Oil Change for Obama

It's simple. The oil industry can let go of any industry-specific tax breaks in exchange for permission to drill anywhere in the US. A change like that would give something to everyone, and the biggest bonus would go to the American people. Too bad Obama has no grasp of the obvious.

Here’s an Easy $100 Billion Cut

Published: August 7, 2011

If the Republicans are truly determined to slash the budget and end government waste, they will start with two obvious and long overdue cuts: ending the web of tax breaks enjoyed by the rolling-in-dough oil industry and terminating the ethanol subsidy. Together these cuts would save up to $100 billion over 10 years, without hurting the poor and middle class or slowing the economy.

If only. The oil industry’s well-paid defenders — lobbyists and lawmakers in unison — will surely scream “tax hike” and claim that ending $4 billion a year in sweetheart subsidies will decrease production and increase prices at the pump. All of which is nonsense.

In 2005, with oil nearing $60 a barrel, James Mulva, the head of ConocoPhillips, told the Senate that his industry did not need these breaks to keep exploring for oil. They need them even less when oil is $100 a barrel.

According to the Congressional Research Service, ending the subsidies would have no effect on gas prices and a trivial effect on profits. The Big Five — Exxon Mobil, BP, ConocoPhillips, Chevron and Shell — reported combined profits of $35.1 billion for just the second quarter. Yes, you read that right.

The ethanol subsidies are just as unnecessary. The big one is a 45-cents-per-gallon tax credit that costs between $5 billion and $6 billion a year and goes not to corn farmers, as commonly supposed, or to ethanol producers, but to the refineries that blend ethanol with conventional gasoline. Which is to say, the oil companies.

Tax credits might have been useful when ethanol was in its infancy. But making corn ethanol is now a commercially viable technology, and one that is further supported by a 2007 Congressional mandate that requires refiners to blend up to 15 billion gallons of corn ethanol every year. In this sense, the subsidy is a bribe to oil companies to get them to buy and blend a product they are already required by law to purchase.

President Obama has called three times for ending the oil subsidies, and in May the Senate voted 52 to 48 to do so, not enough to overcome a filibuster. In June, the Senate also approved an amendment to a bill that ultimately went nowhere that would have ended the ethanol subsidy.

The roadblock is the House Republicans’ blind opposition to anything that could be characterized as a tax increase. Also nonsense. These tax breaks are merely subsidies under another, politically convenient name. It is time to end both. There is no justification for putting the interests of one industry above those of the country.

Oil -- the staff of life

A nation's prosperity is tied to its access to low-cost energy. Having oil beneath its own territory is a great way to ensure some oil supplies. But a healthy world market will do just as well. The history of the world's leading nations and how they advanced shows the link between abundant energy and prosperity.

But Obama thinks it's possible to break the link and continue to enjoy the prosperity. As we can see, that largest burden on Americans is the big increase in the price of gasoline and other petroleum products. Next to that, the pain is coming from higher food prices, which are affected by energy prices.

Oil Oozes Through Your Life

WHEN whales were an important energy source back in the 18th and 19th centuries, whalers made sure to use every last part of each one, given how difficult they were to kill. The blubber was boiled into oil for heat and light; the bones refashioned into women’s corsets; the teeth sold for scrimshaw carvings; the sperm reserved for cosmetics and other uses. “Such a sweetener! Such a softener! Such a delicious molifier!” — as Herman Melville’s narrator puts it in “Moby Dick.”

Since petroleum replaced whale oil as a main fuel source more than a century ago, chemical companies and refineries have found a startling range of uses for it, from asphalt to vanilla flavoring in ice cream to pills from the drugstore. It has oozed into everyday life, so reducing dependency is a more complicated proposition than some might think.

“It just turns out to be a very abundant product that is easy to manipulate chemically, so you can turn it into many different products,” said Dr. Benny Freeman, past chairman of the American Chemical Society’s polymeric materials division.

Take a typical barrel of oil. About 46 percent of it is refined into gasoline, and another 40 percent or so is turned into jet and fuel oil. Only about 2 percent becomes petrochemicals like polyethylene and benzene for everyday products (with the rest going to other uses).

Yet that 2 percent has a pervasive reach, as suggested by the accompanying chart. “Oil, no pun intended, seeps into just about everything in the economy,” said David Garfield, a managing director at the consultancy AlixPartners. And though petrochemicals usually aren’t burned for fuel, they share in the environmental impact of petroleum when extracted and refined using energy-intensive methods.

When oil prices go up, as they have markedly in the past year, companies reassess how they transport items, try to cut down on energy costs, and look for alternatives to petroleum-based materials. For example, some are replacing the hard-to-open plastic clamshell packaging that many consumers find so annoying. But, said Michael Pishko, head of the department of chemical engineering at Texas A & M, there are only a few alternatives to petroleum-based chemicals (one is natural gas as a base for polyethylene). “Beyond that, it becomes very difficult to compete with petroleum, even petroleum at $100 a barrel,” Dr. Pishko said.

