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Obama Kills Atlantic Offshore Drilling For Five Years

From Big Government:

Yesterday the Obama administration announced a delaying tactic which will put off the possibility of new offshore oil drilling on the Atlantic coast for at least five years:

The announcement by the Interior Department sets into motion what will be at least a five year environmental survey to determine whether and where oil production might occur.

Virginia Gov. Bob McDonnell notes that a planned lease sale, which the administration cancelled last year, will now be put off until at least 2018. As you might expect, Republicans were not impressed with the decision:

“The president’s actions have closed an entire new area to drilling on his watch and cheats Virginians out of thousands of jobs,” said Rep. Doc Hastings, R-Wash., who chairs the House Natural Resources Committee. The announcement “continues the president’s election-year political ploy of giving speeches and talking about drilling after having spent the first three years in office blocking, delaying and driving up the cost of producing energy in America,” he said.

Finally, given that this is the Obama administration, you won’t be surprised to learn that oil and gas exploration is not the only aim of the survey:

In addition to assessing how much oil and natural gas is in the area, seismic testing would help determine the best places for wind turbines and other renewable energy projects, locate sand and gravel for restoring eroding coastal areas, and identify cultural artifacts such as historic sunken ships.

The Post reports that environmentalists are already opposing the survey which, conveniently, won’t begin until after the election.

Under Obama, Oil and Gas Production on Federal Lands Is Down 40%

From The Heritage Foundation:

In his announcement rejecting the Keystone XL pipeline today, President Obama boasted that under his administration, “domestic oil and natural gas production is up.” Obama, of course, failed to mention that his administration can’t actually take any credit for the increase.

The vast majority of America’s new oil and gas production is happening on private lands in states like North Dakota, Alaska and Texas.

It’s not that Obama is devoid of responsibility. His administration oversees oil and gas production on federal lands by issuing leases. But when measuring oil and gas production in areas under Obama’s jurisdiction, the numbers tell a different story.

Citing publicly available federal data, the House Natural Resources Committee noted these figures:

  • Under the Obama administration, 2010 had the lowest number of onshore leases issued since 1984.

Despite the Obama administration’s restrictive policies for oil and gas production on federal lands, overall production still increased thanks to the pro-energy policies in states like North Dakota.

Read the rest at The Heritage Foundation

No Reason to Tap the Strategic Petroleum Reserve

From The Heritage Foundation:

In response to OPEC’s inability to come to agreement on boosting oil production, the White House indicated that it would not shy away from tapping into the Strategic Petroleum Reserve (SPR), which holds 700 million barrels of unrefined petroleum reserves in underground salt caverns, in order to smooth over oil supply disruptions originating from the Libyan conflict. A temporary oil price increase, however, is not a valid reason to tap into the U.S. emergency oil supply, which is, after all, a national security asset.

Although President Obama’s approval ratings have been suffering under the heavy burden of high gas prices across the country, national security interests—not politics—should guide the use of America’s SPR. As Heritage policy experts James Carafano and Nick Loris explain:

The SPR, managed by the Department of Energy (DOE), exists for moments of national crisis when there is a dramatic disruption in oil supplies. The current high prices at the pump are a national concern—but playing politics with a national security asset is not the way to address the problem.

A brief review of OPEC’s history further suggests that the lack of agreement among the cartel members is no surprise, nor should it be a major source of concern. Saudi Arabia and its allies are perfectly capable of increasing—and likely will increase—its own oil output in spite of the OPEC disarray, because it is in its interest to avert crushing oil price increases from the Libyan disruption. Reuters market analyst John Kemp even suggests that output will increase beyond what would otherwise have been the case had OPEC been able to reach agreement.

The failed ministerial conference has pushed OPEC to the sidelines and will ensure oil supply decisions are made in Riyadh—unconstrained by the concerns of other cartel members. That probably means a more dovish approach that sees more barrels coming to market because Riyadh is far more concerned about the political and economic damage from soaring oil prices than Iran, Venezuela and some of the other cartel members.

