Obama Energy Gimmickry

[Herb Schaffler]

Posted on August 6, 2008, 9:42am | [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link.
The [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. editorial page takes Sen. Barack Obama to task for his silly idea to tap the Strategic Petroleum Reserve and his counterproductive windfall profits tax on oil companies proposal:

There were good ideas in the energy plan Sen. Barack Obama unveiled Monday. The most important of these is a cap-and-trade system for greenhouse gases that would auction off 100 percent of emission credits. The Illinois Democrat also announced a strong commitment to alternative energy sources and a stepped-up conservation effort. But then there were his proposals for a "windfall profits tax" on oil companies and his call to release oil from the Strategic Petroleum Reserve.
Modifying his previous opposition to tapping the reserve, Mr. Obama would swap more-expensive light crude held there for cheaper heavy crude "with the goal of bringing down prices at the pump." President Bill Clinton did such a swap in September 2000 -- yes, just before another presidential election -- and President Bush released oil in 2005 after Hurricane Katrina. Both moves led to drops in the spot price of crude but not the sort of relief at the pump that Mr. Obama promises. Even if they had, any relief from Mr. Obama's plan would be temporary while compromising a reserve intended to protect against disruptions in supply caused by wars, boycotts and the like.
Meanwhile, thanks to high crude oil prices, energy companies are, indeed, reaping immense profits. In the second quarter of 2008, Exxon and Shell each made over $11.5 billion. However, Mr. Obama's proposal to take some of this money from Big Oil and distribute it, like Robin Hood, to hard-pressed American families doesn't make economic sense. To be sure, Mr. Obama would not copy the tax enacted under President Jimmy Carter in 1980, which netted $40 billion before its repeal in 1988 while imposing huge administrative burdens -- and retarding domestic oil production. Mr. Carter's tax was levied per-barrel, so it directly increased the marginal cost of producing crude -- and made figuring out which barrels to tax ridiculously complicated. Mr. Obama wants a surtax on net oil company profits above a "reasonable" level. The tax would be set high enough to raise $65 billion over the next five years, and the revenue would fund a one-shot tax rebate that Mr. Obama would like to give to families and individuals this year.
Making Exxon surrender money that is now falling into its lap would not necessarily affect its longer-term plans or incentives. Indeed, some of Big Oil's "windfall" already will go to the government: The more profit the companies earn, the more corporate income tax they pay. But to add a five-year tax increase on top of that to pay for a one-year gift to voters would, indeed, increase the cost of doing business. That cost would be passed along in forgone investment in new production, lower dividends for pension funds and other shareholders, and higher prices at the pump -- thus socking it to the consumers whom the plan is supposed to help. If oil prices fall, there might be no windfall profits to tax. Then the Obama rebate would have to be paid for through spending cuts, taxes on something else or borrowing.
When his presumptive Republican opponent, Sen. John McCain (R-Ariz.), proposed a gas tax holiday as a way to reduce the high cost of driving, Mr. Obama showed political courage and intellectual honesty by refusing to sign on to that obvious gimmick. "It's an idea to get them through an election," Mr. Obama said. Now he has two such gimmicks of his own.

Post columnist Ruth Marcus also [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. :

As for a windfall-profits tax, if you want to produce more energy, it hardly makes sense to give oil companies less incentive to make investments. Nor does it make sense to tax companies because market conditions boost their profits -- any more than homeowners and shareholders should be penalized for selling during a boom.
Obama, too, has descended to misleading. He accuses McCain of wanting to give $4 billion in tax breaks to oil companies -- without mentioning that this is no special oil-only deal, just part of McCain's proposal for an overall reduction in the corporate tax rate, something Obama has said he'd consider. Does that put him in the pocket of Big Oil, too?

Forget cheaper gas, by November the candidates will be promising every voter whiter teeth, a full head of lustrous hair, and a great sex life.

[nohil-billy]

"Forget cheaper gas, by November the candidates will be promising every voter whiter teeth, a full head of lustrous hair, and a great sex life."

What happened? Did John Edwards get back in while I wasn't looking?


