent is added to the bitumen in the extraction and processing steps, this needs to be removed before shipping pure bitumen). In the USGC specialized rail off-loading facilities are also needed. The advantage today of moving dilbit, rather than pure bitumen, by rail is that it does not require as much unique rail infrastructure as pure bitumen.

I'm afraid I'm having a difficult time understanding how the link you provided, which clearly states what I have been saying, clearly refutes the information I've given.

I fully understand that you do not want to admit that I actually know what I am talking about.  That would dash the whole idea that you have for dry shipping a product in a form it does not naturally resort to.  Please note, I am not saying it's not a neat idea, or that I feel rail transport is anything but a good, and feasible method for shipping bitumen.  All I am saying, is that, from my experience in working in the industry, producing this very product, the method you are proposing is simply going to add costs over the existing shipping methods.

As both I, and the quoted article stated, DRUs are required to remove the diluent from the bitumen in order to ship it in a pure form.  Also stated by both myself and the article, is the fact that diluent is required for extraction and processing of the bitumen.  I don't know how I can be more clear on this.  If the bitumen is shipped in a pure form, it needs to be upgraded to a feedstock that is suitable for refining.  This is the processing referred to in the article.  Upgrading IS NOT refining.  Upgrading is what we do in our upgraders, to produce synthetic crude oil. That is the material that is refined into the consumer goods we all know.  Raw, or pure bitumen, cannot be refined.  It must first be upgraded, and that is a process that requires diluent.  To date, there has not been a process developed that can upgrade bitumen into a refineable product that does not require diluent.

Greasemonkey:

I do hear your explanation, and part of it is confirmed in the article, as you say.  However, much of the article disagrees with what you say.

The article does clearly state, as you do, that diluent is in the bitumen before shipping, and to ship without the diluent, the diluent must be removed before shipping.  And I understand your point that removing it costs money.

But you go further and differ from what the article says when you conclude that the cost of removing the diluent is a net loss, and thus pointless.  Clearly, the article does not agree with you on that point.    

From the article:

 

“By railing pure bitumen (instead of dilbit in a pipeline or rail car) an oil sands producers can avoid some expense—specifically cost for the diluent—plus there would be fewer barrels to transport (compared with dilbit, shipping pure bitumen decreases the total volume moved by 30%). These savings offset some of the extra costs associated with rail transport.”

 

Clearly, this says there is an economic advantage to shipping pure bitumen, which is the opposite of what you have been telling me.  If it were a net loss as you say, there would be no economic advantage.   

You tell me that there is no economic advantage to shipping pure bitumen because diluent is needed in the bitumen before and after shipping for reasons not related to shipping.

The article says that there is an economic advantage to shipping pure bitumen, and to gain that economic advantage of shipping pure bitumen, new investment in infrastructure must be made.  The new rail car method I suggested would fall into that category of new infrastructure for shipping pure bitumen.  But I have no idea whether it is economically viable in that context of new infrastructure to avoid the expense by railing pure bitumen. 

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Posted by daveklepper on Monday, February 17, 2014 6:25 AM

Euclid:  Have not you learned that the dilutant used in shipping is the same dilutant that is neccesary to remove that dilutant (not a petroleum product) that is essential to removing the bitumen from the sand?

What you a i were essentially asking for, without understanding the process, was removal of the first dilutant AND THEN REMOVAL OF THE SECON DILUTANT THAT WAS NECESSARY TO REMOVE THE FIRST DILUTANT.

Now do you understand why what you and I wanted was not cost effective?

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Posted by Overmod on Monday, February 17, 2014 8:40 AM

MidlandMike
I'm not sure what you mean by "five-year economics of building a pipeline", but pipelines usually want a 20 year commitment from shippers before they will build it.

I was referring (or thought I was) to the original article's reference that it will take five years for a pipeline option for dilbit to be provided practically 'end to end'. I apologize if that's mistaken.   Presumably this involves a considerable amount of new construction; I don't have enough interest in the subject to research exactly what's involved and get hard details.

