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By Bob Beauprez

Moratoriums, permitting bans, cancelling leases, Wild Land designations, EPA regulations on steroids, and tens of billions in DOE loans and subsidies for the alternative green energy industry…..the Obama Administration has done everything in their considerable power to strangle America’s oil and gas industry to death, but it just refuses to die.  In fact, it seems to be stronger than ever.

With 26 million people unemployed, under-employed, or having completely given up even trying to find a job, the oil and gas industry is bucking the trend during this prolonged economic recession by adding jobs and producing more badly needed energy right here at home.  A Thanksgiving weekend editorial in the Wall Street Journal reports that business is booming in energy rich America in the shrinking number of places not shut off by an Administration Steve Forbes blasted for “the most anti-oil and gas record in U.S. history.”  Following is a summary of the WSJ editorial:

* Oil and gas production now employs some 440,000 workers, an 80% increase, or 200,000 more jobs, since 2003. Oil and gas jobs account for more than one in five of all net new private jobs in that period.

* States that embrace oil and gas production are reaping the rewards. North Dakota has the nation’s lowest jobless rate, at 3.5%, and the state now has some 200 rigs pumping 440,000 barrels of oil a day, four times the amount in 2006. The state reports more than 16,000 current job openings, and places like Williston have become meccas for workers seeking jobs that often pay more than $100,000 a year.

* Production in Pennsylvania’s Marcellus shale formation created 18,000 new jobs in the first half of 2011. Some 214,000 jobs are now tied to a natural gas industry that barely existed in the Keystone State a decade ago.

* Energy firms are also rushing to develop the Utica shale in eastern Ohio, and they are expanding operations in Texas, Louisiana and Oklahoma, among other places.

* Oil and Gas could do even more for our struggling economy if the Obama Administration would just stop waging war against it.  The Wood Mackenzie consulting firm estimated that better federal energy policy would create an additional 1.4 million jobs by 2030.

Original Article

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Echoing unfulfilled goals set by every U.S. president since Richard Nixon, President Obama recently called for reducing this nation’s oil imports by one-third by 2025.

That’s an admirable goal, and one with which Louisiana can help. President Obama needs only to truly reopen the Gulf of Mexico to drilling, putting Louisiana back to work and distancing this nation from the instability in the Middle East.

We appreciate the need and support efforts to ensure proper regulations and safeguards are in place to prevent another Deepwater Horizon explosion and oil spill. But it’s now a year since the tragic explosion that claimed 11 lives. And other countries — likely lacking the drilling standards we already have — are or soon will be drilling in the region. So let’s hasten the process, make the fixes and resume work.

Some analysts say a one-third reduction in our dependence on foreign oil is not only possible but doable.

It certainly helps President Obama’s efforts that he has given himself a head start — measuring the one-third reduction from 2008 levels instead of today’s import rate. The economic crisis of the past few years reduced demand for oil and, therefore, imports.

Also, gasoline prices are creeping ever higher, continuing to reduce demand and pushing President Obama closer to his goal. But it’s been said that every $1-per-gallon increase in the price of gasoline means 5 percent less that American consumers will spend elsewhere. That is hardly stimulating to our flailing economy.

Another reason analysts say the oil import goal is reachable is increased blending of biofuels into our gasoline. But that drives up the price of corn and, in turn, our food.

Analysts also cite increased domestic oil production in 2009 and 2010 — after two decades of declines — thanks to new discoveries in shale deposits in Texas, New Mexico, North Dakota, Wyoming and California. But some parts of the West don’t want drilling off their shores or in their backyards.

Not so in Louisiana, which long ago plunged into the middle of energy production, be it oil or natural gas or even lignite. Our coastal wetlands became the jumping off point for Gulf exploration. The state has reaped the fruits but also has borne the wear and tear and has had to fight in recent years for a bigger share in offshore revenues. More recently, northwest Louisiana is looking for the balance that allows extraction from the Haynesville Shale without jeopardizing the quality or quantity of a more precious resource: water.

President Obama, on a related note, also has called for increases in electric and natural gas-fueled vehicles. Those oft-quoted analysts don’t expect those fuels to impact gasoline demand and oil imports before the president’s deadline of 2025. That’s in large part because of the time needed to build the necessary infrastructure, including charging and natural gas filling stations. The Haynesville play already has led to construction of stations in our area. We would welcome an infusion — possibly in partnership with energy companies or through incentives to those companies — to further develop the needed infrastructure.