Michael Watts, a professor of geography and development studies at the University of California at Berkeley, agreed. “The complexity of these hydrocarbons is sort of remarkable,” he said. Even as a critic of oil dependency, he concedes that petroleum’s versatility is impressive: Not only does the American farm and grocery network rely on cheap fuel for low-cost shipping between the coasts, but food itself is grown using petroleum-based fertilizer. (Oil byproducts for food typically fall under federal regulation, although that doesn’t satisfy critics of petroleum-derived food colorings, for example.)

What will it take to wean us off oil? Professor Watts says the question forces scrutiny of “a very complicated set of connections in which what we’re confronting, because of this dependency, is not just, ‘Let’s develop a Prius.’ ”

Oil -- More Domestic Oil is the Answer

We can drill for oil in Texas, and we can use the hydraulic fracturing process to extract it from the rocks it's in. Or we can go for the easy stuff in the Artic National Wildlife Refuge, off the coast of California and in a lot of other places that are now officially off-limits to drillers.

Why is the nation determined to bankrupt itself while enriching the people who want to provoke our collapse? Crazy.

Shale Boom in Texas Could Increase U.S. Oil Output

May 27, 2011

CATARINA, Tex. — Until last year, the 17-mile stretch of road between this forsaken South Texas village and the county seat of Carrizo Springs was a patchwork of derelict gasoline stations and rusting warehouses.

Now the region is in the hottest new oil play in the country, with giant oil terminals and sprawling RV parks replacing fields of mesquite. More than a dozen companies plan to drill up to 3,000 wells around here in the next 12 months.

The Texas field, known as the Eagle Ford, is just one of about 20 new onshore oil fields that advocates say could collectively increase the nation’s oil output by 25 percent within a decade — without the dangers of drilling in the deep waters of the Gulf of Mexico or the delicate coastal areas off Alaska.

There is only one catch: the oil from the Eagle Ford and similar fields of tightly packed rock can be extracted only by using hydraulic fracturing, a method that uses a high-pressure mix of water, sand and hazardous chemicals to blast through the rocks to release the oil inside.

The technique, also called fracking, has been widely used in the last decade to unlock vast new fields of natural gas, but drillers only recently figured out how to release large quantities of oil, which flows less easily through rock than gas. As evidence mounts that fracking poses risks to water supplies, the federal government and regulators in various states are considering tighter regulations on it.

The oil industry says any environmental concerns are far outweighed by the economic benefits of pumping previously inaccessible oil from fields that could collectively hold two or three times as much oil as Prudhoe Bay, the Alaskan field that was the last great onshore discovery. The companies estimate that the boom will create more than two million new jobs, directly or indirectly, and bring tens of billions of dollars to the states where the fields are located, which include traditional oil sites like Texas and Oklahoma, industrial stalwarts like Ohio and Michigan and even farm states like Kansas.

“It’s the one thing we have seen in our adult lives that could take us away from imported oil,” said Aubrey McClendon, chief executive of Chesapeake Energy, one of the most aggressive drillers. “What if we have found three of the world’s biggest oil fields in the last three years right here in the U.S.? How transformative could that be for the U.S. economy?”

The oil rush is already transforming this impoverished area of Texas near the Mexican border, doubling real estate values in the last year and filling restaurants and hotels.

“That’s oil money,” said Bert Bell, a truck company manager, pointing to the new pickup truck he bought for his wife after making $525,000 leasing mineral rights around his family’s mobile home. “Oil money just makes life easier.”

Based on the industry’s plans, shale and other “tight rock” fields that now produce about half a million barrels of oil a day will produce up to three million barrels daily by 2020, according to IHS CERA, an energy research firm. Oil companies are investing an estimated $25 billion this year to drill 5,000 new oil wells in tight rock fields, according to Raoul LeBlanc, a senior director at PFC Energy, a consulting firm.

“This is very big and it’s coming on very fast,” said Daniel Yergin, the chairman of IHS CERA. “This is like adding another Venezuela or Kuwait by 2020, except these tight oil fields are in the United States.”

In the most developed shale field, the Bakken field in North Dakota, production has leaped to 400,000 barrels a day today from a trickle four years ago. Experts say it could produce as much as a million barrels a day by the end of the decade.

The Eagle Ford, where the first well was drilled only three years ago, is already producing more than 100,000 barrels a day and could reach 420,000 by 2015, almost as much as Ecuador, according to Bentek Energy, a consultancy.

The shale oil boom comes as production from Prudhoe Bay is declining and drilling in the Gulf of Mexico is being more closely scrutinized after last year’s Deepwater Horizon disaster.

What makes the new fields more remarkable is that they were thought to be virtually valueless only five years ago. “Everyone said the oil molecules are too large to flow in commercial quantities through these low-quality rocks,” said Mark G. Papa, chief executive of EOG Resources.

EOG began quietly buying the rights to thousands of acres in the Bakken and Eagle Ford after an EOG engineer concluded that the techniques used to extract natural gas from shale — fracking, combined with drilling horizontally through layers of rocks — could be used for oil. Chesapeake and a few other independents quickly followed. Now the biggest multinational oil companies, as well as Chinese and Norwegian firms, are investing billions of dollars in the fields.