A '20 year commitment' is utterly irrelevant in this context -- presumably, it's the time involved in construction, etc. to achieve the technological infrastructure that they're discussing, and the cost involved in building that out.  How they then price the service will be interesting, of course, and very relevant to Fred's idea of absolutely reducing the amount of diluent required to ship bitumen by rail... but I don't see athat being the sense of what was being said in that part of the article.

Yes, I do think Fred et al. were talking about removing 'diluent' used in the extraction of the bitumen (presumably then preserving and 'recycling' it for the extraction process) and then adding the proportionate amount of 'optimized' diluent at the refinery end needed to process the bitumen.  If I draw a correct conclusion from the notes about condensate being countershipped to the extraction sites, conserving even small percentages of 'extraction' diluent may be economically significant --

,,, on the other hand, I expect there is both a time factor and cost factor associated with removing diluent (presumably by some combination of heating and vacuum/reduced pressure, perhaps with a cosolvent) and therefore some determinable level of diluent might mark the 'sweet spot' for diluent even in the 'reduced' bitumen Fred is proposing to use.  I haven't any earthly idea about what that level is, but I suspect there are several people here who either know quite well or can find out in a short time.  I, for one, would like to see the 'hardest' possible information and details about this.

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Posted by daveklepper on Monday, February 17, 2014 8:57 AM

Overmod, I think you need to read my previous thread again.  Just maybe Fred needs to read it also.

There are two dilutants at the extraction site.  The first to remove the Bitumen from the sand, and the second to remove the first diutant.   The second is also needed in the refining process for handling the biutmen and does not interfere with the refining process.  What Euclid and I were proposing, without realizing it, was two removals at the shipping and and restoring the second dilutant at the recieivng end.  This is obviously less cost effective than leeaving the second dilutant in.

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Posted by Overmod on Monday, February 17, 2014 9:18 AM

daveklepper
What Euclid and I were proposing, without realizing it, was two removals at the shipping and and restoring the second dilutant at the recieivng end.  This is obviously less cost effective than leeaving the second dilutant in.

Is the 'second diluent' at the receiving end optimally the same chemical or combination as used at the extraction end? 

I keep saying that the economics of shipping 'de-diluted' bitumen are going to have to be calculated net of all process steps.  But (perhaps this is for competitive or trade-secret reasons) no one except Greasemonkey is providing any discussion of those steps, or what their energy or other factor costs are. 

And there are two costs here.  Fred is talking about the cost of shipping to the transporting entity.  Obviously shipping bitumen without diluent, or with a bare minimum of diluent, saves transportation cost both in the volume that can be carried before a car 'weighs out' and in the reduced need to transport unnecessary process chemicals ... both ways.

On the other hand, the real cost that 'matters' is the cost to the oil companies that work with the bitumen.  Only part of that cost is a presumable 'obvious big saving' in volume, diluent backhaul, etc., and only when the whole cost is known can anyone say, with any particular intelligence, whether reducing bitumen for shipping is a good idea or not.

Of course, there's always the idea that railroads could start surcharging by load volatility or some other 'politically convenient' characteristic, and artificially inflate the cost of shipping dilbit, and thereby transmute 'their' cost benefit into something a shipper will also come to find 'of most benefit' (or perhaps I should say 'least inconvenience for the money they have to spend').  I hesitate to bring this up because I don't want the incivility in... a certain other thread... to metastasize here.

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Posted by daveklepper on Monday, February 17, 2014 1:19 PM

I think I may have read Greasemonkey's contribiutions just a bit more carefully than you and Euclid did, but possibly not.  What he says is that yes, the dilutant that chases out the chemicals used to extract the bitumen from the sand is the same dilutant that is required in the refining process.  So adding at the shipping end does double duty.  It is an oil diliutant itself and does not compromise the refined product in any way.  The added transportation cost is less than the cost of removing this dilutant and then restoring it.  I can imagine that removing it without a replacement might be very costly indeed.

I did not pick up on this right away.   Appaarently neither did Fred Frailey.

