To the President’s Ear: Build the Keystone XL

In an interview with Fox Business Channel this week, billionaire Warren Buffett voiced support for construction of the Keystone XL pipeline:

"I’m not an expert, but it certainly seems like it makes sense to me. There are an awful lot of pipelines running in the United States and net, they've certainly been a huge plus for the country. … Based on what I know, I would say it makes sense.”

That the “Oracle of Omaha” supports the Keystone XL is significant. That Buffett’s support for the project follows similar opinions by others known to have the president’s ear is important as well. These include:

Former President Bill Clinton (Feb. 29, 2012):

“I think we should embrace [the Keystone XL pipeline] and develop a stakeholder-driven system of high standards for doing the work." 

AFL-CIO President Richard Trumka (May 6, 2012):

“[America’s unions] are not divided on the pipeline itself. They are divided on how the pipeline is done. … I think we are all unanimous by saying we should build the pipeline, but we have to do it consistent with all environmental standards, and I think we can work that out, I really do, and we are for that happening.”

Former Obama ‘car czar” Steve Rattner (Jan. 5, 2012):

“My instinct is [the president] should approve it. My instinct is we need the energy, we need the jobs and it can be done in a safe way.”

Let’s see. That’s one of the most successful businessmen in the history of the planet, a former president, one of organized labor’s top leaders and one of the administration’s former leading economic policy advisors – all in favor of the Keystone XL, a project that would create jobs, deliver energy and help boost our country’s future energy security.

The president is the reason the Keystone XL remains on the drawing board. He has the authority to end more than three years of reviewing and delaying. API Executive Vice President Marty Durbin, in a conference call with reporters:

“We’d like to remind the president and the Congress that bipartisan majorities in both the House and Senate have voted in favor of the Keystone XL project, and a recent Gallop poll shows strong public support for project by a 2-1 margin.  In addition, the state of Nebraska is fully engaged in a process to quickly choose a new route that avoids sensitive areas. To borrow from the president’s campaign, it’s time to move forward on this critical project.  Keystone XL is as ‘good-to-go’ as it gets.”

To recap: Buffett, Clinton, Trumka, Rattner. The president has listened to them before. Is he listening now, on the Keystone XL?

View the original article here

The President’s Energy Statements: Myth and Fact

Fact-checking the president’s energy rhetoric: See API’s new point-by-point look at some of the energy assertions the president has made in his State of the Union address and other public statements. For example:

President: “I’m directing my administration to open more than 75 percent of our potential offshore oil and gas reserves.”

Fact: The administration is defining the status quo as progress. The resources identified are restricted to areas in the Gulf of Mexico and the Alaska OCS that have already been leased and where the industry is already active. In fact, the administration’s latest plan for offshore development scales back on the previous plan by removing the Eastern Gulf of Mexico and areas in the Atlantic. The 75 percent number is deceiving because it includes only the areas we have already explored.

More on that, here.

Here’s another one from the myth/fact guide, on U.S. oil reserves:

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

Fact: This is wrong. The U.S. is home to three times the amount of reserves as Saudi Arabia. The “2 percent” number is misleading at best. “Reserves” is a technical term that refers to oil that drilling has proven to be available. According to a recent report by the Congressional Research Service, our “recoverable” conventional oil resources are nearly six times that. And our unconventional oil resources are close to six times larger than our conventional oil resources.

Nevertheless, the administration and opponents of domestic energy development continued to use the misleading “2 percent” number. Companies believe in the long-term potential of U.S. oil development. That’s why they are willing to invest many billions of dollars in new projects here at home.

More on reserves, here.

Other items in the guide include setting the record straight on current domestic oil and natural gas production, imports, natural gas development, the genesis of hydraulic fracturing and the administration’s energy tax hike proposals. Worth a read.

Energy Myths and Facts

View the original article here

The President’s Actions, and Rising Prices

Is President Obama the “anti-energy” president, as former Gov. Pete Du Pont argues in an op-ed piece for the Wall Street Journal (sub. required)? Certainly, in the areas that matter most – oil and natural gas development – a case can be made from the infographic below that the president’s policies haven’t helped.

Administration Oil Strategy Contributes to Price Increases

By “matters most” we mean the sources that current supply more than 60 percent of the energy we use – and which will continue to supply nearly 60 percent of the energy we use for the next quarter century, according to the Energy Information Administration.

That’s not knocking other energy forms, because we need them all. It’s recognizing this energy reality: Our economy runs on oil and natural gas – and will continue to do so for the foreseeable future.

In that context the president and his team should acknowledge that energy reality – by protecting and enhancing the energy sources that play the leading role supporting our economy. Here, this president and his administration often appear to be doing the opposite.

As the graphic shows, the president basically is pursuing an off-oil policy: delaying or canceling development on federal areas onshore and offshore, proposing punitive tax increases on America’s energy producers, threatening new layers of unnecessary regulation and rejecting key components like the Keystone XL pipeline. The president claims credit for oil and gas production (that belongs to others), while pursuing policies that actually put a drag on future oil and gas development, potentially jeopardizing America’s overall security.

Meanwhile, as the lines at the base of the graphic show, prices for crude oil have risen steadily since 2009, boosting costs for gasoline and diesel.

View the original article here

To the President’s Ear on Energy

As the president hits the road to talk about energy, he should first listen to what the American people are saying, reflected in two new polls this week.

Start with a Harris Interactive survey that shows 76 percent of voters believe increasing taxes on oil and natural gas companies could cost them more at the fuel pump. For a president who continues to talk about hiking taxes on energy companies that should be a big red flag.

Americans who’re getting slammed by higher fuel costs appear to sense that increasing energy taxes would drive up energy producers’ costs, which – as the Congressional Research Service found last year – could decrease exploration, development and production while elevating prices.

Other details from the Harris poll of 1,009 respondents:

81 percent believe more U.S. oil and natural gas development could reduce gasoline prices.90 percent believe a pro-energy development strategy could lead to more U.S. jobs.84 percent believe increasing domestic oil and gas production could enhance our energy security.64 percent believe some in Washington are intentionally delaying domestic oil and natural gas development, potentially hurting the economy and leading to higher consumer energy costs.

Clearly, those are slam-dunk numbers on energy policies the president and his administration have been talking about a lot – while keeping 87 percent of America’s offshore areas off limits, while overseeing declines in Gulf of Mexico production and while presiding over a downward trajectory in leasing and permitting on federal lands.

Then there’s the Pew Research Center’s latest findings, that as fuel prices rise, so does Americans’ support for more oil and natural gas production:

“… support for allowing more offshore oil and gas drilling in U.S. waters, which plummeted during the 2010 Gulf of Mexico oil spill, has recovered to pre-spill levels. Nearly two-thirds (65%) favor allowing increased offshore drilling, up from 57% a year ago and 44% in June 2010, during the Gulf spill.”