Let’s put Louisiana back to work and, in doing so, move this nation closer to energy independence.

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With local attention diverted mostly toward last Saturday’s elections, there were several other topics that arose in the past week we thought merited brief comment. And as it turned out, all are energy related:

Transocean is all wet

The BP offshore well explosion spewed forth oil into the Gulf of Mexico and tone-deaf pronouncements from key figures. Who could ever forget BP executive Tony Hayward’s “I would like my life back” slip?

Now comes Transocean Ltd., owner of the rig that exploded. In a filing with the Securities and Exchange Commission, Transocean boasted about its “best year” in safety, not counting, we presume, that little matter of 11 deaths and

200 million gallons of gushing oil. The safety performance was used to justify hefty bonuses and raises to top executives. “We acknowledge that some of the wording in our 2010 proxy statement may have been insensitive,” the company said Monday. Agreed.

It’s about time

With gasoline prices averaging more than $3.50 a gallon, President Obama made his version of the White House energy independence speech last week. Especially encouraging in Haynesville Shale country was a shout-out to natural gas: “The potential for natural gas is enormous.”

Yet exploration companies’ enthusiasm was a bit muted over his call for Congress to “pass a bill that helps us achieve the goal of extracting natural gas in a safe environmentally sound way.” Sounded prudent to us, and natural gas stocks nevertheless jumped.

Despite a few vehicle filling stations here and there, compressed natural gas needs a jump start to grow its market. And natural gas has a strong case to make that it burns cleaner than both oil and coal.

Bring in da noise ordinances

Caddo and Bossier parishes continue their lurch toward enforcement of new noise laws that were enacted to head off potential conflicts between peace and quiet and the hydro fracing and pumping processes. Rather than April 1, enforcement won’t begin for at least couple more months because the parishes are waiting for training programs to be carried out.

We remain disappointed that the Caddo Commission decided not to match Bossier’s lower noise threshold, for uniformity’s sake as well as the public’s.

Drill, bambino, drill

Cuba’s dive into offshore oil and natural gas exploration raises a couple issues. First, no U.S. companies are represented in the joint ventures, another argument that our old Cold War rules prohibiting economic engagement with Cuba seem more and more dated. Second, although U.S. safeguards didn’t prove sufficient to help head off the BP disaster, we wonder about the standards Cuban regulators will impose.

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It seems that hydraulic fracturing–aka “fracking”–increasingly is becoming part of the national conversation. Energy lobbyist Frank Maisano, known for his regular e-mails to those interested in energy issues in Washington, D.C., began today’s mail thusly:

“So tired from a weekend of lacrosse tryouts and field hockey tournaments that I couldn’t stay up through the Oscars last night…or maybe it was just the terrible hosts that put me to sleep. It looked like James Franco might have been sampling some fracking fluids prior to the show last night.”

Last night’s Oscar awards had special interest for the natural gas industry. There no doubt were a number of industry people, ranging from CEOs to toolpushers, who were delighted to see that the controversial “Gasland,” a highly critical look at natural gas drilling and fracking, failed to win in the feature documentary category.

In this blog posting today, political commentator Andrew Schenkel suggested that a debate between natural gas advocate Boone Pickens and “Gasland” creator, director and narrator Josh Fox might be an interesting next step in the debate over gas drilling and fracking. Fox wants to debate the Dallas billionaire, Schenkel wrote.

–Jack Z. Smith

Original Article

Sounds like the U.S. Government needs to hire some competent lawyers.

Lucrative Gulf of Mexico drilling loophole survives challenge in U.S. House

On a mostly party-line vote, The House Friday night rejected a Democratic amendment that would have corrected a 1995 mistake in drilling rules [sic] that allowed oil and gas companies to drill in portions of the Gulf of Mexico without paying royalties.

The amendment would have saved $1.5 billion in 2011, and $53 billion over the next 25 years, according to the measure’s Democratic sponsors. The windfall is a result of a mistake made by the Clinton administration’s oil and gas regulators in 1995, which Congress has been unwilling to change, despite several attempts over the 16 years.