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Posted by Euclid on Monday, February 17, 2014 1:43 PM

 

 

 

daveklepper
The added transportation cost is less than the cost of removing this dilutant and then restoring it.  I can imagine that removing it without a replacement might be very costly indeed.

That is the unresolved question.  Greasmonkey confirms it; and Fred Frailey and the article I link to, conflict with it. 

 

Both the article I linked and comments by Fred Frailey say that shipping pure bitumen by rail saves cost overall, and is a worthy objective that will be pursued.  And both say that the only thing holding back the shipping of pure bitumen by rail at the moment is a lack of advanced infrastructure. 

Neither source says that shipping pure bitumen loses money overall due to the cost of removing diluent prior to shipping.  If that was the case, then neither source would say that shipping pure bitumen is a worthy objective.  It is pretty simple.   

It may very well be that Greasmonkey is right, but if he is right then Fred Frailey and the article I linked to are wrong.  It is clear as a bell that those two sources agree with each other, and are in conflict with what Greasemonkey is saying.     

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Posted by daveklepper on Monday, February 17, 2014 1:47 PM

And Greasemonkey says he is in that specific business.   Nowhere did Fred say he watched or  even learned the details of the extraction process.

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Posted by Euclid on Monday, February 17, 2014 2:39 PM

daveklepper

And Greasemonkey says he is in that specific business.   Nowhere did Fred say he watched or  even learned the details of the extraction process.

 

Here is another article that describes the quest to ship raw oil sands bitumen by rail.  Clearly, it describes the cost advantage of doing so:

https://rbnenergy.com/update-one-in-boost-for-canada-oil-by-rail-meg-plans-diluent-recovery-unit

From the article:

CALGARY, Alberta, Dec 6 (Reuters) - Canadian producer MEG Energy said on Friday it will build Western Canada's first diluent recovery unit, a C$75 million ($70.55 million) facility that could be a crucial step in the quest to ship raw oil sands bitumen by rail.

With a DRU, however, a company can efficiently ship oil from the field to the rail terminal by pipeline, then extract the diluent and put the bitumen onto heated and coiled rail cars, reducing the overall cost of shipping it south by rail.

"We would be looking at shipping undiluted bitumen. That increases our shipping capacity and the value of each barrel," MEG spokesman Brad Bellows said.

In theory, pure-bitumen rail shipments may even be cheaper than exporting diluted bitumen by pipeline, analysts say, although complicated logistics make the economics hard to predict.

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Posted by daveklepper on Tuesday, February 18, 2014 12:31 AM

Good piece of research.   They yet have experience with the operating costs of the unit.   interesting to note what greasemonkey has to say about this.

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Posted by MidlandMike on Tuesday, February 18, 2014 7:34 PM

Overmod

MidlandMike
I'm not sure what you mean by "five-year economics of building a pipeline", but pipelines usually want a 20 year commitment from shippers before they will build it.

I was referring (or thought I was) to the original article's reference that it will take five years for a pipeline option for dilbit to be provided practically 'end to end'. I apologize if that's mistaken.   Presumably this involves a considerable amount of new construction; I don't have enough interest in the subject to research exactly what's involved and get hard details.

...

I went back and read the original linked reference, and to quote from it:

"In order to receive a payback on building pure bitumen railing infrastructure, producers must anticipate its use over a longer time frame—perhaps five years."

This seems to literally say that the pure bitumen rail infrastructure (rail loading/unloading facilities and probably the dilutent reclaimer) would have to be operated for at least 5 years to pay for itself.  In your post, by "pipeline option" did you mean pipeline alternative (as in the rail option)?  Otherwise, Canadian dilbit has already been shipped by long distance pipeline for at least 5 years.  The article says to me that the oil sand producers don't want to bother with pure bitumen rail experiments and maybe don't accept that it will necessarily be cheaper.