Price hawks like Iran and Venezuela have overplayed their hand. Paradoxically, failure to reach a consensus means output will rise more sharply and openly in the coming months than it would have done otherwise.

Nevertheless, there are important actions that the U.S. should take to stabilize oil prices in the long term. The U.S. could increase access to oil reserves onshore and offshore by (1) speeding up lengthy permitting processes, (2) removing any moratoria that prevent drilling in places like Alaska and most of the outer continental shelf, and (3) increasing the sale of leases to domestic oil reserves. These measures could help offset rising global oil demand while also strengthening America’s strategic position among oil-exporting countries.

What If Oil Producers Actually Received Subsidies Like Wind Energy Producers?

From The Heritage Foundation:

With the current debate over ending oil producers’ subsidies the question arises as to what subsidies do the producers actually get.  It is a surprisingly complicated question.  Wind producers also get subsidies that take complex forms—investment tax credits, production tax credits, mandates, property tax exemptions, etc.  But the major federal subsidy for wind producers is the option to take a 30 percent investment tax credit or to receive a 2.2 cents per kilowatt-hour production tax credit.

“2.2 cents” doesn’t seem like much, but, depending on the time of year, it falls somewhere between 25 percent and 100 percent of the wholesale price of electricity.  Forty percent if frequently used as the average.

So, what would an oil-production subsidy look like if it were the same magnitude?

Deepwater drilling rigs can cost over $400,000 per day.  With other costs, a rough per-well figure would be $100,000,000 per well.  If an oil company could get the same 30 percent investment tax credit as wind producers, the government would write the company a $30,000,000 check for each well completed.  For the lower cost, shallow-water wells, the government would write a check closer to $3,000,000 for every well drilled.

If on the other hand, the oil company opted for a production tax credit (and it was set at 40 percent of the 2010 average price of about $75 per barrel) then the government would write the oil company a check for $30 for each barrel produced (onshore as well as offshore).

If a subsidy like that was the deal oil companies had, then cut away.  But the $4 billion per year that oil’s detractors keep repeating works out to $0.60 per barrel, and upon closer examination they do not even qualify as oil-industry subsidies.

Heritage’s Nick Loris and Curtis Dubay have sorted it all out. Of course, there are subsidies for the oil and gas industry, but they come from the Department of Energy, not from unfair tax benefits, and they work out to about a nickel per barrel.  So, leave it to Washington to misidentify and exaggerate the problem.  It’s as though they are firing a shotgun at the chandelier when the problem is a gnat in the salad dressing.

House Passes Three Bills Lifting Obama’s Drilling Moratorium

From The Blaze:

WASHINGTON (AP/THE BLAZE) — The Republican-controlled House has easily passed the last of three bills to expedite and expand oil and gas drilling.  While these bills promise to create jobs and expedite oil production, both the Senate and the White House stand in opposition.

In a 243-179 vote Thursday, the House passed a measure that would open up areas off the West and East coasts, Alaska and the eastern Gulf of Mexico to drilling. The Obama administration pulled back on leasing in some of those spots after the Gulf oil spill last year to further evaluate the environmental consequences. It never considered drilling in the Pacific.  FOX News has more:

Republicans say that the bill, along with [the] two other drilling measures passed earlier this month, would create 1.2 million jobs and lower the price of oil. The Congressional Budget Office says that the offshore lease sales would generate $800 million in revenue over ten years.

The bill directs the Interior Department to select lease areas based on how much oil and gas they contain.  The measure joins two others passed earlier by the House to speed up drilling and leasing.

President Obama has a complicated history when it comes to domestic oil procurement.  While Obama originally supported expanding oil and gas exploration, the Gulf oil disaster changed his course:

In March 2010, Obama sounded like he wanted to expand the plan with more oil and gas exploration on the Outer Continental Shelf. But he left out the Northeast and West coast to appease political supporters opposed to drilling. The policy included expanded drilling in the Arctic and Gulf of Mexico.