That last stat is worth underscoring. While Americans’ support for a variety of energy policies – from improved fuel efficiency to more federal support for mass transit systems – is pretty much where it has been, public support for more offshore oil and natural gas drilling has increased significantly. Pew finds that twice as many Americans (65 percent) support increased offshore drilling as those who oppose more drilling (31 percent).

Again, the Pew poll suggests growing numbers of Americans believe that increasing domestic supplies of oil and natural gas can put downward pressure on the price of crude oil, which accounts for 76 percent of the cost of what they pay at the pump. So, while the president continues to talk as though little can be done about fuel prices, U.S. consumers who’re being punished at the pump aren’t buying it.

A couple of other tidbits from Pew:

Of American voters who know something about hydraulic fracturing and energy from shale, 52 percent are in favor compared to 35 percent opposed. Among independents, support is actually a little stronger than the overall number, 54 percent to 35 percent.Awareness of fracking and producing natural gas from shale is mixed, but Pew found that 63 percent of those surveyed had heard something about the process.

One more note about Pew’s survey. The poll finding that Pew chose to highlight in its public announcement – Americans’ top energy priority – stems from a glaringly false choice foisted on the 1,503 sampled adults who were forced to choose one top priority between alternative sources (wind, solar, hydrogen technology) and expanded oil, natural gas and coal production. Those aren’t mutually exclusive options.

We commend the 5 percent of respondents who selected “both” even though the Pew folks didn’t offer it as a choice, as well as the 4 percent who didn’t know or refused to answer – perhaps, like us, frustrated that some continue to pit energy sources against each other when the truth is America needs all energy options to build a secure future.

View the original article here

The President’s Fuzzy Energy Future

Yesterday President Obama gave a campaign speech centered around energy policy.  In it he said:

“There’s a problem with a strategy that only relies on drilling and that is, America uses more than 20 percent of the world’s oil.  If we drilled every square inch of this country -- so we went to your house and we went to the National Mall and we put up those rigs everywhere -- we’d still have only 2 percent of the world’s known oil reserves.  Let’s say we miss something -- maybe it’s 3 percent instead of two.  We’re using 20; we have two.  Now, you don’t need to be getting an excellent education at Prince George’s Community College to know that we’ve got a math problem here.  I help out Sasha occasionally with her math homework and I know that if you’ve got two and you’ve got 20, there’s a gap.  (Laughter.)  There’s a gap, right?”

No actually, the president needs to go back to school here, there isn’t a gap, because he is talking about “reserves” when the measurement that matters is “resources.” In simple terms, the president is pointing out the oil we have in our “checking account” while ignoring the larger amounts available in our “savings account” and overlooking our ability to deposit more oil in to those accounts in the future – more on that here.  Also, who exactly is calling for a strategy that “only relies on drilling?”  Not us and not any and not any of the presidential candidates.

"So if we don’t develop other sources of energy, if we don’t develop the technology to use less energy to make our economy more energy-efficient, then we will always be dependent on foreign countries for our energy needs."

No actually, we could have a 100 percent secure supply of liquid fuels by 2024 with the right policies in place, instead we have had three years worth of delays and obstructions when it comes to oil and natural gas development in the United States.

"And that means every time there’s instability in the Middle East, which is the main thing that’s driving oil prices up right now -- it’s the same thing that was driving oil prices up last year -- every time that happens, every time that there’s unrest, any time that there’s concern about a conflict, suddenly, oil futures shoot up, you’re going to feel it at the pump.  It will happen every single time."

The Washington Post reported earlier this week that: “…because a series of crises has shaved oil production or boosted demand worldwide. Together they add up to a difference of about 1 million barrels a day in the global oil balance.”  Right now the U.S. is down 530,000 barrels a day in the Gulf, has delayed 1 million barrels of oil a day from ANWR for decades, and continues to block Canadian oil from the market.  So no, we aren’t helpless, we just aren’t helping ourselves.

"So we can’t have an energy strategy for the last century that traps us in the past.  We need an energy strategy for the future -- an all-of-the-above strategy for the 21st century that develops every source of American-made energy."

Absolutely, and America’s oil and natural gas companies get this because they are first and foremost, energy companies.  In fact, 1 of every 5 dollars spent on renewables in 2000-2010 came from the oil and gas industry.  But as we work on new fuels it is important to keep in mind that the Energy Information Administration projects that in 2035 the United States will continue to meet over 56 percentof its demand through oil and gas – even with significant gains in efficiency and growth of alternatives.  Our current policies put our oil supply like this in the future.

When with expanded domestic production and without sacrificing any environmental protections we could look like this:

But instead of forward looking policies we get polemics:

“The question – there’s a question before Congress I want everybody to know about.  The question is whether or not we should keep giving $4 billion in taxpayer subsidies to the oil industry.  The oil industry has been subsidized by you, the taxpayer, for about a hundred years – 100 years.  One hundred years, a century.  So some of the same folks who are complaining about biofuels getting subsidies, or wind or solar energy getting subsidies, or electric cars and advanced batteries getting subsidies to help get them off the ground, these same folks – when you say, why are we still giving subsidies to the oil industry – ‘well, no, we need those.’”

Actually the oil industry receives no subsidies.  Here is chart* from EIA data:

And the industry does not get tax credits (which reduce taxes dollar for dollar) or grants from the government.  They get tax deductions for business investments that will generate tax revenues in the future.  Unlike the case of credits or grants, the government will still be paid the full amount of tax owed on our operations.  Which means the taxpayer is getting every dollar they are owed.  What the president is proposing to do is to front load the tax collection, so any increases in current collections come at the expense of future taxpayers.

"[Congress] can bet -- they can place their bets on the energy of the past, or they can place their bets on America’s future -- on American workers, American ingenuity, American technology, American science, American-made energy, American efficiency, American productivity.   We can bet on America and our own capacity to solve this problem.  That’s the choice we face.  That’s what’s at stake right now."

Oil and natural gas, according the governments’ own energy experts will be a large part of our energy future:

And our industry is all about American jobs, American ingenuity, American technology, American science, American-made energy, American efficiency and American productivity.  We do have a choice.  Have a look:

*You will notice on the chart a tiny sliver of four million dollars a year for natural gas. This credit refers to the “The Tax Credit and Deduction for Clean-Fuel, Alternative Fuel, and Electric Vehicles” which is a credit for individual consumers not the industry.

View the original article here

The President’s Almost None-Of-The-Above Energy Approach

The president spoke about energy again Thursday, saying his all-sources strategy will ensure a prosperous future:

“If we’re going to avoid being at the mercy of these world events, we’ve got to have a sustained, all-of-the-above strategy that develops every available source of American energy.”

