…[It] was public research dollars, over the course of thirty years, that helped develop the technologies to extract all this natural gas out of shale rock – reminding us that Government support is critical in helping businesses get new energy ideas off the ground.

- Barack Obama’s 2012 State of the Union Address

On Thursday, Energy Secretary Dr. Steven Chu visited the National Energy Technology Laboratory in South Park, PA:

Chu said the Department of Energy’s experiments between 1978 and 1992 helped develop the widespread practice of horizontal drilling and fracturing that made capturing natural gas from rock formations such as shale cost-effective enough that private industry could take over. (Source.)

This is some pretty serious revisionist history, and it’s all directed at justifying continued “investment” in green clean energy research*.

Nicolas Loris is an energy and environmental policy analyst at The Heritage Foundation. Mr. Loris gets it right:

Well before the government invested in natural gas technologies, it was the private sector that established and developed hydraulic fracturing (or “fracking”), a process by which producers inject a fluid, composed of 99 percent water, and sand into wells to free oil and gas trapped in rock formations.

Its roots go as far back as the 1860s. In the 1940s, Stanolind Oil and Gas Corp. began studying and testing the method, with a patent issued in 1949 and a license granted to Halliburton to frack on two commercial wells.

Government involvement came years later. The Department of Energy partly funded data accumulation, microseismic mapping, the first horizontal well, and tax credits to extract unconventional gas. But who was in the driver’s seat? George Mitchell, who invested millions of his own money in research and development for fracking and horizontal drilling.

The geologist for Mitchell’s company, Jim Henry, first identified Barnett shale as a possibility for more energy. Mitchell spent between $7 million and $8 million of his own money trying to extract shale gas successfully and eventually made it economically viable. He is behind the shale gas revolution, not the government.

Truth be known, DoE has never taken the lead in oil and gas research. The majors (“Big Oil”) historically had their own research labs and were loathe to share their proprietary research with the government or each other. The major service companies like Halliburton and Schlumberger also wanted to develop their own patents and protect their commerciality.

Much of the research that mattered was conducted by the Gas Research Institute, an industry consortium that spent private funds. The revenue base was a small fee on gas transported by the major interstate pipelines. DoE cooperated with GRI, and may have provided funding at some level. For two or three years in the early ’90s, I served as one of 2-3 dozen industry advisors, providing GRI with industry feedback for their research planning. There were always a couple of DoE staffers present at our meetings.

Some of the GRI-backed research was private, some at research universities, and some at national labs like Sandia and Lawrence Livermore. But it was privately directed and privately funded.

I remember from those days Mitchell Energy’s keen interest in unlocking the gas in the Barnett Shale. Mitchell had most of Wise County, TX under lease, and the Barnett was widespread. I thought at the time that Mitchell was particularly good at milking the Feds when it came to funding its research. Mitchell’s strategy was the exception, not the rule. (Mitchell Energy was bought by Devon Energy [DVN] in 2002.)

As ex-Mitchell VP Dan Steward recalls, Mitchell did drill the first horizontal shale well with DoE backing.

Money wasn’t given directly, but like on the horizontal well, Mitchell paid the cost of a vertical well, and government paid the rest. If the horizontal well cost $1.5 million, but the vertical was 800k, the DOE contributed the difference between the two. I don’t know exact numbers. But there was a contribution of money toward that well. …

Mitchell got the slickwater frack from UPR [Union Pacific Resources]. They developed it.

If there was a government program that was significant, it was the Section 29 production tax credit, which I blogged about back in 2010. Steward has this to say about the importance of the credit, but also the advantageous gas sales contract that Mitchell enjoyed:

Mitchell was selling his gas dollar and a quarter over the spot price. We would never have been able to do what we did in the Barnett without that. Mitchell had the money to invest in R&D. And he had the vision. He had people in the company saying this is bulls**t, this is wasting our money, you’re using our retirement money on something that’s no good. They’d say, “Dan, if Barnett is the best thing we have, then we don’t have s**t.” …

We had a gas contract with a natural gas pipeline that gave us a higher price. We had a basket of prices and gases and with the different categories we could keep our gas price. So you could say that those pricing scenarios, and the tight gas tax credit, created the possibility for shale gas.

Yes, the government played a role by providing the tax credit. DoE research, and support of private research, was significant but not central to the story.

Horizontal drilling and hydraulic fracturing are private sector successes.

In any case, there is no analogy in oil and gas to the kind of support that is being lavished upon alternative fuels and “green energy”. Where is the gas analog of a Solyndra, or a Fisker? They don’t exist. Government support for gas did not come in the form of $535 million loan guarantees. That kind of silly money is begging to be wasted.

But as the good Dr. Chu reminds it, there are more failures to come.

Chu: Expect more loan guarantee failures

Energy Secretary Steven Chu again warned Friday that more recipients of Energy Department green technology loan guarantees will likely collapse even as he touted the strength of the program overall.

* Factoid from President Obama’s 2012 SOTU address:
References to “Green Jobs” or “Green Energy”: 0
References to “Clean” Energy: 10

This change in terminology presumably reflects the Administration’s begrudging embrace of the promise of natural gas.

Cross-posted at stevemaley.com.

Follow @VladimirRS

Around these parts, we have a word that aptly describes shale formations: ubitquitious. (sic)

Every conventional oil and gas basin must have a hydrocarbon source, and that source is a shale. And since shales are low in permeability, we’re finding that the source rock still contains plenty of hydrocarbons, if you can figure out how to get the stuff out.

One of the newly-emerging plays is the Tuscaloosa Marine Shale, which is being explored in a wide arc that cuts across central Louisiana and southern Mississippi.

Although the promise of the Marine Shale has yet to be proved, there is reason for optimism: if you follow that arc to the west, roughly parallel to the Texas coast, you’re smack-dab in the middle of the Eagle Ford trend of south Texas, currently the site of one of the hottest oil drilling plays in the country. The Tusc is equivalent in age to the Eagle Ford, and the newest well just tested almost 800 barrels of oil per day.

Yes, the shales are indeed ubiquitious.

Tuscaloosa shale promising

St. Helena well’s initial production spurs interest

The Encana Weyerhauser well, completed in November, averaged 784 barrels of oil per day and 309,000 cubic feet of natural gas, according to Encana’s filing with the state Department of Natural Resources. …

Around two dozen wells have been drilled or are being drilled in the Tuscaloosa Marine Shale, an oil-rich formation that covers Louisiana’s midsection. Energy companies have leased more than 1 million acres in the formation, but so far the firms aren’t sharing much of their early production figures.

Kirk A. Barrell, president of Amelia Resources, of Texas, said before the formation can be considered economically viable, 10 to 20 wells will have to be completed.

“You need the initial (production) rates for 10 to 20 wells, but you also need to get 12 to 15 months out and see what the decline of that rate is,” Barrell said.

Barrell has a blog called The Tusacaloosa Trend:

Sources indicate that Devon will be adding a 2nd rig to the TMS play soon. Encana, who has been rumored for weeks to be adding rigs, now appears to be slowing down the plan. Several sources indicate that it is for corporate reasons relating to very depressed natural gas prices and not the TMS results. The initial rates on the Weyerhaeuser 73H-1 and their record drilling time and lateral length on the Anderson 17H-1 are very encouraging. Sources indicate that after 5-6 completions, a full operational plan will be implemented.

It is worth noting that RedState’s editor, Erick Erickson, attended high school in Jackson, LA. Jackson is in East Feliciana Parish, right in the heart of the Marine Shale play. Considering that Erick’s younger years were spent in Abu Dhabi, we should not be surprised if eventually oil and gas leasing action heats up in and around Macon, GA.