The president then changed his mind about those plans after the April 2010 BP Deepwater Horizon oil spill in the Gulf of Mexico, and a six-month moratorium was instituted in the Atlantic and eastern Gulf areas — set to expire Nov. 30, 2010.

With all three bills unlikely to pass the Senate, they will probably fall legislatively flat.  That said, their proposal and passage in the House is a significant development in the energy independence dialogue.

Connect the Dots

From Power Line:

I’m always behind on my reading, so I missed calling attention yesterday to two items in the Wall Street Journal that prompt the following two-part quiz: Why are Australia and North Dakota alike? Second, which state produces more oil–California or Alaska? The second question sounds really dumb: of course oil-rich Alaska is going to produce more than green, anti-oil California, dude.

Actually, it is a very close call. Alaska is currently producing more oil per day than California, but just barely, and at least three times in recent years California briefly overtook Alaska to be the nation’s second-largest oil producing state. It’s not that California is increasing oil production–rather, Alaska’s oil production is declining at a faster rate than California’s. Which brings us to the front page story yesterday about how the famed Alaska pipeline is in danger of clogging up because we aren’t able to put enough oil into it any more. At its peak in 1988, Alaska produced 2 million barrels a day; now production is down to about 600,000 barrels per day, even though there is not shortage of oil in the ground in Alaska. If present trends continue, California will pass Alaska in oil production in about three more years.

The second notable story from the Journal yesterday concerned Australia, which is forecasting a return to a budget surplus over the next two years; moreover, Australia expects its labor shortage to be so serious that it will need to import skilled labor from Asia. The Journal supplies the obvious comment: “Canberra’s policy measures are in stark contrast with those of other developed economies, where high unemployment and surging debt levels are more typical.”

What “policy measures” in particular accounts for this happier economic outlook downunder? Why, those boorish Aussies are exploiting their natural resources! As the Journal explained:

Also key to the surplus plans is projected revenue in the mining sector, where demand from emerging Asian economies such as China means prices for commodities such as iron ore and coal are trading at historic highs. Investments in the mining sector alone in the fiscal year beginning July 1 are projected at A$70 billion.

Australia, which hasn’t experienced a technical recession in 20 years, is enjoying a mining boom “never before seen in its history,” which makes dealing with the labor shortage urgent, Treasurer Swan said. “We don’t have a single person to waste,” he said.

Think maybe the United States might take a hint from this? Well, have a look at North Dakota, which has the nation’s lowest unemployment rate (currently 3.6 percent) and a state budget surplus. How’d they do it? A massive increase in oil and gas drilling, nearly all of it on private or state lands. Like Australia, North Dakota has a labor shortage.

EPA Blocks Oil Drilling in Alaska

From The Heritage Foundation:

There are an estimated 27 billion barrels of oil waiting to be tapped in the Arctic Ocean, off the coast of Alaska. But after spending five years and nearly $4 billion, Shell Oil Company has been forced to abandon its efforts to drill for oil in the region.

With gas at $4 per gallon and higher, one might think that more oil would be a good thing. So what’s the road block? The Environmental Protection Agency. Fox News reports that the EPA is withholding necessary air permits because of a one square mile village of 245 people, 70 miles from the off-shore drilling site. From Fox News’ Dan Springer:

The EPA’s appeals board ruled that Shell had not taken into consideration emissions from an ice-breaking vessel when calculating overall greenhouse gas emissions from the project. Environmental groups were thrilled by the ruling.

“What the modeling showed was in communities like Kaktovik, Shell’s drilling would increase air pollution levels close to air quality standards,” said Eric Grafe, Earthjustice’s lead attorney on the case.

Who at the EPA made the decision? Springer writes:

The Environmental Appeals Board has four members: Edward Reich, Charles Sheehan, Kathie Stein and Anna Wolgast. All are registered Democrats and Kathie Stein was an activist attorney for the Environmental Defense Fund. Members are appointed by the EPA administrator.