The president is right: A sustained strategy that uses all of America’s energy sources is the key to U.S. energy security. API President and CEO Jack Gerard:

“More oil and gas development here at home would benefit the nation. It would increase the security of our energy supplies, create jobs, boost revenue tour government and help put downward pressure on prices at the pump.”

Ah, but the president’s so-called all-of-the-above strategy actually appears to be an almost-none-of-the-above strategy. In a speech in Florida, he dismissed calls for increased domestic oil drilling:

“You know there are no quick fixes to this problem, and you know we can’t just drill our way to lower prices.”

And:

“Anybody who tells you we can drill our way out of this problem doesn’t know what they’re talking about — or just isn’t telling you the truth.”

This administration is talking a big game on energy – even claiming credit for domestic oil and natural gas production increases that stem from decisions made long before it came into office. Indeed, those gains have come in spite of the president’s policies, not because of them. And his rhetoric on drilling suggests ignorance or disdain for analysis that shows, yes, we could see 100 percent of our liquid fuel needs met with North American sources of oil by 2024.

Gerard:

“The administration is restricting where oil and natural gas development may occur, leasing less often, shortening lease terms, going slow on permit approvals and increasing or threatening to increase industry’s development costs through higher taxes, higher royalty fees, higher minimum lease bids and more regulations.”

More Gerard:

“Keeping 85 percent of our offshore areas off limits – per the administration’s latest offshore energy plan – is not a prescription for increased oil and natural gas production. Decreasing oil and gas leasing in the Rockies by 70 percent is not generating jobs and more affordable energy that America’s workers and consumers need. Having 10 federal agencies planning more regulation of hydraulic fracturing … is not keeping affordable supplies of gas flowing to generate electricity, heat homes and supply chemical plants. Rejecting the Keystone XL pipeline is not increasing American access to affordable, secure energy.”

Current energy conditions, globally and domestically, are pulling the veil away from the president’s do-little energy policies. You can’t reject the Keystone XL pipeline, for example, then say the United States is at the mercy of the volatility in global energy markets. You can’t keep U.S. energy on federal lands and offshore off limits and say you’re for increased domestic oil and natural gas production. You can’t say yours is an all-of-the-above strategy when you’re denying multiple opportunities to industries that supply the majority of the energy we currently use.

Gerard:

“The administration’s own projections tell us that we’re still going to rely on oil and natural gas for nearly 60 percent of our energy for the next quarter century. We’re either going to produce that oil and gas in the U.S. with the added benefits of creating over a million new American jobs, strengthening our national security and generating more revenue for our government, or we’re going to depend more on resources from less stable parts of the world.”

View the original article here

Taking the President’s Energy Rhetoric to Task

The more the president talks about energy, the more heat he creates for himself. Here’s the Washington Post’s Fact Checker, weighing his rhetoric about the U.S. consuming 20 percent of the world’s oil while having just 2 percent of its proven reserves:

“ … this is a good example of what we call ‘non sequitur facts’ — two bits of information that actually bear little relationship to each other. The president is trying to make the case that the world has finite oil resources, and the United States — the world’s biggest oil consumer — needs to use less oil in the future. But using ‘oil reserves’ as a key metric gives an incomplete picture of U.S. oil resources.”

The Fact Checker points out that “proven reserves” is a specific term. The oil must have been discovered, confirmed by drilling and be economically recoverable – the latter dependent on the global price of crude.

But guess what? Proven reserves figures change as we drill new wells, discover more oil, hard-to-get oil becomes economically viable and new technologies come on line. That’s how the U.S. could produce something like 200 billion barrels since 1990 – even though its proven reserves peaked at 40 billion barrels in 1970. That’s how, even though U.S. production and consumption will grow, projected proven preserves in 2035 will be 30 percent greater than at the end of 2010 (U.S. Lower 48).

Here’s what the president isn’t telling Americans: There’s approximately 200 billion barrels of undiscovered, technically recoverable American oil that isn’t counted with “proven reserves” – or mentioned in his speeches, a fairly gaping fact omission that’s deliberately misleading.

More Fact Checker:

“Measuring the U.S. consumption against its proven oil reserves makes little sense. Europe, with the exception of Russia, Kazakhstan and Norway, has virtually no oil reserves. Japan, a major consumer, has zero. China’s oil reserves are about half the size of the United States. In fact, in the relative scheme of things, the United States is relatively blessed with proven oil reserves — and, given the U.S. technological advantage, also with potentially large resources of oil yet to be tapped. … (I)n the context of higher gas prices — which is how the president often uses these figures now — it just is not logical to compare consumption to ‘proven oil reserves.’ This is a lowball figure that does not begin to describe the oil known to be within the U.S. borders.”

The United States is energy rich, not energy deficient, as the president makes it sound at a time when U.S. consumers are taking a beating. America has options. There’s oil in remote Alaska, off both coasts and on federal lands. With the right policies and leadership the U.S. could see 100 percent of its liquid fuel needs met domestically and from Canada by 2024.

Meanwhile, columnist Charles Krauthammer picks up on a key bit of illogic in the president’s recent energy riff – that decreasing U.S. demand for crude oil affects global prices but increasing U.S. crude supplies doesn’t. Krauthammer:

“‘The American people aren’t stupid,’ Obama said (Feb. 23), mocking ‘Drill, baby, drill.’ The ‘only solution,’ he averred in yet another major energy speech last week, is that ‘we start using less — that lowers the demand, prices come down.’ Yet five paragraphs later he claimed that regardless of ‘how much oil we produce at home … that’s not going to set the price of gas worldwide.’  So: Decreasing U.S. demand will lower oil prices, but increasing U.S. supply will not? This is ridiculous. Either both do or neither does.”

Krauthammer is spot on here. Given the fact that crude oil accounts for 76 percent of the price Americans pay at the pump, the crude supply is the biggest factor in the energy equation. Decreased crude oil demand at one end of the equation can have an effect, but so can increased crude supply at the other. The president is for the first part but in denial on the second. Sen. Chuck Schumer certainly gets the importance of supply, renewing his call for Saudi Arabia to commit to make up for any lost Iranian production.

Supply matters, and the U.S. can affect supplies – even if the president won’t say it. API President and CEO Jack Gerard, speaking at a House Energy and Commerce subcommittee hearing earlier this month:

“A strategy that confidently deploys resources here at home will send a clear message to global markets that the United States is serious about affecting supply. To the American people it will say help’s on the way.”

View the original article here

The President’s Almost None-Of-The-Above Energy Approach

The president spoke about energy again Thursday, saying his all-sources strategy will ensure a prosperous future:

“If we’re going to avoid being at the mercy of these world events, we’ve got to have a sustained, all-of-the-above strategy that develops every available source of American energy.”