I hate to nit-pick, but the mistake was not made in “drilling rules”, but in the oil and gas lease form that was written by government attorneys, subject to competitive bid in two lease sales back in the 1990s.

Here’s what happened: back in the ’90s, oil prices were too low to justify oil exploration in the deepwater Gulf of Mexico. To encourage oil companies to bid on the leases, and the winners subsequently to explore them, the U.S. Government as landowner proposed to waive the (then) 12.5% royalty on certain deepwater leases. The 0% royalty was supposed to revert to 12.5% if oil prices ever exceeded $35 per barrel.

But the section of the lease that addressed the $35 price cap was inadvertently left out of the contract. Ooops.

The leases were subject to competitive bid.

Years passed, and several of the leases were drilled, resulting in a number of discoveries. When the price of oil later climbed past $35, the mistake became apparent.

The (then) Minerals Management Service asked companies to honor the “spirit” of the royalty relief. Some companies complied and paid the royalty per the intent. Some said no.

Congress has huffed and puffed, but has so far been unable to compel the cooperation of the latter group.

I’m no lawyer, but my impression is that in real estate matters, the contract (in this case, the oil and gas lease) is the entirety of the agreement between the parties. In this matter, the courts have ruled favor of the oil companies.

What do you think would have happened if the mistake in a contract happened to favor the Government? Is there any chance that the Government would roll?

Originally posted here

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By David Vitter

1776 was quite a year for American ideas — and not just because of the political philosophy embodied in the Declaration of Independence. Just as importantly, 1776 also saw the publication of Scottish economist Adam Smith’s The Wealth of Nations, the first textbook, if you will, on free-market economics.

As with the Declaration, The Wealth of Nations is a treasure trove of principles that are at the heart of America’s exceptionalism and unparalleled economic success. Adam Smith realized something revolutionary for his time: The wealth of nations is not dependent on finite factors like the precious metals nations possess. Rather, it is determined by the labor of their citizenry and how productively that labor is employed. This led Smith to additional modern economic concepts such as the opportunity for almost limitless economic growth through division of labor and employment of capital, and perhaps most famously, the “invisible hand” of the free market, which organizes economic activity with astounding efficiency.

Sound compelling? Don’t worry — 235 years and indescribable economic success later — the Obama crowd isn’t buying a bit of it. This is perhaps most evident in Obama’s approach to energy and the environment, particularly in the Gulf of Mexico and in my home state of Louisiana.

At the heart of America’s recipe for remarkable economic growth since World War II has been cheap energy. As mentioned, Adam Smith wrote about division of labor, employment of capital, and how those factors could increase productivity, economic output, and wealth. He gave eighteenth-century examples of how that works. But he couldn’t possibly have imagined just how powerful such an engine could become — or what cheap energy could do for American economic growth.

The Obama approach to cheap energy? Cheap energy is a key part of the problem. This attitude is perhaps even more worrisome than the president’s actual environmental goals like taxing and regulating away purported “man-made” climate change. His primary means of getting there is, pure and simple, dramatically raising the price of energy — not increasing productivity and innovation.

This impulse is so strong that it seems to be part of an emotional reaction against our very economic prosperity — as if that end in itself is outdated and suspect — stemming from the belief that it can only have been gained to the detriment of the less-developed world. In this way, the president would be right at home with most thinkers before Adam Smith, who considered economics a zero-sum game.

Before President Obama tapped Carol Browner to be his climate-change czar, she was listed as a leader of the Commission for a Sustainable World, which argued that developed countries actually must shrink their economies and consumption to address climate change. Similarly, White House science advisor John Holdren had advocated “de-industrializing” America. That means we all need to “face up to . . . zero net physical growth” in which we all need to consume far less. As a candidate, Barack Obama himself admitted that his cap-and-trade plan would necessarily create “skyrocketing” utility costs. And even in office, Obama’s energy secretary Steven Chu has baldly stated that he hoped the U.S. would “boost the price of gasoline to the levels in Europe,” currently about $7 per gallon.

Small wonder that President Obama still has the Gulf of Mexico virtually shut down to oil and gas activity nine months after the Deepwater Horizon disaster. The formal moratorium is lifted, and promises to resume drilling abound, but the reality remains — a virtual shutdown. And offshore may be the good news. Onshore, federal permitting for domestic energy resources has been reduced by a whopping 79 percent since Obama took office.