Cross-posted at stevemaley.com.

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]]> http://www.redstate.com/vladimir/2012/02/07/introducing-the-tuscaloosa-marine-shale/ Phelim McAleer and his wife Ann McElhinney are journalists and documentary filmmakers. You may remember Not Evil Just Wrong (2009), their takedown of Al Gore and Global Warming hysteria.

Now they want to tell the truth about natural gas development and hydraulic fracturing in a full-length documentary titled FrackNation. McAleer says:

FrackNation will skeptically examine some of the scarier claims made by anti-fracking activists and look at how shale gas is helping some of the poorest communities in the US and potentially across the planet. It will feature small farmers, the working class and others who are benefiting from this economic boom. We will look at the backgrounds and motives of those opposing fracking.

[Click here to see the producers' Kickstarter pitch for the project. (2:53)]

FrackNation will go head-to-head with GasLand II, Josh Fox’s planned sequel to GasLand (2010), the highly effective anti-gas propaganda piece. With scant concern for earth science and demonstrable fact, GasLand earned an Academy Award nomination and stirred up anti-fracking hysteria nationwide with its memorable footage of flaming faucets. PBS and HBO will jointly bankroll Gasland II to the tune of $750,000. It is set to air on HBO this fall.

Here’s how you can fight back: To tell their grassroots tale, McAleer, McElhinney and co-producer Magda Segieda will rely on grassroots financing. The website kickstarter.com provides a fundraising platform for creative projects. FrackNation‘s goal is a modest $150,000.

For as little as $1.00, you can support a professional, fact-based counterargument to GasLand II. $20 donors will receive a copy of the DVD upon release. All donors will be named executive producer of the project.

But why fracking?

In 2011, McAleer called out Josh Fox, quite publicly, for conveniently neglecting to tell GasLand‘s audience that flammable methane in groundwater is unrelated to gas development, and in fact predates gas development in Colorado, New York, and Pennsylvania. The Colorado Oil and Gas Commission looked into the claims in their state and concluded that the gas was “biogenic” in origin (i.e., naturally-occurring shallow gas, and not deep gas-well gas). Fox dismissed those reports as “not relevant”:

Fox and his attorneys had the video above shut down for a time on both youtube and vimeo. The attempt at suppression inspired Phelim and Ann in their current project.

Josh Fox is an intelligent man must be quite aware that he is  pandering to the fears of the people. Radical environmentalists see cheap natural gas as the #1 threat to the development of wind, solar and other alternative forms of energy. By playing fast and loose with the facts, they can mobilize public sentiment against gas development.

That’s why it’s important and timely to counter those arguments with facts and reason.

“Normally, Kickstarter projects are pro-radical environmentalism,” said McAleer.  “FrackNation will be the first documentary funded through Kickstarter to challenge the environmental establishment.  It will appeal to the workers and small farmers who know the truth, but never see it represented in modern documentaries.”

Fundraising began quietly on Monday, with a full press campaign due on Tuesday. As of this writing [Tuesday morning], a total of nearly $7,500 $14,600, 5% ~10% of the goal, had already been achieved. [Updated 5:00 pm ET, 2/7. - Ed.]

Cross=posted at stevemaley.com.

]]> http://www.redstate.com/vladimir/2012/02/07/coming-soon-fracknation/ This is an abbreviated version of a post at my personal blog. There you will find more detailed text, additional figures and references.

In 1956, M. King Hubbert predicted that crude oil production in the U.S. (ex-Alaska) would peak in rate around 1970, to be followed by a long, irreversible decline. Hubbert nailed the timing of the peak, and in doing so, cemented his status as a technological visionary among neo-Malthusians and opponents of the “fossil fuels”. But Hubbert’s paper also contained a similar forecast for gas.

In 1956, Hubbert’s estimate of the amount of natural gas that would ultimately be consumed in the U.S. was 850 trillion cubic feet (TCF).

In the 1978 update, Hubbert increased his estimate to 1,103 TCF, but considered that value to be on the high side.

Lower 48 Gas Production, 1900-2010

By the end of 2010, we had produced and marketed 1,131 TCF from the Lower 48, more gas than Hubbert thought would ever be possible. We find ourselves in the midst of a natural gas boom, with gas production now exceeding the peaks of 1973: rates are over three times higher than the 7 TCF per year Hubbert foresaw for 2010. The Lower 48 resource base is some 3,100 TCF, three to four times Hubbert’s earlier estimates.

Peak Oilers rarely mention Peak Gas. Hubbert expected his method to work for all resources; why did it fail with respect to gas? The answers to that question shed light on the shortcomings of Peak Oil Theory, and reveal the reasons why it should not be used as a policy-making tool.

Shortcoming #1: Hubbert’s technique depends entirely upon the estimate of the ultimate resource base. Any extrapolation of historical trends contains only the information embedded in the history. There is no way to anticipate “game-changing” developments outside the confines of the history upon which it is based. A forecast of a limited future thus becomes a self-fulfilling prophecy if it is used to set policy.

Shortcoming #2: “Hubbert’s Peak” is the ultimate ceteris paribus analysis. Problem is, all other things are never equal, particularly in the realm of economics. Hubbert’s equations worked well in his experience, so well that he accepted them as immutable laws. Hubbert showed little concern for how changing policies or economics might affect his resource estimates (see Shortcoming #1).

Shortcoming #3: We are all limited by our imaginations. Hubbert could not imagine economic production of hydrocarbons from water depths over 600 feet; we now have production in nearly 10,000 feet of water. Shale rocks were never considered to have economic potential. Moore’s Law has enabled accomplishments in drilling and exploration beyond Hubbert’s wildest dreams.

Product Price

Until the mid-1970s, natural gas was dirt cheap, so cheap that drillers rarely targeted it intentionally. Most of the gas that was found and produced was incidental to oil operations, which explains why Hubbert deemed the gas resource to be a ratio of his crude oil estimate.
The following graph shows the history of natural gas prices (which was historically priced per mcf, or 1,000 standard cubic feet). The average wellhead price (i.e., the price received by the producer in the field) from 1925 until 1970 was less than 10¢ per mcf (about 66¢ in 2005 dollars). The energy content of one barrel of oil is roughly the same as 6 mcf of gas, so that the cost of buying one barrel’s worth of energy in natural gas form was only 60¢ (or less than $4.00 in 2005 dollars).

Nominal and Real U.S. Wellhead Gas Prices, 1925-2010

Public Policy

Since 1938, the Natural Gas Act had enforced low gas prices and near monopoly status for the big interstate gas pipelines. It was not unusual for a producer to be locked into a long term gas sales contract at 3¢ per mcf, with no recourse and no alternatives. In an effort to build domestic gas supplies, President Carter signed the Natural Gas Policy Act (NGPA) in 1978. It maintained existing price controls while granting preference to newly-found supplies. Its recognition of a dozen or more “vintages” of gas led to a price structure that became increasingly byzantine over time.

President Reagan began phasing out price controls on oil and gas in 1983. Tax reform ended limited partnerships’ tax shelters for drilling dry holes. The industry floundered as prices tanked and investors vanished. From 1981 until 1985, the count of active drilling rigs declined from 4,500 to under 700. Under severe economic pressure, the energy industry consolidated and contracted, then set about figuring out how to regain profitability.

Technology

Coincidentally, by about 1985, the impact of desktop computing began to be felt in the industry. Directly or indirectly, the PC era would contribute to a number of important technical advances in exploration and well operations, including 3-D seismic, horizontal drilling and logging-while-drilling. Using these and other new technologies, operators began finding ways to produce natural gas from rocks that had been never before been considered to be commercial sources of hydrocarbons. Explorers drilled fewer dry holes, and more efficiently developed smaller accumulations than in earlier days.