The president is right: A sustained strategy that uses all of America’s energy sources is the key to U.S. energy security. API President and CEO Jack Gerard:

“More oil and gas development here at home would benefit the nation. It would increase the security of our energy supplies, create jobs, boost revenue tour government and help put downward pressure on prices at the pump.”

Ah, but the president’s so-called all-of-the-above strategy actually appears to be an almost-none-of-the-above strategy. In a speech in Florida, he dismissed calls for increased domestic oil drilling:

“You know there are no quick fixes to this problem, and you know we can’t just drill our way to lower prices.”

And:

“Anybody who tells you we can drill our way out of this problem doesn’t know what they’re talking about — or just isn’t telling you the truth.”

This administration is talking a big game on energy – even claiming credit for domestic oil and natural gas production increases that stem from decisions made long before it came into office. Indeed, those gains have come in spite of the president’s policies, not because of them. And his rhetoric on drilling suggests ignorance or disdain for analysis that shows, yes, we could see 100 percent of our liquid fuel needs met with North American sources of oil by 2024.

Gerard:

“The administration is restricting where oil and natural gas development may occur, leasing less often, shortening lease terms, going slow on permit approvals and increasing or threatening to increase industry’s development costs through higher taxes, higher royalty fees, higher minimum lease bids and more regulations.”

More Gerard:

“Keeping 85 percent of our offshore areas off limits – per the administration’s latest offshore energy plan – is not a prescription for increased oil and natural gas production. Decreasing oil and gas leasing in the Rockies by 70 percent is not generating jobs and more affordable energy that America’s workers and consumers need. Having 10 federal agencies planning more regulation of hydraulic fracturing … is not keeping affordable supplies of gas flowing to generate electricity, heat homes and supply chemical plants. Rejecting the Keystone XL pipeline is not increasing American access to affordable, secure energy.”

Current energy conditions, globally and domestically, are pulling the veil away from the president’s do-little energy policies. You can’t reject the Keystone XL pipeline, for example, then say the United States is at the mercy of the volatility in global energy markets. You can’t keep U.S. energy on federal lands and offshore off limits and say you’re for increased domestic oil and natural gas production. You can’t say yours is an all-of-the-above strategy when you’re denying multiple opportunities to industries that supply the majority of the energy we currently use.

Gerard:

“The administration’s own projections tell us that we’re still going to rely on oil and natural gas for nearly 60 percent of our energy for the next quarter century. We’re either going to produce that oil and gas in the U.S. with the added benefits of creating over a million new American jobs, strengthening our national security and generating more revenue for our government, or we’re going to depend more on resources from less stable parts of the world.”

View the original article here

To the President’s Ear on Energy

As the president hits the road to talk about energy, he should first listen to what the American people are saying, reflected in two new polls this week.

Start with a Harris Interactive survey that shows 76 percent of voters believe increasing taxes on oil and natural gas companies could cost them more at the fuel pump. For a president who continues to talk about hiking taxes on energy companies that should be a big red flag.

Americans who’re getting slammed by higher fuel costs appear to sense that increasing energy taxes would drive up energy producers’ costs, which – as the Congressional Research Service found last year – could decrease exploration, development and production while elevating prices.

Other details from the Harris poll of 1,009 respondents:

81 percent believe more U.S. oil and natural gas development could reduce gasoline prices.90 percent believe a pro-energy development strategy could lead to more U.S. jobs.84 percent believe increasing domestic oil and gas production could enhance our energy security.64 percent believe some in Washington are intentionally delaying domestic oil and natural gas development, potentially hurting the economy and leading to higher consumer energy costs.

Clearly, those are slam-dunk numbers on energy policies the president and his administration have been talking about a lot – while keeping 87 percent of America’s offshore areas off limits, while overseeing declines in Gulf of Mexico production and while presiding over a downward trajectory in leasing and permitting on federal lands.

Then there’s the Pew Research Center’s latest findings, that as fuel prices rise, so does Americans’ support for more oil and natural gas production:

“… support for allowing more offshore oil and gas drilling in U.S. waters, which plummeted during the 2010 Gulf of Mexico oil spill, has recovered to pre-spill levels. Nearly two-thirds (65%) favor allowing increased offshore drilling, up from 57% a year ago and 44% in June 2010, during the Gulf spill.”

That last stat is worth underscoring. While Americans’ support for a variety of energy policies – from improved fuel efficiency to more federal support for mass transit systems – is pretty much where it has been, public support for more offshore oil and natural gas drilling has increased significantly. Pew finds that twice as many Americans (65 percent) support increased offshore drilling as those who oppose more drilling (31 percent).

Again, the Pew poll suggests growing numbers of Americans believe that increasing domestic supplies of oil and natural gas can put downward pressure on the price of crude oil, which accounts for 76 percent of the cost of what they pay at the pump. So, while the president continues to talk as though little can be done about fuel prices, U.S. consumers who’re being punished at the pump aren’t buying it.

A couple of other tidbits from Pew:

Of American voters who know something about hydraulic fracturing and energy from shale, 52 percent are in favor compared to 35 percent opposed. Among independents, support is actually a little stronger than the overall number, 54 percent to 35 percent.Awareness of fracking and producing natural gas from shale is mixed, but Pew found that 63 percent of those surveyed had heard something about the process.

One more note about Pew’s survey. The poll finding that Pew chose to highlight in its public announcement – Americans’ top energy priority – stems from a glaringly false choice foisted on the 1,503 sampled adults who were forced to choose one top priority between alternative sources (wind, solar, hydrogen technology) and expanded oil, natural gas and coal production. Those aren’t mutually exclusive options.

We commend the 5 percent of respondents who selected “both” even though the Pew folks didn’t offer it as a choice, as well as the 4 percent who didn’t know or refused to answer – perhaps, like us, frustrated that some continue to pit energy sources against each other when the truth is America needs all energy options to build a secure future.

View the original article here

The President’s ‘Anti-Stimulus’

From the president’s remarks during Monday’s rollout of his 2013 budget:

“The last thing we need is for Washington to stand in the way of America's comeback.”

The president is 100 percent right – and he can put his words into action by dropping his politically motivated obstruction of the Keystone XL pipeline.

The Keystone XL is the largest shovel-ready infrastructure project available to help spur the economic revival everyone wants. The $7 billion, privately financed pipeline would create 20,000 U.S. jobs during its construction phase and up to 500,000 U.S. jobs by 2035 as a big part of a comprehensive strategy to fully utilize Canada’s oil sands resources. Energy to run our economy and jobs. But we need Washington to get out of the way.

President Obama:

“We need to … [end] the subsidies for oil companies … The budget that we’re releasing today is a reflection of shared responsibility. … I want everybody here to go out there and do great.  I want you to make loads of money if you can.  That’s wonderful.  And we expect people to earn it -- study hard, work hard for it.  So we don’t envy the wealthy.  But we do expect everybody to do their fair share …”

Unfortunately, the president’s budget would place Washington squarely in the path of America’s economic comeback by increasing taxes on the country’s energy companies by $41 billion over 10 years.