The new drilling makes economic sense as long as oil prices remain above $60 a barrel, according to oil companies. At current oil prices of about $100 a barrel, shale wells can typically turn a profit within eight months — three times faster than many traditional wells.

But water remains a key issue. In addition to possible contamination of surface and underground water from fracking fluids, the sheer volume of water required poses challenges, especially in South Texas, which faces a severe drought and rapidly diminishing water levels in the local aquifer.

At the rate wells are being drilled, “there’s definitely going to be a problem,” said Bay Laxson, a local water official.

Dave Thompson, regional production superintendent for the oil company SM Energy said the industry knew that water issues were “an Achilles heel.” He said his company was building a system to reuse water in the field.

But unlike Pennsylvania and New York, where fracking for natural gas has produced organized opposition, the oil industry has been mostly welcomed in western and southern states.

Thanks to the drilling boom, the recession bypassed North Dakota entirely. Here in Dimmit County, Tex., the unemployment rate has fallen in half, and sales tax receipts are up 70 percent so far this year, allowing the county to hire more police officers and buy sanitation and road repair equipment.

“In my lifetime, this is the biggest thing I’ve ever seen,” said Jose Gonzalez, 78, a retired teacher and son of migrant farm workers, who leased mineral rights to Chesapeake for $27,000 and sold another plot for $100,000 to a company building an RV park for oil workers. “You can see I’m happy.”

Barack Petroleum – Oil Stays on Gulf Waters

 

Why Is the Gulf Cleanup So Slow?

There are obvious actions to speed things up, but the government oddly resists taking them.

As the oil spill continues and the cleanup lags, we must begin to ask difficult and uncomfortable questions. There does not seem to be much that anyone can do to stop the spill except dig a relief well, not due until August. But the cleanup is a different story. The press and Internet are full of straightforward suggestions for easy ways of improving the cleanup, but the federal government is resisting these remedies.

First, the Environmental Protection Agency can relax restrictions on the amount of oil in discharged water, currently limited to 15 parts per million. In normal times, this rule sensibly controls the amount of pollution that can be added to relatively clean ocean water. But this is not a normal time.

Various skimmers and tankers (some of them very large) are available that could eliminate most of the oil from seawater, discharging the mostly clean water while storing the oil onboard. While this would clean vast amounts of water efficiently, the EPA is unwilling to grant a temporary waiver of its regulations.

Next, the Obama administration can waive the Jones Act, which restricts foreign ships from operating in U.S. coastal waters. Many foreign countries (such as the Netherlands and Belgium) have ships and technologies that would greatly advance the cleanup. So far, the U.S. has refused to waive the restrictions of this law and allow these ships to participate in the effort.

The combination of these two regulations is delaying and may even prevent the world's largest skimmer, the Taiwanese owned "A Whale," from deploying. This 10-story high ship can remove almost as much oil in a day as has been removed in total—roughly 500,000 barrels of oily water per day. The tanker is steaming towards the Gulf, hoping it will receive Coast Guard and EPA approval before it arrives.

In addition, the federal government can free American-based skimmers. Of the 2,000 skimmers in the U.S. (not subject to the Jones Act or other restrictions), only 400 have been sent to the Gulf. Federal barriers have kept the others on stations elsewhere in case of other oil spills, despite the magnitude of the current crisis. The Coast Guard and the EPA issued a joint temporary rule suspending the regulation on June 29—more than 70 days after the spill.

The Obama administration can also permit more state and local initiatives. The media endlessly report stories of county and state officials applying federal permits to perform various actions, such as building sand berms around the Louisiana coast. In some cases, they were forbidden from acting. In others there have been extensive delays in obtaining permission.

As the government fails to implement such simple and straightforward remedies, one must ask why.

One possibility is sheer incompetence. Many critics of the president are fond of pointing out that he had no administrative or executive experience before taking office. But the government is full of competent people, and the military and Coast Guard can accomplish an assigned mission. In any case, several remedies require nothing more than getting out of the way.

Another possibility is that the administration places a higher priority on interests other than the fate of the Gulf, such as placating organized labor, which vigorously defends the Jones Act.

Finally there is the most pessimistic explanation—that the oil spill may be viewed as an opportunity, the way White House Chief of Staff Rahm Emanuel said back in February 2009, "You never want a serious crisis to go to waste." Many administration supporters are opposed to offshore oil drilling and are already employing the spill as a tool for achieving other goals. The websites of the Sierra Club, Friends of the Earth and Greenpeace, for example, all feature the oil spill as an argument for forbidding any further offshore drilling or for any use of fossil fuels at all. None mention the Jones Act.

To these organizations and perhaps to some in the administration, the oil spill may be a strategic justification in a larger battle. President Obama has already tried to severely limit drilling in the Gulf, using his Oval Office address on June 16 to demand that we "embrace a clean energy future." In the meantime, how about a cleaner Gulf?