Real Wellhead Price and Lower 48 Gas Production, 1925-2010

Conclusion

Hubbert may have been correct about the ultimate volume of gas that would have been produced under pre-1970 prices and marketing structures. That price was unrealistically low compared to the energy content of gas. Today’s gas prices are about six times the pre-1970 average (2005 dollars), but gas is still a relative bargain. (Six thousand cubic feet of gas costs about $24, but can do as much work as one $100 barrel of oil.)

So, if all this is true, why does Hubbert’s curve seem to work so well for crude oil?

One key fact distinguishes natural gas and oil. Oil can be readily imported from anywhere in the world. Gas is primarily a North American commodity. Imports (other than Canadian pipeline imports) can impact the market only when domestic prices are high – and even then we have to compete with Japan and other regular customer on the world market. At the current low price of gas (relative to oil), the United States may become a gas exporter.

The transportability of oil caused the oil-oriented major integrated companies to focus their exploration efforts overseas when drilling and production costs rose in the U.S. Finding large deposits of oil overseas was easier, cheaper and more efficient than it was in the States. The U.S. natural gas market became the domain of domestic independents.

Policy decisions have taken much of the domestic oil resource base off the table, namely in the Alaskan North Slope, much of the Mountain West and the 85% of the Outer Continental Shelf which is closed to exploration. We cannot know how big this potential resource base is until we drill it. Many would prefer not to know, whether for political or environmental reasons, so we can expect the fight to continue.

Cross-posted at stevemaley.com.

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]]> http://www.redstate.com/vladimir/2012/01/28/whats-wrong-with-peak-oil-theory-consider-peak-gas/ In Tuesday night’s State of the Union Address, President Obama said:

Over the last three years, we’ve opened millions of new acres for oil and gas exploration, and tonight, I’m directing my Administration to open more than 75 percent of our potential offshore oil and gas resources.

Taking the show on the road,

Obama Promotes Energy Agenda in Las Vegas

Fending off critics who say his policies have stifled domestic energy production, President Obama today announced that his administration would open 38 million acres of oil and gas drilling in the Gulf of Mexico.

Wow! The guy is finally getting aggressive!

Not so much, according to the House Natural Resources Committee:

WASHINGTON, D.C., January 26, 2012 – Today, President Obama made a “major announcement,” in what otherwise must be a slow day for the White House, by moving forward with offshore lease sales that were scheduled before he even took office. The rather banal “major announcement” does not open any new offshore areas for energy production but combines a lease sale delayed for a year by the Obama Administration (216 Central Gulf of Mexico 2011) and a lease sale scheduled for this year by the previous Administration (222 Central Gulf of Mexico 2012). Since elected, President Obama has delayed or canceled multiple lease sales, including #220 off the Virginia Coast, which was scheduled for 2011 and is now delayed indefinitely. These delays have destroyed jobs, caused a decline in American oil and natural gas production and harmed local economies.

In other words, the 38,000,000 acres are all in areas that have never been off-limits to drilling. These leases have been in annual area-wide sales for at least the last 20 years, up until Obama cancelled sales after Macondo. This is nothing new.

And the "75% of our resources" claim? Seventy-five percent of the resource estimate is in the Central Gulf Planning Area, because that’s where all the wells are! That’s where all the data is! (See: Sutton, Willie.) Reserve estimation relies heavily on known data and estimates of probability; since oil and gas is known to exist in the Central Gulf, it stands to reason that it’s a pretty good place to look.

We know much, much less about the 85% of land area of the Outer Continental Shelf that is still off-limits. 25% of the resource estimate is there, but since the data are so sparse and so old (the geophysical data is at least 30 years old, ancient in technology terms), there is a huge error bar on those estimates.

Most geologists thought the deepwater Gulf of Mexico contained no commercial oil or gas. That is, until the drill bit proved it was there.

President Obama:

”We’ve got to have an all-out, all-in, all-of-the-above strategy that develops every source of American energy, a strategy that is cleaner and cheaper and full of new jobs,” he said.

Ba. Lo. Ney. The Obama Administration must really be feeling the heat on energy to try to paint this one as a “major initiative”. Does the substance ever matter, Chief?

Cross-posted at stevemaley.com.

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]]> http://www.redstate.com/vladimir/2012/01/26/in-major-announcement-from-white-house-obama-decides-sun-will-rise-tomorrow/ We’ve heard it all before, except now the message has been repackaged to deal with the evolving reality in the Energy Sector. In “fossil fuels”, we have two big success stories: the Shale Revolution and the continued success of domestic oil development. What we didn’t hear much about was rebuilding the economy based on Green Jobs. The new Green Economy had more than a few stumbling blocks (Kaiser/Solyndra and exploding Chevy Volts).

Of course, we heard not a peep about Keystone XL.

I keep circling back to the central irony of the Obama Presidency: Obama could have been the Energy President. Clean, responsible North American energy security is within our grasp, and nothing would jump-start our economy faster than to make that commitment. Think Kennedy/Space Program or Nixon/China: every president since Nixon has promised progress on energy, and now, the president in 2012 is in a position to deliver.

But will he?

It would mean making workable compromises with industry. It might mean giving in on ANWR. It might mean telling the anti-development Luddite environmentalists who have loyally backed him to go pound sand. It might mean acknowledging that we’ve been sold an elitist bill of goods in Global Warming. It might mean backtracking on alternative energy giveaways.

Ain’t gonna happen.

Anyway, back to the State of the Union:

Right now, American oil production is the highest that it’s been in eight years. That’s right – eight years. Not only that – last year, we relied less on foreign oil than in any of the past sixteen years.

President Obama continues to take credit for the increase in oil production over the last couple of years. The production increase is not due to any Federal policies; it is due to risks taken by private companies, mostly on private lands in North Dakota, South Texas and elsewhere. Were it not for hostile Federal policies in the Gulf of Mexico, production in 2012 might be 500,000 barrels a day higher than is currently expected. Further reading: Shameless White House Takes Credit for Oil Production Increase.

But with only 2 percent of the world’s oil reserves, oil isn’t enough.

This is at least the third time I’ve heard President Obama revisit The Big Energy Lie™, the notion that the nation’s “Proved Reserves”, at 2% of the world total, represent some kind of limitation on its production capacity. Not true. Our reserves are low because we’ve chosen to import rather than drill at home; it’s our resource potential, and our resolve to help ourselves, that are important. Further reading: The Big Energy Lie, The Big Energy Lie, Revisited.

The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy. And by the way, it was public research dollars, over the course of thirty years, that helped develop the technologies to extract all this natural gas out of shale rock – reminding us that Government support is critical in helping businesses get new energy ideas off the ground.

I have no idea what the President is talking about here. This is my thirty-fourth year in the industry. For a time in the early ’90s, I served as an industry advisor to the Gas Research Institute, which did direct research funds (derived from a small fee on interstate pipelines) to private and university research. In my mind, the major advances in drilling and completion technology happened because of innovations and initiatives on the part of the private sector, and independent oil and gas companies in particular, as opposed to Department of Energy initiatives.

If any reader is aware of DoE research projects that deserve some of the credit for the Shale Revolution, I’d love to learn of it. Federal Production Tax Credits were successful in assisting unconventional gas technologies (see: A Tale of Two Subsidies), but tax credits are not “public research dollars”.

Our experience with shale gas shows us that the payoffs on these public investments don’t always come right away. Some technologies don’t pan out; some companies fail. But I will not walk away from the promise of clean energy. … I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here. We have subsidized oil companies for a century. That’s long enough. It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising. Pass clean energy tax credits and create these jobs.