Although the oil and natural gas industry is its own stimulus, contributing $476 billion to the economy in 2010 and projected by Strategic Energy & Economic Research’s Michael Lynch to spend $145 billion this year on drilling and completing new wells in the U.S., the president would saddle the industry with new taxes – hampering its ability to develop new energy sources and create new jobs.

Instead of standing in the way of the economic lift the industry could provide by threatening tax increases, the president should consider policies that could allow the industry to create 1 million new jobs in just seven years and increase revenue to the government by $127 billion by 2020 – three times the amount his tax hike would raise.

API President and CEO Jack Gerard:

“Increasing our taxes would push oil and natural gas investment overseas and diminish job-creation and economic activity here at home.  After a handful of years, we would see less domestic energy production – particularly of natural gas – more imports, fewer new jobs, and, eventually, depressed tax, royalty and other revenues.  Frankly, the administration should be trying to replicate the success America’s oil and natural gas industry has had in creating jobs and growing the economy primarily through development on private and state lands.  The evidence clearly shows that what we’re doing is working. If the industry’s job-creating investments are a stimulus for the nation, then what the administration is proposing is an anti-stimulus.”

One more point on taxes: The president is wrong about subsidies. The oil and natural gas industry doesn’t receive targeted subsidies from Washington. More on that here.

As for shared responsibility, the fact is America’s oil and natural gas companies pay $86 million every day to the U.S. Treasury in rents, royalties and income taxes. They pay their fair share and more than any other sector:

As Gerard noted to reporters Monday during a conference call, Apple is one of the country’s most profitable corporations, but no one is talking about singling it out for a tax hike – nor should they. That would be punishing the success the president says he favors.

“We want to lock arms with the president,” Gerard said. But it will take policies that help increase domestic oil and natural gas production and the American jobs that go with it “instead of penalizing the best job creator in the country.”

View the original article here

The President’s Energy Tax Hikes: Section 199 Deduction

The president’s State of the Union address last month had lots of good stuff in it about domestic oil and natural gas production. Unfortunately, the president’s actions are speaking louder than his words.

His just-released 2013 budget includes proposals to increase taxes on oil and gas companies – more than $86 billion over 10 years – that would take the country in the wrong direction on energy. Research shows higher energy taxes would discourage production, lead to fewer well-paying American jobs and increase our reliance on imports.

Today, let’s take a look at one of his tax-hike proposals – repealing the Section 199 manufacturer’s deduction only for oil and natural gas companies. Benefit to Washington: $11.6 billion over 10 years.

Here’s what the president said back on Jan. 24:

“Let’s remember how we got here.  Long before the recession, jobs and manufacturing began leaving our shores.  Technology made businesses more efficient, but also made some jobs obsolete.”

Indeed, which is why the 2004 “American Jobs Creation Act” included the Section 199 deduction. It was extended to all U.S. manufacturers, to help address the very problem the president identified by benefiting employers who maintain and create well-paying U.S. jobs.

The president went on to talk about tax policies he said would foster more American manufacturing:

“If you’re an American manufacturer, you should get a bigger tax cut.  If you’re a high-tech manufacturer, we should double the tax deduction you get for making your products here.  And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.”

Too bad the president’s affinity for American manufacturing is more rhetoric than reality – demonstrated by his renewed proposal to eliminate the Section 199 deduction only for American oil and natural gas companies. Talk of tax fairness from the administration is especially hollow here. Under Section 199, a 9 percent deduction is available to all qualifying income from all domestic manufacturers – except that the deduction for the oil and gas industry is limited to 6 percent, and now the president wants to eliminate that.

If the objective, as the president said, is more domestic oil and natural gas production – creating more U.S. energy and more U.S. jobs – then raising taxes on these companies is the wrong way to go. Higher taxes on an industry that already pays more than $86 million a day to the federal treasury and which contributed $476 billion to the economy in 2010 would likely cost jobs, not create them, while undermining efforts to reduce imports.

View the original article here

The President’s Energy Statements: Myth and Fact

Fact-checking the president’s energy rhetoric: See API’s new point-by-point look at some of the energy assertions the president has made in his State of the Union address and other public statements. For example:

President: “I’m directing my administration to open more than 75 percent of our potential offshore oil and gas reserves.”

Fact: The administration is defining the status quo as progress. The resources identified are restricted to areas in the Gulf of Mexico and the Alaska OCS that have already been leased and where the industry is already active. In fact, the administration’s latest plan for offshore development scales back on the previous plan by removing the Eastern Gulf of Mexico and areas in the Atlantic. The 75 percent number is deceiving because it includes only the areas we have already explored.

More on that, here.

Here’s another one from the myth/fact guide, on U.S. oil reserves:

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

Fact: This is wrong. The U.S. is home to three times the amount of reserves as Saudi Arabia. The “2 percent” number is misleading at best. “Reserves” is a technical term that refers to oil that drilling has proven to be available. According to a recent report by the Congressional Research Service, our “recoverable” conventional oil resources are nearly six times that. And our unconventional oil resources are close to six times larger than our conventional oil resources.

Nevertheless, the administration and opponents of domestic energy development continued to use the misleading “2 percent” number. Companies believe in the long-term potential of U.S. oil development. That’s why they are willing to invest many billions of dollars in new projects here at home.

More on reserves, here.

Other items in the guide include setting the record straight on current domestic oil and natural gas production, imports, natural gas development, the genesis of hydraulic fracturing and the administration’s energy tax hike proposals. Worth a read.

Energy Myths and Facts

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The President’s Energy Tax Hikes: Expensing of Intangible Drilling Costs

Yesterday, we discussed the president’s 2013 budget proposal to repeal the Section 199 manufacturer’s deduction for oil and natural gas companies – showing the disconnect between his call for more domestic oil and natural gas production and boosting U.S. manufacturing. Today, let’s look at another proposed energy tax increase in the president’s spending plan: repealing the expensing of intangible drilling costs (IDC).

Repealing IDC would generate $13.9 billion for the U.S. Treasury over 10 years. But it would eliminate a 99-year-old section of the tax code that has fostered innovation and exploration in the oil and natural gas business – playing a major role in the development of our energy resources for nearly a century.

Here’s what the president said in his State of the Union address:

“We have a huge opportunity, at this moment, to bring manufacturing back. But we have to seize it. Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.”

And:

“We have a supply of natural gas that can last America nearly 100 years. And my administration will take every possible action to safely develop this energy.”

More manufacturing, jobs and energy. We’re for all three. Unfortunately, the president’s energy tax increases, including the IDC repeal, would make all three harder.