President Barack Obama said in his weekly address on Saturday that “there’s no silver bullet that can bring down gas prices right away,” but that one thing America can do is pursue “safe and responsible production of oil at home.” Too bad his words and his actions are not one and the same. Aside for the EPA’s decision on Shell, the Obama administration has imposed a months-long moratorium on deepwater offshore drilling that curtailed domestic production and sent some seven drilling rigs elsewhere.

The Heritage Foundation’s Nicolas Loris recommends the following actions for Congress and President Obama if they truly want to expand access to America’s domestic energy supply:

  • Allow access to domestic reserves. Permitting exploration of reserves in Alaska, Colorado, Wyoming, and federal waters offshore would inject confidence into the market, create jobs, and stimulate the economy.
  • Roll back regulatory burdens on companies. Strapping companies with onerous regulatory processes only hinders access. Litigation opportunities should be limited and the permitting process made more rational.
  • Issue offshore drilling permits. Lifting the de facto moratorium on offshore drilling permits would gain companies access to domestic resources and increase our domestic energy supply.

America Leads the World in Untapped Fossil Fuel Reserves

From Moonbattery:

In light of the extent to which we are at placed at the mercy of largely hostile nations for our energy supply, you would never guess who has the greatest reserves of fossil fuels. We do.

From the Energy Tribune:

America’s combined energy resources are, according to a new report from the Congressional Research Service (CSR), the largest on earth. They eclipse Saudi Arabia (3rd), China (4th) and Canada (6th) combined — and that’s without including America’s shale oil deposits and, in the future, the potentially astronomic impact of methane hydrates.

Having the resources is one thing. Being sufficiently free of tyranny to access those resources is something else.

Read the rest at Moonbattery.

Hope and Change: Gas Prices Have Gone Up 67 Percent Since Obama Became President

From The Weekly Standard:

Ah, January of 2009. Hope was in the air, but more importantly, gas was under two dollars a gallon. Since then gas prices, have gone up 67 percent and it’s an ominously upward trend. Interestingly enough, the Heritage Foundation also took a look at the first 26 months of Bush’s presidency — gas only rose 7 percent during that time frame.

Now obviously turmoil in the Middle East has something to do with our current astronomical gas prices, but keep in mind that by this point in the Bush presidency 9/11 had happened and we were on the verge of invading Iraq. So while the president can’t be entirely responsible for global commodity prices, it’s still worth asking what Obama’s doing to make things worse.

After all, this is the President who told us “We can’t drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times … and then just expect that other countries are going to say OK.”

This is the President that appointed a Secretary of the Interior that famously said he didn’t mind if gas hit $10 a gallon.

This is the President whose administration secretly urged him to bypass needed Congressional approval to create as many at 17 national monuments throughout the west, effectively closing off all that land to energy exploration forever.

This is the President who has illegally tried to illegally enforce an offshore drilling ban.

How much higher is gas going to go before the Administration takes a long hard look at what its doing to send gas prices through the roof?

How to Derail A Recovery

From Power Line:

The economy is bouncing back, naturally, but instead of helping it to recover–or at least getting out of the way–the Obama administration seems determined to plunge us into another recession.

With economic growth returning, the fact that we have done nothing to increase our own supplies of fossil fuels once again emerges, as the price of oil climbs inexorably, putting a brake on the nascent recovery. The Financial Times headlines: “Oil could give kiss of death to recovery.”

This week oil climbed to $87 a barrel, its highest level since October 2008 and prompted concerns that triple-digit crude was once again in the offing. …

The latest surge seems to have been prompted by rising confidence in a global economic recovery, even if most traders and bankers are still cautious about supply and demand fundamentals. …

Hussein Allidina, commodity strategist at Morgan Stanley, says the $100 oil he predicts next year would increase the “oil burden” – a function of demand, prices and global output – to about 4 per cent from 2.8 per cent late last year. This would hurt developed economies more than emerging ones, as the latter are powering global growth and can afford fuel subsidies, he says. The IMF estimates consumer petroleum subsidies will reach almost $250bn this year.

So, what is our administration doing to increase our domestic energy supply? Nothing

Read the rest at Power Line.

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