Another thing I picked up from the blog article, was that railbit was in the 20-25% range.  This agrees with what I previously recall hearing of 21%.  Fred's article says 17%.  Perhaps the amount of dilutent depends on the viscosity of the particular bitumen, or maybe they are tweaking the the mix to save dead weight.

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Posted by MidlandMike on Tuesday, February 18, 2014 7:53 PM

Euclid

Here is another article that describes the quest to ship raw oil sands bitumen by rail.  Clearly, it describes the cost advantage of doing so:

https://rbnenergy.com/update-one-in-boost-for-canada-oil-by-rail-meg-plans-diluent-recovery-unit

From the article:

CALGARY, Alberta, Dec 6 (Reuters) - Canadian producer MEG Energy said on Friday it will build Western Canada's first diluent recovery unit, a C$75 million ($70.55 million) facility that could be a crucial step in the quest to ship raw oil sands bitumen by rail.

With a DRU, however, a company can efficiently ship oil from the field to the rail terminal by pipeline, then extract the diluent and put the bitumen onto heated and coiled rail cars, reducing the overall cost of shipping it south by rail.

"We would be looking at shipping undiluted bitumen. That increases our shipping capacity and the value of each barrel," MEG spokesman Brad Bellows said.

In theory, pure-bitumen rail shipments may even be cheaper than exporting diluted bitumen by pipeline, analysts say, although complicated logistics make the economics hard to predict.

As the article says in the last sentence you quoted, "complicated logistics make the economics hard to predict"

It goes on to say: 

"Theoretically it's a cost-effective way of doing it but there are a lot of moving parts. MEG is the bleeding edge. If it plays out, they will be ahead of the game and they will be in the money," said Sandy Fielden, an analyst at RBN Energy.

So the savings are not clear until they build and operate this first loading facility.  Nevertheless, I am glad that someone is taking the gamble to see if the theory is correct.

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Posted by Euclid on Tuesday, February 18, 2014 7:58 PM

MidlandMike

Overmod

MidlandMike
I'm not sure what you mean by "five-year economics of building a pipeline", but pipelines usually want a 20 year commitment from shippers before they will build it.

I was referring (or thought I was) to the original article's reference that it will take five years for a pipeline option for dilbit to be provided practically 'end to end'. I apologize if that's mistaken.   Presumably this involves a considerable amount of new construction; I don't have enough interest in the subject to research exactly what's involved and get hard details.

...

I went back and read the original linked reference, and to quote from it:

"In order to receive a payback on building pure bitumen railing infrastructure, producers must anticipate its use over a longer time frame—perhaps five years."

This seems to literally say that the pure bitumen rail infrastructure (rail loading/unloading facilities and probably the dilutent reclaimer) would have to be operated for at least 5 years to pay for itself.  In your post, by "pipeline option" did you mean pipeline alternative (as in the rail option)?  Otherwise, Canadian dilbit has already been shipped by long distance pipeline for at least 5 years.  The article says to me that the oil sand producers don't want to bother with pure bitumen rail experiments and maybe don't accept that it will necessarily be cheaper.

Another thing I picked up from the blog article, was that railbit was in the 20-25% range.  This agrees with what I previously recall hearing of 21%.  Fred's article says 17%.  Perhaps the amount of dilutent depends on the viscosity of the particular bitumen, or maybe they are tweaking the the mix to save dead weight.

I interpret the article to be saying that the industry is partly holding back on building infrastructure for shipping pure bitumen because they anticipate that pipeline capacity will catch up with rising production, and pipeline with diluent is expected to be cheaper than rail shipping without diluent.

Although, I also get the impression (from that article and the other one I linked to ) that this calculation is not 100% certain, and there is hedging of the bet by going ahead with plans to ship pure bitumen by rail in anticipation that it will be the cheapest option. Perhaps there is also some degree of uncertainty about pipelines overcoming their political resistance and becoming able to meet future demand. 

 

Midland Mike,

I posted this without seeing what you posted above, so I must clarify that the article I referred to was the other article that you were talking about on the previous page in relation to what Overmod had said.

I agree with what you say above, and that is basically my point of this post as well.

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