Here’s why: When energy companies drill they incur costs that can’t be recovered, such as site preparation and labor, representing 60 to 80 percent of the cost of the well. These costs accrue whether the well produces oil or natural gas or is a dry hole. Take away IDC and you increase the cost of production. Increase production costs and you discourage new energy development, which affects manufacturing and energy supply.

Since 1913 companies have been able to expense drilling costs – much like the Research & Development deduction enjoyed by other industries. Repealing IDC would discourage the very things the president wants: innovation, risk-taking, investment and new drilling activity – which helps the manufacturing sector as well as overall economic growth. We’re seeing that right now in states like North Dakota, Pennsylvania and Texas.

The president is right: There’s huge opportunity to help spur U.S. manufacturing and to capitalize on America’s vast energy riches – including the second-largest natural gas reserves in the world that are being unlocked through hydraulic fracturing.

With the right policies in place, America’s oil and natural gas companies can be a catalyst for both. Greater access to our resources could generate 1 million new U.S. jobs by 2016 while making our energy future more secure. Raising taxes on America’s oil and natural gas companies, which already are paying $86 million a day to the U.S. Treasury, will squander the opportunities the president mentioned. It’s the wrong policy for the jobs, energy and economic growth everyone wants.

View the original article here

The President’s Energy Statements: Myth and Fact

Fact-checking the president’s energy rhetoric: See API’s new point-by-point look at some of the energy assertions the president has made in his State of the Union address and other public statements. For example:

President: “I’m directing my administration to open more than 75 percent of our potential offshore oil and gas reserves.”

Fact: The administration is defining the status quo as progress. The resources identified are restricted to areas in the Gulf of Mexico and the Alaska OCS that have already been leased and where the industry is already active. In fact, the administration’s latest plan for offshore development scales back on the previous plan by removing the Eastern Gulf of Mexico and areas in the Atlantic. The 75 percent number is deceiving because it includes only the areas we have already explored.

More on that, here.

Here’s another one from the myth/fact guide, on U.S. oil reserves:

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

Fact: This is wrong. The U.S. is home to three times the amount of reserves as Saudi Arabia. The “2 percent” number is misleading at best. “Reserves” is a technical term that refers to oil that drilling has proven to be available. According to a recent report by the Congressional Research Service, our “recoverable” conventional oil resources are nearly six times that. And our unconventional oil resources are close to six times larger than our conventional oil resources.

Nevertheless, the administration and opponents of domestic energy development continued to use the misleading “2 percent” number. Companies believe in the long-term potential of U.S. oil development. That’s why they are willing to invest many billions of dollars in new projects here at home.

More on reserves, here.

Other items in the guide include setting the record straight on current domestic oil and natural gas production, imports, natural gas development, the genesis of hydraulic fracturing and the administration’s energy tax hike proposals. Worth a read.

Energy Myths and Facts

View the original article here

Taking the President’s Energy Rhetoric to Task

The more the president talks about energy, the more heat he creates for himself. Here’s the Washington Post’s Fact Checker, weighing his rhetoric about the U.S. consuming 20 percent of the world’s oil while having just 2 percent of its proven reserves:

“ … this is a good example of what we call ‘non sequitur facts’ — two bits of information that actually bear little relationship to each other. The president is trying to make the case that the world has finite oil resources, and the United States — the world’s biggest oil consumer — needs to use less oil in the future. But using ‘oil reserves’ as a key metric gives an incomplete picture of U.S. oil resources.”

The Fact Checker points out that “proven reserves” is a specific term. The oil must have been discovered, confirmed by drilling and be economically recoverable – the latter dependent on the global price of crude.

But guess what? Proven reserves figures change as we drill new wells, discover more oil, hard-to-get oil becomes economically viable and new technologies come on line. That’s how the U.S. could produce something like 200 billion barrels since 1990 – even though its proven reserves peaked at 40 billion barrels in 1970. That’s how, even though U.S. production and consumption will grow, projected proven preserves in 2035 will be 30 percent greater than at the end of 2010 (U.S. Lower 48).

Here’s what the president isn’t telling Americans: There’s approximately 200 billion barrels of undiscovered, technically recoverable American oil that isn’t counted with “proven reserves” – or mentioned in his speeches, a fairly gaping fact omission that’s deliberately misleading.

More Fact Checker:

“Measuring the U.S. consumption against its proven oil reserves makes little sense. Europe, with the exception of Russia, Kazakhstan and Norway, has virtually no oil reserves. Japan, a major consumer, has zero. China’s oil reserves are about half the size of the United States. In fact, in the relative scheme of things, the United States is relatively blessed with proven oil reserves — and, given the U.S. technological advantage, also with potentially large resources of oil yet to be tapped. … (I)n the context of higher gas prices — which is how the president often uses these figures now — it just is not logical to compare consumption to ‘proven oil reserves.’ This is a lowball figure that does not begin to describe the oil known to be within the U.S. borders.”

The United States is energy rich, not energy deficient, as the president makes it sound at a time when U.S. consumers are taking a beating. America has options. There’s oil in remote Alaska, off both coasts and on federal lands. With the right policies and leadership the U.S. could see 100 percent of its liquid fuel needs met domestically and from Canada by 2024.

Meanwhile, columnist Charles Krauthammer picks up on a key bit of illogic in the president’s recent energy riff – that decreasing U.S. demand for crude oil affects global prices but increasing U.S. crude supplies doesn’t. Krauthammer:

“‘The American people aren’t stupid,’ Obama said (Feb. 23), mocking ‘Drill, baby, drill.’ The ‘only solution,’ he averred in yet another major energy speech last week, is that ‘we start using less — that lowers the demand, prices come down.’ Yet five paragraphs later he claimed that regardless of ‘how much oil we produce at home … that’s not going to set the price of gas worldwide.’  So: Decreasing U.S. demand will lower oil prices, but increasing U.S. supply will not? This is ridiculous. Either both do or neither does.”

Krauthammer is spot on here. Given the fact that crude oil accounts for 76 percent of the price Americans pay at the pump, the crude supply is the biggest factor in the energy equation. Decreased crude oil demand at one end of the equation can have an effect, but so can increased crude supply at the other. The president is for the first part but in denial on the second. Sen. Chuck Schumer certainly gets the importance of supply, renewing his call for Saudi Arabia to commit to make up for any lost Iranian production.

Supply matters, and the U.S. can affect supplies – even if the president won’t say it. API President and CEO Jack Gerard, speaking at a House Energy and Commerce subcommittee hearing earlier this month:

“A strategy that confidently deploys resources here at home will send a clear message to global markets that the United States is serious about affecting supply. To the American people it will say help’s on the way.”