According to the International Energy Agency, these Obama trend-lines mean that we’ll need to import 300,000 barrels of oil more per day in 2015. Even at today’s oil prices (which are likely to look low in 2015), that’s $27 million more per day, $9.855 billion more per year flowing out of our national economy.

To me, this sure doesn’t add up to a renewal of American prosperity. Rather, it seems to be giving up on that very goal. It’s as if President Obama is saying: “Well, yes, our time has passed.” And that’s probably because the President never understood The Wealth of  Nations and how America became so exceptional to begin with.

— David Vitter is a U.S. senator from Louisiana.

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When it comes to oil taxes, consuming nations just can’t think straight when crude prices rocket. That’s what OPEC came to remind us this week as consumers accuse the oil producers’ group to be behind a recent price hike.

“In 2009, when the oil price was lower, the [consumers’ watchdog International Energy Agency] had advised its members that they needed to increase petroleum taxes,” said Abdalla Salem El-Badri, the secretary general of the Organization of Petroleum Exporting Countries, in remarks to the Wall Street Journal.

Back in March 2009, the IEA had told U.S. lawmakers to take advantage of lower oil prices by considering new taxes on fuel.

“So why, today, when they are complaining that oil prices are too high, are they not advising their members to reduce taxes?” El-Badri asked.

Good question. Much of the response lies, quite simply, in the addiction many governments have developed to oil taxes. It’s not as if you were putting duties on children’s hospital beds. Fuel duties are akin to the fiscal version of “crime and punishment”–the polluter pays and the money goes to the piggy bank.

Secondly, many consuming countries in the Northern Hemisphere are also producers. They can’t blame far-flung nations for their woes since crude is a “produit du terroir.” And while complaining about inflationary pressure, some governments are getting filthy rich on high oil prices.

Based on U.K. budget estimates, the British Treasury will collect about £2 billion more than previously planned on North Sea oil royalties thanks to the price rise.

Indeed, recent remarks by British Premier David Cameron seem to concur with OPEC’s El-Badri.

“Is there any way in which, when the oil price goes up, if the Treasury is getting more revenue out of that oil, can we find a way of sharing that risk with the consumer?” Cameron wondered.

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From Mr Dennis Kelleher and Mr David Frenk.

Sir, Sylvia Pfeifer’s article “Rising oil price threatens fragile recovery” (January 4) was quite right to point out that the accelerating rise in oil prices poses a major threat to a US and global recovery. However, the article only told part of the story.

Is the current oil price rise really attributable to emerging market demand – especially from China – as some commentators claim? China’s economic growth is slowing, with expected growth for 2011 downgraded from 10.5to 8.5 per cent. Moreover, data from the US Energy Information Administration show that the global supply and demand balance for crude oil is much the same as it has been for the past 20 years. Granted, demand for oil has risen, but so too has supply. The latest EIA figures suggest there is no persistent shortage of oil.

So what can explain the rise? Perhaps part of the answer might lie in the $50bn of institutional money Barclays is estimating will flow into commodity indexes this year (on top of the already record high $350bn or more presently “invested”). The best available data suggest that close to half of this money is held in the form of long crude oil positions. Estimates of the impact of this money on crude prices range from a premium of 15 per cent on the conservative side to as high as 50 per cent.

Furthermore, net long speculative positions in crude oil by hedge funds and other large financial speculators are reported to be at a record high, having increased by close to 5 per cent during the last trading week of 2010.

Some have argued that speculation cannot drive up futures prices over the long run, because, ultimately, betting against supply and demand fundamentals is a losing strategy. Yet, when speculators control more than 50 per cent of the market, as they do in many commodities today, it is the producers and consumers who lose out to the speculators, not the other way around.

The International Energy Agency suggests that 0.5 per cent of gross domestic product in the Organisation for Economic Co-operation and Development area will be lost because of the current price hikes. However, their baseline is the already inflated prices of 2010. The true cost of excessive speculation in oil and other commodities is therefore much higher. Stamping down on oil speculation, particularly index speculation by large institutional investors, is a targeted, high-impact stimulus governments around the world can no longer afford to ignore.

Original Article