Production Tax Credits worked for unconventional gas because it reduced the risk in developing a technology that had the potential of being successful once the credits ended. Alternative energy cannot survive without the credits. Big difference.

“Doubling down” on Solyndra is a sucker’s bet. Putting wind and solar energy on perpetual life support is foolish. At some point, they need to be successful in the marketplace on their own merits, or die.

Favorable cost-recovery tax treatment for oil investments are not “subsidies”. Since 1913, Congresses have seen the value of encouraging domestic oil production, but President Obama would single the industry out for punishment by taking away tax incentives that are common across many industries. Further reading: Obama’s Softheaded Energy Policy (2011 SOTU), SOTU From an Energy Perspective (2010), How Much Will It Cost to Repeal Oil ‘Subsidies’

Cross-posted at My Blog.

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]]> http://www.redstate.com/vladimir/2012/01/25/energy-deja-vu-at-the-sotu/ Six House Democrats, led by Rep. Dennis Kucinich (D’OH), have filed a bill aimed at controlling gasoline prices. Styled the “Gas Price Spike Act”, H.R. 3784 would establish a “Reasonable Profits Board” which would have the power to confiscate 100% of oil company profits above a level that they deem to be “reasonable”.

I know: “You had me at ‘Kucinich’.”

Kucinich is either a naive buffoon, a craven panderer to his electorate, or a throwback to Soviet-style central planning. (Not that those descriptions are mutually exclusive.) That he could find five other elected nitwits (Reps. Woolsey^[1], Langevin, Conyers, Fudge and Filner^[2]) to put their names on such an unconstitutional socialist fantasy is an indication that the Progressive Wing of the Democratic Party has “progressed” right off the reservation.

According to a Thursday post at TheHill.com:

The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and [natural] gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding “a reasonable profit.” It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress.

The bill would also seem to exclude industry representatives from the board, as it says members “shall have no financial interests in any of the businesses for which reasonable profits are determined by the Board.”

Oil companies would only be able to make less than a reasonable profit without penalty. Anything over 105% of reasonable would be taxed at 100%. Proceeds of the confiscation would be dedicated to tax credits for high-milage vehicle purchase and mass transit subsidies for the poor.

Peeling back the layers of stupidity in H.R. 3784 would be akin to peeling an artichoke. In the interest of time, I will cut to my central point.

Implicit in the very suggestion that a Windfall Profit Tax is called for is the notion that somehow the oil companies are able to manipulate the price of oil, and hence, gasoline.

Gasoline prices are at historically high prices. Despite the spike above $4.00 per gallon in 2008, you actually paid 10% more at the pump in 2011.

When we refer to the industry as “oil and gas”, we mean “oil and natural gas”, not oil and gasoline. All oil companies make a substantial fraction of their revenue — many more than half — from natural gas.

The price of natural gas has plunged to 10 year lows recently as a result of warm winter temperatures, slack industrial demand and burgeoning supplies.

Natural gas prices have fallen to levels that make it difficult to justify drilling for more. Many of the new supplies of gas that come on will be incidental to the successful search for oil.

I challenge anyone who believes that oil companies control the price of oil and gasoline to explain how they do it, and why they seemingly have no control of natural gas.

^[1] Rep. Lynn Woolsey (D-CA), chair of the House Progressive Caucus from Marin Co., CA.

^[2] Rep. Bob Filner (D-CA). From his Wikipedia entry:

Filner has been a vocal supporter of the People’s Mujahedin of Iran, a group designated as a terrorist organization by the United States. Filner has long argued that the group’s designation should be removed, and considers the MEK an ally against the Iranian regime. He has accepted free trips, and paid speaking engagements from the group for which he has been criticized by the National Iranian American Council.

The other co-sponsors are John Conyers (D-MI), Rep. Marcia Fudge (D-OH) and Rep. Jim Langevin (D-RI).

Cross-posted at SteveMaley.com.

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]]> http://www.redstate.com/vladimir/2012/01/22/six-house-dems-would-confiscate-excessive-oil-profits/

The drilling rig Scarabeo 9, visible in the distance. Image taken from the northern coast of Cuba near Havana. Drilling operations are expected to commence within a week.

Fact #1: In U.S. waters, the Eastern Gulf of Mexico is off-limits for drilling. The only way to legally drill for oil within 125 miles of the Florida coast is to drill in Cuban waters, which reach within 45 miles of Key West.

The Florida Straits, showing the locations of Havana, Cuba and Key West, FL. Photo credit Wikipedia.

Fact #2: In 2011, the average price of gasoline was the highest of any year in history, including 2008 when the price spiked above $4.00 per gallon.

Open thread, sucker.

Bialystock and Bloom plotted to make millions with a guaranteed Broadway flop. Against all odds, Springtime for Hitler became a runaway hit, and The Producers went to jail.

But at least Mssrs. Bialystock and Bloom produced something of value – a hit musical.

Our Green Initiative produces flop after flop, but precious little energy. Instead of throwing the perpetrators in the hoosegow, we keep reelecting them.

Case #1, reported by John Hayward at Human Events: Solyndra Wants to Pay Six-Figure Employees Huge Bonuses

So whose sense of job security will be bolstered by these taxpayer-financed bonuses?

The proposed bonus recipients include nine equipment engineers, six general business and finance employees and up to two information technology workers.

The biggest bonus, for $50,000, would go to a Solyndra employee whose job title is listed as a senior director with a base salary of $206,499 per year. Two senior managers stand to receive bonuses of $30,000 and $32,500. [From the Washington Times.- Ed.]

Taxpayers were stiffed for a good $300 million of the money they poured into Solyndra, because late-arriving private investors – lured with promises of “senior debt” by an Administration desperate to keep this boondoggle from becoming a political nightmare – got repaid first. Now you’re going to get stiffed again so an employee in a useless company who makes over $200,000 a year can get his $50,000 bonus. Only three of the employees set to receive these bonuses make less than six figures.

Um, in this crappy economy, a regular paycheck is sufficient to keep most of us working diligently. So what if they leave? Are we going to throw good money after bad because a total debacle might turn into a cataclysm? I’ll take my chances.

On second thought, how ’bout we fire Steven Chu, and divide his paycheck up among the remaining Solyndra stalwarts. This mess has his fingerprints all over it.

Case #2, from The New York Times: Companies Face Fines for Not Using Non-Existent Biofuel

Congress, in its brilliance, mandated quotas for the use of cellulosic ethanol, which is made from stuff like corn cobs, switchgrass and wood chips. Theoretically. What’s the use of a quota without a penalty for not meeting it?

In one fell swoop, Congress can feel good about their support of Green Energy and increase Federal revenues without raising taxes!

WASHINGTON — When the companies that supply motor fuel close the books on 2011, they will pay about $6.8 million in penalties to the Treasury because they failed to mix a special type of biofuel into their gasoline and diesel as required by law.

But there was none to be had. Outside a handful of laboratories and workshops, the ingredient, cellulosic biofuel, does not exist.

In 2012, the oil companies expect to pay even higher penalties for failing to blend in the fuel, which is made from wood chips or the inedible parts of plants like corncobs. Refiners were required to blend 6.6 million gallons into gasoline and diesel in 2011 and face a quota of 8.65 million gallons this year. …

But Cathy Milbourn, an E.P.A. spokeswoman, said that her agency still believed that the 8.65-million-gallon quota for cellulosic ethanol for 2012 was “reasonably attainable.” By setting a quota, she added, “we avoid a situation where real cellulosic biofuel production exceeds the mandated volume,” which would weaken demand.

Wait. What?!