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The President’s ‘Anti-Stimulus’

From the president’s remarks during Monday’s rollout of his 2013 budget:

“The last thing we need is for Washington to stand in the way of America's comeback.”

The president is 100 percent right – and he can put his words into action by dropping his politically motivated obstruction of the Keystone XL pipeline.

The Keystone XL is the largest shovel-ready infrastructure project available to help spur the economic revival everyone wants. The $7 billion, privately financed pipeline would create 20,000 U.S. jobs during its construction phase and up to 500,000 U.S. jobs by 2035 as a big part of a comprehensive strategy to fully utilize Canada’s oil sands resources. Energy to run our economy and jobs. But we need Washington to get out of the way.

President Obama:

“We need to … [end] the subsidies for oil companies … The budget that we’re releasing today is a reflection of shared responsibility. … I want everybody here to go out there and do great.  I want you to make loads of money if you can.  That’s wonderful.  And we expect people to earn it -- study hard, work hard for it.  So we don’t envy the wealthy.  But we do expect everybody to do their fair share …”

Unfortunately, the president’s budget would place Washington squarely in the path of America’s economic comeback by increasing taxes on the country’s energy companies by $41 billion over 10 years.

Although the oil and natural gas industry is its own stimulus, contributing $476 billion to the economy in 2010 and projected by Strategic Energy & Economic Research’s Michael Lynch to spend $145 billion this year on drilling and completing new wells in the U.S., the president would saddle the industry with new taxes – hampering its ability to develop new energy sources and create new jobs.

Instead of standing in the way of the economic lift the industry could provide by threatening tax increases, the president should consider policies that could allow the industry to create 1 million new jobs in just seven years and increase revenue to the government by $127 billion by 2020 – three times the amount his tax hike would raise.

API President and CEO Jack Gerard:

“Increasing our taxes would push oil and natural gas investment overseas and diminish job-creation and economic activity here at home.  After a handful of years, we would see less domestic energy production – particularly of natural gas – more imports, fewer new jobs, and, eventually, depressed tax, royalty and other revenues.  Frankly, the administration should be trying to replicate the success America’s oil and natural gas industry has had in creating jobs and growing the economy primarily through development on private and state lands.  The evidence clearly shows that what we’re doing is working. If the industry’s job-creating investments are a stimulus for the nation, then what the administration is proposing is an anti-stimulus.”

One more point on taxes: The president is wrong about subsidies. The oil and natural gas industry doesn’t receive targeted subsidies from Washington. More on that here.

As for shared responsibility, the fact is America’s oil and natural gas companies pay $86 million every day to the U.S. Treasury in rents, royalties and income taxes. They pay their fair share and more than any other sector:

As Gerard noted to reporters Monday during a conference call, Apple is one of the country’s most profitable corporations, but no one is talking about singling it out for a tax hike – nor should they. That would be punishing the success the president says he favors.

“We want to lock arms with the president,” Gerard said. But it will take policies that help increase domestic oil and natural gas production and the American jobs that go with it “instead of penalizing the best job creator in the country.”

View the original article here

To the President’s Ear on Energy

As the president hits the road to talk about energy, he should first listen to what the American people are saying, reflected in two new polls this week.

Start with a Harris Interactive survey that shows 76 percent of voters believe increasing taxes on oil and natural gas companies could cost them more at the fuel pump. For a president who continues to talk about hiking taxes on energy companies that should be a big red flag.

Americans who’re getting slammed by higher fuel costs appear to sense that increasing energy taxes would drive up energy producers’ costs, which – as the Congressional Research Service found last year – could decrease exploration, development and production while elevating prices.

Other details from the Harris poll of 1,009 respondents:

81 percent believe more U.S. oil and natural gas development could reduce gasoline prices.90 percent believe a pro-energy development strategy could lead to more U.S. jobs.84 percent believe increasing domestic oil and gas production could enhance our energy security.64 percent believe some in Washington are intentionally delaying domestic oil and natural gas development, potentially hurting the economy and leading to higher consumer energy costs.

Clearly, those are slam-dunk numbers on energy policies the president and his administration have been talking about a lot – while keeping 87 percent of America’s offshore areas off limits, while overseeing declines in Gulf of Mexico production and while presiding over a downward trajectory in leasing and permitting on federal lands.

Then there’s the Pew Research Center’s latest findings, that as fuel prices rise, so does Americans’ support for more oil and natural gas production:

“… support for allowing more offshore oil and gas drilling in U.S. waters, which plummeted during the 2010 Gulf of Mexico oil spill, has recovered to pre-spill levels. Nearly two-thirds (65%) favor allowing increased offshore drilling, up from 57% a year ago and 44% in June 2010, during the Gulf spill.”

That last stat is worth underscoring. While Americans’ support for a variety of energy policies – from improved fuel efficiency to more federal support for mass transit systems – is pretty much where it has been, public support for more offshore oil and natural gas drilling has increased significantly. Pew finds that twice as many Americans (65 percent) support increased offshore drilling as those who oppose more drilling (31 percent).

Again, the Pew poll suggests growing numbers of Americans believe that increasing domestic supplies of oil and natural gas can put downward pressure on the price of crude oil, which accounts for 76 percent of the cost of what they pay at the pump. So, while the president continues to talk as though little can be done about fuel prices, U.S. consumers who’re being punished at the pump aren’t buying it.

A couple of other tidbits from Pew:

Of American voters who know something about hydraulic fracturing and energy from shale, 52 percent are in favor compared to 35 percent opposed. Among independents, support is actually a little stronger than the overall number, 54 percent to 35 percent.Awareness of fracking and producing natural gas from shale is mixed, but Pew found that 63 percent of those surveyed had heard something about the process.

One more note about Pew’s survey. The poll finding that Pew chose to highlight in its public announcement – Americans’ top energy priority – stems from a glaringly false choice foisted on the 1,503 sampled adults who were forced to choose one top priority between alternative sources (wind, solar, hydrogen technology) and expanded oil, natural gas and coal production. Those aren’t mutually exclusive options.

We commend the 5 percent of respondents who selected “both” even though the Pew folks didn’t offer it as a choice, as well as the 4 percent who didn’t know or refused to answer – perhaps, like us, frustrated that some continue to pit energy sources against each other when the truth is America needs all energy options to build a secure future.

View the original article here

The President’s Energy Tax Hikes: Section 199 Deduction

The president’s State of the Union address last month had lots of good stuff in it about domestic oil and natural gas production. Unfortunately, the president’s actions are speaking louder than his words.

His just-released 2013 budget includes proposals to increase taxes on oil and gas companies – more than $86 billion over 10 years – that would take the country in the wrong direction on energy. Research shows higher energy taxes would discourage production, lead to fewer well-paying American jobs and increase our reliance on imports.