Obama will try any knid of quick fix possible to get himself an election victory in November. He has offered no long term energy solution. Obama is on the "Green Team" and wants us to depend on the development of alternative fuels, which is fine. However, we need more oil now and lots of it. The enviromentalists don't seem to realize that no matter what form of alternative fuel we come up with, we need the equivalent of 9 million barrels a day, every day.

DRILL HERE, DRILL NOW!!!

[Herb Schaffler]

Open ANWR Already!

The case for drilling—and more energy production

[LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. | August 14, 2008


The media constantly repeat the claim that it would take a decade to get the Arctic National Wildlife Refuge (ANWR) into oil production and about as long for offshore continental oil to start flowing. Most accounts promote the views of extreme environmentalists to make the issue appear so hopeless that we must instead "change our way of life" rather than tap into proven oil reserves. In July, CNN repeatedly reported that offshore drilling would take "seven to 10 years" to get into production. Yet Brazil's Petrobras expects its new finds in extraordinarily deep waters to already be producing 100,000 barrels per day in [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. . What is wrong with American oil companies that they would take so long?

In fact, the world oil shortage is political, not geological. In the U.S., the government prohibits drilling offshore. In Nigeria, civil strife has shut down major production. In Libya and Iran, Washington effectively blockaded and isolated the nations for years to inhibit new production. In Iraq, of course, the U.S. destroyed much of the infrastructure since the first Gulf war in 1991 and then blockaded reconstruction. In nations such as Russia and Mexico nationalism and corruption curtail increased production.
Outside of developed Western countries, the single largest reason for oil "shortages" is government incompetence and ownership of the subsoil rights so that landowners don't benefit from oil discoveries. In Patagonia, Argentina (a nation with abundant oil), I was told how it was common for landowners to try to hide any evidence of oil seepages from underground, lest the government oil company come in and ruin their lands with no benefit to themselves. Private mineral rights ownership is the reason some 90 percent of all oil wells drilled have been in the U.S. Scientific advances and innovative engineers keep coming up with ways to both discover new fields and [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link.

ANWR could become the fastest way to generate hundreds of billions of dollars of new oil. But laws need to be changed to [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. , as recently proposed by Rep. Michele Bachman (R-Minn.). Under current laws, it could indeed take 10 years to produce oil, compared to two or three years for the actual drilling and pumping. Additionally, leasing is done slowly, thanks to laws written when oil was plentiful. Such laws were designed to gain maximum upfront money for the government, not for speed. For example, BP recently paid $1.2 billion for a new offshore lease, some 400 miles East of Canada's Alaska's Prudhoe Bay. The cost and distance gives some idea of industry expectations as to the extent of oil reserves.

In Anchorage last month, Marilyn Crockett, executive director of the Alaska Oil & Gas Association, explained to me the following time frame for ANWR drilling: Expect 12 months or more for an Environmental Impact Statement after Congress approves drilling. And this is working fast. It would likely take much longer. Expect 12 months to 18 months for the Department of Interior to draw up and bid out the lease-sale process. Plan on two years for oil companies to do test drilling and analysis. Drilling and transport of heavy equipment can only be done in the winter months when the permafrost ground is solidly frozen, from December through April. Concurrently with oil drilling, a 75-mile pipeline spur needs be built to connect to the main Alyeska Pipeline from Prudhoe Bay to the Southern shipping port.

However, this time frame does not allow for environmental lawsuits "every step of the way," as Crockett warned. The rest of the 10-year time frame is to allow for lawsuits trying to prevent or harass production in one way or another. For example, a single judge in California's 9th circuit has failed to issue a decision on a Shell Oil project that already had $200 million of investment before it was ordered to stop. It will produce 30,000 barrels per day, about $1 billion per year of oil.

There has already been a test well drilled in ANWR and the oil drilling could be done from a concentrated small area, about the size of Dulles Airport. Compare this to the total size of ANWR, which is roughly equivalent to the size of South Carolina. Its reserves are [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. , compared to 32 billion nationwide, almost a 33 percent increase. At full production, ANWR would add a million barrels per day to U.S. production. At $100 per barrel, this would equal over $36 billion per year that would not need to be spent on foreign oil. It would also create some 700,000 well-paying jobs, according to a [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. [pdf].

[LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. are finally beginning to circulate. Previously, ANWR was typically portrayed as if it was like the Rockies, with happy goats jumping around. But the land is actually flat and desolate for most of the year, feeding birds and caribou in the summertime. I have personally seen such land with its untold numbers of shallow, frigid little lakes on the Arctic Circle in Northern Russia. It reminded me of what the first French explorer called such lands in Canada's northern extremes: [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. I was in Alaska hiking last July; the [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. is astounding. Grizzly bears roam within the city limits of Anchorage and moose die of starvation every winter all over the state. Nearly a million caribou (reindeer) roam. The whole western half of the state is without roads. Hundreds of streams are filled with salmon. I saw a bowhead whale breaching and little sea otters (once nearly extinct) in Seward Harbour during one afternoon boat trip out into the bay. Drilling, in other words, will not spoil the richness and abundance of Alaska's wildlife.

Here are some other interesting facts about Alaskan oil:

• Drilling is permitted in the Beaufort Sea on Alaska's north coast. On the west coast, it is not allowed under the general prohibition against offshore drilling.
• Wells at Prudhoe Bay and nearby ANWR, if allowed, are very shallow, mostly 1,000 feet to 2,000 feet deep, which allows for fast drilling.
• New technology now also allows long distance slant and horizontal drilling from a single drill site. BP is now planning such an eight-mile drill.
• The Beaufort Sea off shore is very shallow and production is done from man-made islands. A single platform allows for many slant wells.
• The Bering Sea between Alaska and Siberia is only some 2,000 feet to 3,000 feet deep.
• Estimates of recoverable oil are based on a $40 barrel price—they should be much higher with oil at $100-plus per barrel. The higher price justifies more costly drilling and secondary recovery engineering.
• Alyeska Pipeline once pumped 2.1 million barrels of oil per day, It's now at 700,000 and declining 7 percent annually. Roughly 400,000 of these barrels come from many new, smaller fields discovered after Prudhoe Bay started production.
• The Alaska National Petroleum Reserve, a very large area west of Prudhoe Bay, may also have large new oil reserves. However, most of the area has not yet been leased by the Federal government's very slow plan, nor explored, nor litigated.

The amounts of natural gas are just as astounding as the quantities of oil. The U.S. Geological Survey estimated years ago that there were 150 trillion cubic feet of conventional gas, 590 trillion cubic feet of [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. (an as-yet-unexploited form of methane trapped in water molecules underground). The U.S. Geological Survey estimated that to be "twice the amount of carbon to be found in all known fossil fuels on Earth." Also, there is an uncalculated amount of drillable coal-bed methane in an estimated 13.7 billion tons of indicated coal resources.

The state government of Alaska is now proposing [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. to transport already discovered gas through Canada to connect with pipelines reaching the American Midwest and the east. It will cost around $30 billion, be underground, and transport quantities equal to some 6 percent to 8 percent of all current U.S. consumption.

Meanwhile, Washington has become paralyzed by dysfunctional government. France and China can build nuclear electric plants in just years; in the U.S. it takes a decade. Brazil will bring offshore oil online in 24 months, while for U.S. companies it takes 10 years. New refineries are virtually illegal to build. New electricity-generating plants using coal are now unable to obtain financing because of environment constraints.

This is destroying the value of the dollar and wrecking our balance of trade, making oil prohibitively expensive, and sending hundreds of billions of dollars to foreign lands—many of whom are no friends of America. No wonder 80 percent of Americans think their nation is on the wrong track. Washington needs to declare a national emergency program to produce energy. The reasons we don't are political, not technical. Indeed, new natural gas discoveries have knocked U.S. prices down by about 30 percent.

Jon Basil Utley is associate publisher of The American Conservative and a former foreign correspondent for Knight Ridder newspapers. He has decades of experience in the oil business, including as the owner and operator of a small oil drilling partnership.

Democrats complain that drilling offshore and ANWR are not the solution to our energy problems because of how long it takes for the oil and gas to come on line, but as the above article points out, it's only because of their environmental extremism that it takes so long to come on line.