And Mascoma, a company partly owned by General Motors [a company 30% owned by the U.S. Government - Ed.], announced last month that it would get up to $80 million from the Energy Department to help build a plant in Kinross, Mich., that is supposed to make fuel alcohol from wood waste. Valero Energy, the oil company, and the State of Michigan are also providing funds.

With apologies to Mel Brooks, even he could not have concocted such wacky schemes. These policies are straight out of Alice in Wonderland.

Cross-posted at stevemaley.com.

Congress should now focus on the oil industry, which has long enjoyed a web of arcane and unnecessary tax breaks — deductions for well depletion and intangible drilling costs. They are unique to the industry and, when combined with other subsidies, cost roughly $4 billion a year.

President Obama has tried twice to kill these subsidies, without success. We hope he tries again in his coming Budget Message. The Congressional Research Service says that ending the subsidies would have no effect on gas prices for consumers and only a trivial effect on industry profits, which have been at record highs. [Emphasis added.]

Where to begin?

The ethanol blenders’ tax credit was a true subsidy. It was a dollar-for-dollar offset of a company’s tax liability, a cash reward from the federal government of 45 cents per gallon for each gallon of ethanol blended.

The oil industry items are deductions from taxable income, not subsidies. All businesses are allowed to deduct legitimate business costs, and the oil industry is no different.

Oil industry profits are large because the companies are large. The profit per dollar of revenue and return per dollar of capital investment are in the middle of the pack compared to other industries.

Cost depletion is a charge to income that, contrary to the Times’ assertion, is not unique to oil and gas. All extractive industries have some form of depletion, including timber as well as mining industries like gold, silver, gypsum, and even gravel and sand.

The deduction for intangible drilling costs (IDCs) has been a feature of the IRS Code since 1913, since the beginning of the income tax. They are a feature, not a bug (a/k/a “loophole”). Because of the risk profile of exploration, and the extreme capital intensity of the business, modifying a long-standing cost recovery scheme would certainly impact financing and drilling activity.

IDCs represent those costs of drilling that have no tangible (or salvageable) value, like labor, trucking, and rig rental costs. The issue is not whether IDCs should be deductible; instead the issue is one of timing. IDCs can be expensed in the year they occur, unlike many capital items which must be written off over a useful life.

Such tax treatment is not unique to oil and gas. Expensing IDCs is analogous to the tax treatment of R&D for computer software companies.

The benefit of both depletion and IDCs is phased out for the major integrated oil companies like BP, Exxon and Shell. Thus the pain of Obama’s punitive move would fall upon small domestic independents. Depletion, in particular, benefits "stripper" producers. These low-volume, high cost producers in aggregate account for 500,000 barrels per day of domestic production that would otherwise have to be imported.

The Obama Administration has, without a doubt, the most hostile policies in recent history with respect to domestic energy production. In the New York Times, the Administration has a willing lackey who is always ready, willing and able to distort the truth to accomplish its ends.

Cross-posted at stevemaley.com.

2a & 2b. The Daily Beast seems to have turned over reporting on energy issues to complete idiots. They should stick with things they do best, like candid upskirt photos of the Kardashian sisters. (Two DB links below the fold.)

3. Betty Sutliff is a member of the Upper Wayne County Property Owners Alliance. Her northeastern Pennsylvania county is prospective for Marcellus gas development, but a board called the Delaware River Basin Commission (representing New York, Delaware, New Jersey, Pennsylvania and the U.S. government) has blocked development. In addition an influx of well-heeled interlopers who own second homes in NE PA are vocal in their anti-gas rhetoric, although they have almost no skin in the game.

There exists a minority of those who vehemently oppose natural gas development. They would oppose it if it were 200% safe. For this group it really isn’t a question of safety. Instead, it is a new ideology aimed against anything fossil. Simplistically, these folks look at any fossil fuel development as an addiction that should be conquered “cold turkey.”

Most of these individuals own very little land and think (mistakenly, as UGI [retail natural gas price cut] demonstrates) they have nothing to gain economically from natural gas exploration and production. They also are typically residents who do not reside here full-time or have moved to the area after living elsewhere. They don’t want their peace and serenity, not to mention their viewscape, tampered with at all for any reason.

However well-funded, well organized, and vocal they may be, they do not speak for the majority of residents here who have called this area home for generations. This is noticeable by the landslide victories of pro gas candidates in local elections which show the majority of people in favor of moving forward with exploration and production of natural gas.

Well said, Ms. Sutliff. The loudest voices in the debate are the ones with the least knowledge and the least stake in the game. And they would be the first one to cry “Conspiracy!” if the cost to heat their home doubled, or if there were no gas available at all.

These elitists portray natural gas as bad for the environment (a very tenuous position), but in reality they know that cheap gas is the #1 enemy of their Mother Gaia-approved alternatives.

1. NY Times:
With Gas Drilling Next Door, County in New York Gets an Economic Lift

HORSEHEADS, N.Y. — At the Glamour and Glow boutique in the local mall here, crystal necklaces and fake fur vests have been hot-ticket items the last year.

When the drilling workers head home between long stretches of work in this gas-rich region, explained Christy Spreng, the shop’s owner, they need gifts for their wives and girlfriends. “They know what they want,” she said. “They’ll say: ‘Looks good. Wrap it up.’ ”

2a. The Daily Beast:
Gas Drilling Likely Caused Ohio Quake

A seismologist investigating a series of minor earthquakes in Ohio says they were almost certainly caused by a well used to dispose of wastewater from oil and gas drilling.

Nice headline; too bad it is a blatant lie. Gas drilling doesn’t cause quakes; disposal of waste products in a well situated near a fault zone may have caused some slippage in the fault, so the well is being shut down to check it out. I blogged it here; even the Washington Post got it right in the article the DB links.

2b. The Daily Beast:
Youngstown Rocks: Is Fracking Causing Earthquakes in Ohio? by Jon Avlon

My wife and I were in town visiting my 96-year-old grandmother and felt the mid-afternoon rattle shake the roof for five to 10 seconds.

What makes the minor rumble newsworthy is that until 2011, Youngstown had never had a recorded earthquake.

What changed? Fracking. …

In response to a Christmas Eve earthquake—the 10th in nine months—the Ohio Department of Natural Resources ordered D&L Energy Inc. to stop its operations at a brine-injection well in the heart of downtown Youngstown.

The epicenter of the New Year’s Day quake was within half mile of the 9,000-foot-deep well. All of the earthquakes emanated from within five miles of local drilling, and in some cases as close as a few thousand feet. The Ohio Department of Natural Resources is careful to state that there is no proven link between the drilling and the quakes, but the cause and effect seems clear to citizens.

This is one of the stupidest things I’ve ever read. Mr. Avlon clearly doesn’t know the difference between a “drilling”, “fracking” and an “injection well”, and I suspect he could not care less. I set a very low bar of expectation for technical comprehension by journalists, and Mr. Avlon has tunneled under it.

Cross-posted at stevemaley.com.

Meanwhile, the shale gas revolution has set the stage for declining prices per mmbtu of natural gas.

Natural gas spot prices. Source: http://www.eia.gov.

The chart above shows the price of natural gas per million BTU delivered to the Henry Hub, a large pipeline interconnection point in Louisiana. The current ratio of oil price per barrel to gas price per mmbtu is about 33:1 ($100/bbl to $3.00/mmbtu), a historically low value. The energy equivalency is about 6:1.

Before the impact of the shale boom, a normal ratio was about 10:1. On rare occasion, the ratio has been below 6:1 for brief times.

Transportation and distribution add significantly to the price of gas at the retail level, but even there the gas price is about a 40% discount to oil on the basis of energy content.