Today, let’s take a look at one of his tax-hike proposals – repealing the Section 199 manufacturer’s deduction only for oil and natural gas companies. Benefit to Washington: $11.6 billion over 10 years.

Here’s what the president said back on Jan. 24:

“Let’s remember how we got here.  Long before the recession, jobs and manufacturing began leaving our shores.  Technology made businesses more efficient, but also made some jobs obsolete.”

Indeed, which is why the 2004 “American Jobs Creation Act” included the Section 199 deduction. It was extended to all U.S. manufacturers, to help address the very problem the president identified by benefiting employers who maintain and create well-paying U.S. jobs.

The president went on to talk about tax policies he said would foster more American manufacturing:

“If you’re an American manufacturer, you should get a bigger tax cut.  If you’re a high-tech manufacturer, we should double the tax deduction you get for making your products here.  And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.”

Too bad the president’s affinity for American manufacturing is more rhetoric than reality – demonstrated by his renewed proposal to eliminate the Section 199 deduction only for American oil and natural gas companies. Talk of tax fairness from the administration is especially hollow here. Under Section 199, a 9 percent deduction is available to all qualifying income from all domestic manufacturers – except that the deduction for the oil and gas industry is limited to 6 percent, and now the president wants to eliminate that.

If the objective, as the president said, is more domestic oil and natural gas production – creating more U.S. energy and more U.S. jobs – then raising taxes on these companies is the wrong way to go. Higher taxes on an industry that already pays more than $86 million a day to the federal treasury and which contributed $476 billion to the economy in 2010 would likely cost jobs, not create them, while undermining efforts to reduce imports.

View the original article here

The President’s Almost None-Of-The-Above Energy Approach

The president spoke about energy again Thursday, saying his all-sources strategy will ensure a prosperous future:

“If we’re going to avoid being at the mercy of these world events, we’ve got to have a sustained, all-of-the-above strategy that develops every available source of American energy.”

The president is right: A sustained strategy that uses all of America’s energy sources is the key to U.S. energy security. API President and CEO Jack Gerard:

“More oil and gas development here at home would benefit the nation. It would increase the security of our energy supplies, create jobs, boost revenue tour government and help put downward pressure on prices at the pump.”

Ah, but the president’s so-called all-of-the-above strategy actually appears to be an almost-none-of-the-above strategy. In a speech in Florida, he dismissed calls for increased domestic oil drilling:

“You know there are no quick fixes to this problem, and you know we can’t just drill our way to lower prices.”

And:

“Anybody who tells you we can drill our way out of this problem doesn’t know what they’re talking about — or just isn’t telling you the truth.”

This administration is talking a big game on energy – even claiming credit for domestic oil and natural gas production increases that stem from decisions made long before it came into office. Indeed, those gains have come in spite of the president’s policies, not because of them. And his rhetoric on drilling suggests ignorance or disdain for analysis that shows, yes, we could see 100 percent of our liquid fuel needs met with North American sources of oil by 2024.

Gerard:

“The administration is restricting where oil and natural gas development may occur, leasing less often, shortening lease terms, going slow on permit approvals and increasing or threatening to increase industry’s development costs through higher taxes, higher royalty fees, higher minimum lease bids and more regulations.”

More Gerard:

“Keeping 85 percent of our offshore areas off limits – per the administration’s latest offshore energy plan – is not a prescription for increased oil and natural gas production. Decreasing oil and gas leasing in the Rockies by 70 percent is not generating jobs and more affordable energy that America’s workers and consumers need. Having 10 federal agencies planning more regulation of hydraulic fracturing … is not keeping affordable supplies of gas flowing to generate electricity, heat homes and supply chemical plants. Rejecting the Keystone XL pipeline is not increasing American access to affordable, secure energy.”

Current energy conditions, globally and domestically, are pulling the veil away from the president’s do-little energy policies. You can’t reject the Keystone XL pipeline, for example, then say the United States is at the mercy of the volatility in global energy markets. You can’t keep U.S. energy on federal lands and offshore off limits and say you’re for increased domestic oil and natural gas production. You can’t say yours is an all-of-the-above strategy when you’re denying multiple opportunities to industries that supply the majority of the energy we currently use.

Gerard:

“The administration’s own projections tell us that we’re still going to rely on oil and natural gas for nearly 60 percent of our energy for the next quarter century. We’re either going to produce that oil and gas in the U.S. with the added benefits of creating over a million new American jobs, strengthening our national security and generating more revenue for our government, or we’re going to depend more on resources from less stable parts of the world.”

View the original article here

The President’s Energy Tax Hikes: Expensing of Intangible Drilling Costs

Yesterday, we discussed the president’s 2013 budget proposal to repeal the Section 199 manufacturer’s deduction for oil and natural gas companies – showing the disconnect between his call for more domestic oil and natural gas production and boosting U.S. manufacturing. Today, let’s look at another proposed energy tax increase in the president’s spending plan: repealing the expensing of intangible drilling costs (IDC).

Repealing IDC would generate $13.9 billion for the U.S. Treasury over 10 years. But it would eliminate a 99-year-old section of the tax code that has fostered innovation and exploration in the oil and natural gas business – playing a major role in the development of our energy resources for nearly a century.

Here’s what the president said in his State of the Union address:

“We have a huge opportunity, at this moment, to bring manufacturing back. But we have to seize it. Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.”

And:

“We have a supply of natural gas that can last America nearly 100 years. And my administration will take every possible action to safely develop this energy.”

More manufacturing, jobs and energy. We’re for all three. Unfortunately, the president’s energy tax increases, including the IDC repeal, would make all three harder.

Here’s why: When energy companies drill they incur costs that can’t be recovered, such as site preparation and labor, representing 60 to 80 percent of the cost of the well. These costs accrue whether the well produces oil or natural gas or is a dry hole. Take away IDC and you increase the cost of production. Increase production costs and you discourage new energy development, which affects manufacturing and energy supply.

Since 1913 companies have been able to expense drilling costs – much like the Research & Development deduction enjoyed by other industries. Repealing IDC would discourage the very things the president wants: innovation, risk-taking, investment and new drilling activity – which helps the manufacturing sector as well as overall economic growth. We’re seeing that right now in states like North Dakota, Pennsylvania and Texas.

The president is right: There’s huge opportunity to help spur U.S. manufacturing and to capitalize on America’s vast energy riches – including the second-largest natural gas reserves in the world that are being unlocked through hydraulic fracturing.

With the right policies in place, America’s oil and natural gas companies can be a catalyst for both. Greater access to our resources could generate 1 million new U.S. jobs by 2016 while making our energy future more secure. Raising taxes on America’s oil and natural gas companies, which already are paying $86 million a day to the U.S. Treasury, will squander the opportunities the president mentioned. It’s the wrong policy for the jobs, energy and economic growth everyone wants.

View the original article here