Cross-posted at stevemaley.com.

Column A

• Mitt Romney
• Newt Gingrich
• Rick Perry
• Rick Santorum
• Michele Bachmann
• Herman Cain
• Mitch Daniels
• Tim Pawlenty
• Thad McCotter
• Mike Huckabee

Column B

• Ron Paul
• Gary Johnson
• Donald Trump
• Buddy Roemer

Column A candidates seem to share a vision: the goal of the 2012 election is to fire the current occupant of the White House and replace him with the best possible candidate. Each of them, if unsuccessful in securing the nomination, will contribute to the success of the ultimate Republican candidate. At a minimum, they will not detract from his or her effort to gain the White House.

All of the Column B candidates have, at one time or another, contemplated a third party run if unsuccessful as a Republican. None of them has a serious chance of being successful in a third party bid. Declaring third party would clearly place their personal goals and/or their ego ahead of the goal of replacing Barack Obama.

The Republican primary/convention process may end up selecting a candidate with warts. Upon entering the voting booth on November 6, 2012, the choice may well be between a “less good” Republican and the horrible incumbent. I pledge to enthusiastically pull the lever for “less good” over “horrible”. That is my responsibility as a grownup.

Furthermore, I resent candidates who would use the Republican selection process, then bolt in an effort to act as a spoiler. A spoiler gave us eight years of Bill Clinton.

Cross-posted at my blog

NEW ORLEANS – The Department of the Interior’s Bureau of Ocean Energy Management announced that its Western Gulf of Mexico Oil and Gas Lease Sale 218, held [December 14] in New Orleans, attracted $337,688,341 in high bids and included 20 companies submitting 241 bids on 191 tracts comprising over a million acres offshore Texas. The sum of all bids received totaled $712,725,998. This announcement is consistent with steps President Obama announced in May 2011 to expand domestic oil and gas production safely and responsibly.

By comparison, the previous Western Gulf sale, Sale 210 in August 2009, saw high bids totaling $115 million for 164 tracts. More money for more tracts: what’s not to like?

A detailed look at the leasing history, however, reveals a different story. While deepwater remains active, the shallow water Gulf saw little leasing action. Many of the shallow water bidders from recent sales stayed home for Sale 218.

Administratively, the Gulf of Mexico is carved into thousands of tracts or “blocks”. A typical block is 9 square miles. Leases for “open” (unleased) blocks are offered in sealed bid auctions, normally twice a year. The semiannual regularity of the sales was disrupted in 2010 by the Macondo spill.

Figure 1 shows the number of tracts receiving bids in the last three Western Gulf of Mexico sales, broken out to show the split by water depth. Sale 218 saw renewed interest in deepwater blocks (water depth greater than 500 feet), with 179 blocks receiving bids compared to 130 in the last pre-Macondo sale. Two companies, ConocoPhillips and ExxonMobil, accounted for 125 of those high bids.

But in the shallow waters of the “Shelf” (water less than 500 feet deep), only 12 blocks received bids, down from 34 in 2009 and 67 in 2008.

A similar trend is evident if we consider the number of companies bidding for operating rights on new leases (see Figure 2). In the 2008 sale, shallow water tracts drew bids from 32 companies. That number declined to 18 companies as oil and gas prices fell in 2009 from their 2008 peaks. But in 2011, only 8 companies bid for shallow water leases. The number of companies bidding on deepwater leases actually grew to 12.

“Big Oil” rules the deepwater. Shallow water has become the domain of smaller independent companies, many of them privately-held. None of the shallow water operators are household names; nonetheless, their jobs and capital investment supports the economies of several states across the region and contributes to the nation’s domestic energy supply.

Macondo was a deepwater event. Some 40,000 wells have been drilled on the Gulf of Mexico Shelf, and in the last 40 years the total volume spilled from Shelf wells, drilling and producing, is less than the Macondo well was probably spilling per day. The risk of deepwater operations is several orders of magnitude greater than on the Shelf, yet the regulatory regime is little different.

We should not be surprised to find that the burden of increased regulation in the offshore falls disproportionately on smaller operators. As they curtail their activity or focus their attention elsewhere, the shallow water drilling contractors and small service companies who work for the operators will feel the pain.

While it may be mature as an exploration province, the Gulf of Mexico Shelf remains an important storehouse of resources and a potential source of jobs. Regulatory overkill threatens to finish it off for good.

Cross-posted at my blog.

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Headline: Add Quakes to Rumblings Over Gas Rush
(originally published under the headline “Some Blame Hydraulic Fracturing For Earthquake Epidemic”; link may require subscription/signup)

Nine quakes in eight months in a seismically inactive area is unusual. But Ohio seismologists found another surprise when they plotted the quakes’ epicenters: most coincided with the location of a 9,000-foot well in an industrial lot along the Mahoning River, just down the hill from Mr. Moritz’s neighborhood and two miles from downtown Youngstown.

At the well, a local company has been disposing of brine and other liquids from natural gas wells across the border in Pennsylvania — millions of gallons of waste from the process called hydraulic fracturing that is used to unlock the gas from shale rock.

Here, the Times conflates two dissimilar processes in an attempt to create fear and worry about natural gas. Follow below the jump, and allow me to explain.

As excited as the Times may be to have the words “fracking” and “earthquakes” in the same headline, there is not a single shred of a scintilla of an iota of evidence that the well-completion process known as hydraulic fracturing has ever caused an earth-shifting seismic event.

But the Times would like you to associate the two.

Wikipedia image.

The Youngstown, OH well featured in the linked article is a deep injection well.

There are thousands of deep injection wells in the U.S. They are used for the disposal of all kinds of hazardous and non-hazardous liquid waste, from all kinds of industries.

Construction of deep injection wells is normally regulated by a state agency. Here in Louisiana, Underground Injection Control is a totally separate agency from the oil and gas regulatory body. All they do is regulate underground injection, and there are elaborate well construction standards designed to prevent shallow water resources.

An injection well is typically vertical, as shown in the accompanying diagram. The fluids are injected into permeable rock layers that are separated from drinking water sources by impermeable beds and thousands of feet.

The expected life of an injection well is many years. During that period of time, millions of barrels may be injected. The intention is for the injected fluid to stay put forever, out of sight and out of mind.

As the Times article notes, a deep injection well at the Rocky Mountain Arsenal in Colorado was suspected of causing seismic activity — after injection of 165 million gallons (nearly 4 million barrels) of wastewater. Injection in several wells in Arkansas has been suspended until a connection to earthquakes can be investigated, but as yet there is no proven link.

I’m willing to concede that a deep injection well might be capable of causing an earthquake. That might happen if there were a fault in the vicinity of the injection zone. The introduction of millions of barrels of fluid into an existing fault might – might – provide sufficient lubricity to make movement along that fault more likely. It would not make for a stronger earthquake than would be possible without the injection.

But here’s the key point: it does not matter whether the injected fluid is industrial waste, fracking fluid or mother’s milk.

The fluid used in fracking is 99% water. You would have to run a lab analysis to determine the trace chemicals in the other 1%. Any seismic effect, if true, would happen because of the introduction of a large quantity of fluid – of any type – into an existing fault.

Horizontal oil and gas wells are a whole ‘nother kettle of fish from deep injection wells.

Horizontal wells drilled for production into a shale zone are stimulated by fracturing to help the impermeable rock give up the gas or oil inside. A frac job on a new well is a limited process lasting a day or a few days at most. The volumes pumped into the well are not intended to stay downhole as in injection wells, but are intended to flow back out.

Like deep injection wells, horizontal production wells are separated from drinking water supplies by thousands of feet of rock. Wells are designed with protection of shallow water sources a key consideration.

{Quick analogy: If fracking a well is like a getting a shot with hypodermic needle, an injection well is like a continuous IV. They differ in volume, in pressure, and duration. They’re simply not the same thing.}

There is not a shred of evidence that fracking a production well has ever caused a damaging seismic event. Coincidence does not establish causation, and major earthquakes have happened in areas where seismic activity is rare. The strongest earthquake ever in North America was the New Madrid (MO) quake (200th anniversary this week!); there was nary a Halliburton truck in sight.

Our nation is enjoying an unprecedented boom in natural gas production. If asked to design the ideal fuel for our times, one would be hard-pressed to improve on clean-burning, abundant, American natural gas. The Times‘ irrational, anti-science vendetta against gas is particularly confounding in light of the economic opportunity gas development represents for upstate New York.

Cross-posted at my blog.

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Canada will not meet its 2012 goal, so as a treaty member it would incur penalties of $14 billion in 2012, or $1,600 for every Canadian family. Kent characterized Kyoto as an “impediment”, citing the absence of the world’s two largest carbon-emitting countries, China and the U.S., from its membership.

(The United States never ratified the Kyoto Protocols. China was exempt from the penalties. China’s carbon emissions are now highest in the world, eclipsing U.S. emissions by nearly 50% in 2008.)

Canada Withdraws From Kyoto Protocol
(NYT link may require subscription/registration.)

“To meet the targets under Kyoto for 2012 would be the equivalent of either removing every car, truck, ATV, tractor, ambulance, police car and vehicle of every kind from Canadian roads or closing down the entire farming and agriculture sector and cutting heat to every home, office, hospital, factory and building in Canada,” Kent said. [Emphasis added.]

To quote Lloyd in Dumb and Dumber, “So you’re saying there’s a chance!”

[Prime Minister Stephen] Harper’s Conservative government is reluctant to hurt Canada’s booming oil sands sector, which is the country’s fastest growing source of greenhouse gases and a reason it has reneged on its Kyoto commitments.

Canada has the world’s third-largest oil reserves, more than 170 billion barrels. Daily production of 1.5 million barrels from the oil sands is expected to increase to 3.7 million in 2025. Only Saudi Arabia and Venezuela have more reserves. But critics say the enormous amount of energy and water needed in the extraction process increases greenhouse gas emissions.

Kent said Canada produces “barely 2 percent” of global emissions and said the previous Liberal government signed onto Kyoto in 1997 without any intention of meeting its targets.

But Canada’s population of 35 million is just 0.5% of global population, which makes them carbon hogs almost on a par with their neighbors in the U.S.

But wait; there’s still hope for the polar bears:

Kent’s announcement comes a day after marathon climate talks wrapped up in the South African port city of Durban.

Negotiators from nearly 200 countries agreed on a deal that sets the world on a path to sign a new climate treaty by 2015 to replace the first Kyoto Protocol, which expires at the end of next year.

Check out the coverage at wattsupwiththat.com.

Cross-posted at my blog.

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It resonated because it was true. In the early ’70s, the environment was a mess. Urban skies were noticeably tinged in sepia/grey. Rivers and streams were often clogged with discarded debris and fouled with chemical sludge.

April 1970 saw the first Earth Day. In December of the same year, the Environmental Protection Agency was born.

The Clean Air Act was passed in 1970, with the Clean Water Act to follow in 1972. 1973 brought the Endangered Species Act. [Note: see comments. The Fish & Wildlife Service & NOAA are the lead ESA agencies, with EPA in a support role. I stand corrected. Ed.]

Gradually, the environment improved. The bald eagle and the American alligator came back from the brink of extinction. Air quality improved, there was less litter, and the phosphate foam disappeared from streams.

And, rightly or wrongly, EPA got the credit. As the hippies of my generation greyed, they remembered their Earth Day Groove-In fondly.

Fast forward to 2011: the EPA has become a stifling, job-killing bureaucracy. What happened? When did the EPA jump the shark?

EPA takes credit for cleaning the air of Six Principal Pollutants: Lead, Carbon Monoxide, Ozone, Pariculate Matter, Sulfur Dioxide, Nitrogen Dioxide.

The snail darter and the spotted owl were harbingers. The 1.6 gallon-per-flush toilet brought the EPA into the Inner Sanctum of the average American’s home; in 1994, it should have been our clarion call.

In California, restrictions on brush-clearing favor the kangaroo rat’s habitat over humans’ habitations. In West Texas, a 3-inch lizard threatens to shut down oil drilling.

Beyond the Endangered Species Trump Card, the EPA keeps expanding its purview. The alphabet-soup of CERCLA and other Superfund-related legislation has benefited legions of environmental attorneys and consultants with precious little progress in cleaning up actual pollution. Under President Clinton’s Executive Order, the EPA made an issue of “environmental justice”, based on the anecdotal observation that oil refineries, landfills and chemical plants tend not to be built near posh neighborhoods and country clubs. Frustrated by inaction on Anthropogenic Global Warming, EPA expanded the definition of “pollutant” to cover carbon dioxide, which we exhale and green plants depend on for life. EPA has pushed to set acceptable urban ozone levels lower than the natural levels in Yellowstone Park.

But if commercial or property interests push back as the EPA expands its scope, they are characterized as “anti-environment”, without a critical look at the value of the regulation. The public in general is supportive of “the environment”, which translates into popular support of the EPA. Few are interested in cost/benefit analyses or even common sense.

But this screed is less an indictment of the EPA in particular than it is an indictment of bureaucracy in general. The problem is that budget growth is structurally built into the system. “Draconian budget cuts” are in fact decreases in a previously-projected rate of growth, not true cuts. Anything that grows at an annual rate of 8% doubles in size in just nine years. By not exercising fiscal restraint, meaning zero-based budgeting, weak politicians tacitly accept “mission creep”.

The bureaucracies have grown too large, too complex and too arrogant to accept Congressional oversight. They have expropriated legislative authority with “rulemaking”, and they enforce the laws as they see fit.

It’s not just the EPA, it’s virtually every branch of the government.

It’s killing our freedom and our prosperity.

We need conservative leaders with the cojones to stop it.

The Baby Cuckoo: my favorite metaphor for the result of unchecked bureaucratic growth. (The cuckoo is a parasite, not an endangered species!)

Cross-posted at stevemaley.com.

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In a nutshell, North America contains a vast bounty of energy sources in the form of oil, natural gas and coal. Reports that we are “running out” of energy sources use semantics and terminology to play with the facts. Simply put, we have chosen not to exploit potential sources close to home, finding it more expedient or convenient to depend on faraway sources for our energy.

Based on the ongoing tangible successes in North Dakota and Pennsylvania, one would think that the jobs/growth potential presented by aggressive energy development would tantalize any politician who is truly interested in helping the economy. One would think.

The following video will give you a quick run-down of the key points of the report, but I would encourage anyone interested to download and read the full report. It is extremely well-documented and although it is chock-full of facts and figures, I found it to be an easy read.

Excerpt from the report’s executive summary:

The amount of oil that is technically recoverable in the United States is more than 1.4 trillion barrels, with the largest deposits located offshore, in portions of Alaska, and in shale in the Rocky Mountain West. When combined with resources from Canada and Mexico, total recoverable oil in North America exceeds 1.7 trillion barrels.

That is more than the world has used since the first oil well was drilled over 150 years ago in Titusville, Pennsylvania. To put this in context, Saudi Arabia has about 260 billion barrels of oil in proved reserves. For comparative purposes, the technically recoverable oil in North America could fuel the present needs in the United States of seven billion barrels per year for around 250 years.

Moreover, it is important to note that that “reserves” estimates are constantly in flux. For example, in 1980, the U.S. had oil reserves of roughly 30 billion barrels. Yet from 1980 through 2010, we produced over 77 billion barrels of oil. In other words, over the last 30 years, we produced over 150 percent of our proved reserves. …

Proved reserves of natural gas in the United States and throughout North America are enormous, and the total amount of recoverable natural gas is even more impressive. The EIA estimates that the United States has 272.5 trillion cubic feet of proved reserves of natural gas. The total amount of natural gas that is recoverable in North America is approximately 4.2 quadrillion (4,244 trillion) cubic feet.

Given that U.S. consumption is currently about 24 trillion cubic feet per year, there is enough natural gas in North America to last the United States for over 175 years at current rates of consumption.

A key point of the IER report: We have been told repeatedly by our President, liberal members of Congress and our environmental community that the U.S. consumes 24% (or somesuch) of the world’s energy, but we have only 2% (or somesuch) of the world’s proved reserves. It’s just not fair!

However, IER explains how lying liars lie:

RESOURCES AND RESERVES: WHY TERMS MATTER WHEN JUDGING ENERGY POTENTIAL

A frequent source of confusion about America’s energy potential is the terminology used, primarily the enormous yet poorly understood difference between “resources” and “reserves.” The term “reserves” typically refers to a country’s known, proved and presently economic energy supplies, but a country’s resources are much larger, representing a nation’s total potential energy. The debate over whether a country has only a few years’ supply of a particular energy source or centuries’ worth can hinge upon the terms employed. It is merely semantics—not a scientific assessment of what America has the capacity to produce—that allows critics to claim repeatedly that America is running out of energy.

Hmmmm…. Sounds familiar….

Cross-posted at stevemaley.com.

Of course, the Times tries to portray the Congressman’s voting record as corrupt, since he has income from a (silent) interest in a family enterprise (on the order of $100K/year). Added to that, his father, former U.S. Sen. David Boren (D-OK) receives compensation for his service on the board of a successful oil company. (David Boren, as the Times chooses not to report, is president of the University of Oklahoma since 1994, and a member of several corporate boards.)

The congressman’s income has jumped in the last six years, thanks to two family businesses he partly owns that have signed more than 300 mineral leases, worth hundreds of thousands of dollars. Many of those deals are with Chesapeake Energy, a top donor to his campaigns. …

House ethics rules do not prohibit lawmakers from taking steps to aid industries in which they have a financial stake. But some ethics experts say such actions are still inadvisable. [Emphasis added.]

“Some experts say…” It wouldn’t be a Times article without that chestnut.

“Even if it is legal, if every member of Congress pushed for industries that they have financial ties to, there would be an outcry from the public,” said Robert M. Stern, a California lawyer who has helped draft state ethics and campaign finance laws.

You gotta be kidding me, chief.

House ethics (oxymoron alert!) rules do not prohibit members from trading in public companies whose fortunes may be affected by Congressional action. And then there’s the case of Maxine Waters, who intervened, not in the interest of her state or an industry, but for a particular bank in which her husband owns a significant stake.

The implication that Boren’s voting record is the result of corruption and not the consequence of his experience and his constituents’ interests is pretty astounding.

Fracking has been going on in Oklahoma since the late 1940s. Oklahoma-based corporations (notably Chesapeake, Devon Energy, and Continental Resources) are national leaders and innovators in the new “resource” technologies. (The energy industry has always tried to cover its bets by backing friendly members of both parties, but energy state Dems are becoming an endangered species.)

Most of the land in Oklahoma is in private hands (or in some cases, tribal lands). It’s not unusual that a large land-owning family would be leasing its land, and not unusual that the pace of leasing has picked up since 2004, which was the beginning of a gas-drilling boom.

Oil and gas has been a large segment of Oklahoma’s economy since before statehood. The state depends not only on the 71,000 industry jobs; 1 in 7 jobs of all kinds depend directly or indirectly on energy. State revenues benefit from a 7% severance tax — a percentage of value of all minerals produced within its borders — in addition to income taxes. Then there are the landowner royalties, the mineral owner’s participation in success, a tremendous source of income to the landowners of the state.

What is the power of the natural gas bogeyman in the mind of the Times and in the minds of its (dwindling) legions of readers?

What is the mystical power of oil and gas money versus, say, corn money?

Should we question the ethics of a Kansas, Iowa or Indiana legislator with family interests in farming be questioned because of a vote on agricultural policy, or ethanol subsidies? I’m sure there are plenty of examples.

Is a congressman from Florida or Hawaii suspect because of donations from the tourism industry? Nevada and gambling? New Jersey and concrete?

Are the only politicians to be trusted anti-industry hacks like Henry Waxman (CA) or Ed Markey (MA)? Or the delegates from Puerto Rico, American Samoa, the Northern Marianas and Guam, who the Democrats have packed onto the House Natural Resources Committee, and who enjoy full voting rights on committee matters?

Or better yet, are we going to trust Hollywood know-nothings like Mark Ruffalo on energy issues?

It’s probably good timing for Boren to leave Congress in 2012. His district encompasses much of what was once a Dem stronghold in eastern OK, but with redistricting and population shifts it now comprises growing Tulsa suburbs which trend conservative. In 2010, he beat his Republican challenger 56-43 despite an overwhelming money advantage.

Cross-posted at stevemaley.com.

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Neo-Malthusians and Progressives make sure you know about Hubbert’s pessimistic outlook for conventional crude oil. They made Hubbert a household name, the only oil technologist whose name they use without adding “sellout” or “whore”.

But here’s what they never tell you about what Hubbert’s wrote…

1. The name of the paper is “Nuclear Energy and the Fossil Fuels”

(.pdf link)

…Fig. 30 … covers the time span from 5,000 years ago — the dawn of recorded history — to 5,000 years in the future. On such a time scale the discovery, exploitation and exhaustion of the fossil fuels will be seen to be an ephemeral event in the span of recorded history. There is promise, however, provided mankind can solve its international problems and not destroy itself with nuclear weapons, and provided the world population (which is now expanding at such a rate as to double in less than a century) can somehow be brought under control, that we may at last have found an energy supply adequate for our needs for at least the next few centuries of the “foreseeable future.”

Hubbert arrived at this conclusion after cataloging the uranium potential in the United States. Much of that potential exists in widespread shale deposits in various parts of the nation.

Hubbert’s vision of the future may have become reality in France. He must have been disappointed to see what a bunch of hysterical twits the American environmentalist movement can be when they derailed American nuclear development after Three Mile Island/The China Syndrome.

2. Hubbert saw considerable potential in the oil shales.

The oil obtainable from oil shales in the United States has been taken to be 1,000 billion barrels. [Hubbert's high-end crude oil projection for the Lower 48 was 200 billion barrels. - Ed.] This is based upon a revised figure recently released by the United States Geological Survey of 900 billion barrels of oil for the shales of Colorado. A.C. Rubel has recently made a review from published literature of all the bituminous shales of the United States which are potential sources of oil, and has arrived at an estimate of a possible 2.5 trillion barrels of oil obtainable from shale.

(Oil shales are massive kerogen-rich formations which are found in the Mountain West, primarily western Colorado. Kerogen is a waxy, immature oil precursor, not to be confused with conventional oil in the Bakken shale of North Dakota and elsewhere.)

Ironically, Hubbert foresaw the potential energy locked up in the shales in the form kerogen and fissionable materials, but did not appreciate the potential of shale as a source of natural gas. Shales currently supply 40+% of our gas.

More on that topic in a future blog.

Cross-posted at stevemaley.com.

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