Energy Policy per American Petroleum Institute
Posted by Gail the Actuary on August 7, 2007 - 12:30am
Topic: Policy/Politics
Tags: corporate average fuel economy, energy legislation, natural gas, oil [list all tags]
The American Petroleum Institute (API) held a conference call with bloggers on Tuesday, July 31, to answer questions about API's position on energy legislation.
A link to a recording of the conference call (or most of it--the recording was cut off due to technical difficulties) can be found here. A transcript can be found here.
The API is not at all happy with the House legislation. One of the bloggers asked if there was anything in the 800 pages of legislation the API could support.
Gerald Kerry (of Platts): It doesn't look like there is much of anything you could support.
Jim Ford: That's right. This is Jim Ford with Government Affairs at API. And basically, you look at the provisions that are in the House bill, and it has a negative impact on current and future domestic production. It has limitations on expanding refining capacity. . . . So it has an extremely negative impact. It just far outweighs anything else that you might consider positive.
In fact the Senate bill . . . does not have as many deep flaws as the House bill does, but it does have deep concerns still raised. The price gouging provisions that are in the Senate bill, . . . we believe will . . . amount to price controls. We know how bad price controls are from our experience in the 1970s and 80's.
And then, the increase in ethanol. The increase in standard from the current standard to 36 billion gallons a year was done without . . . looking to check and see whether the technology is well developed enough to actually be able to provide the ethanol, particularly cellulosic ethanol, that would be required to meet the mandate. There is no way for the government to just mandate it if it can't be met. And knowing the technological breakthroughs that have yet to be made before we have adequate amounts of cellulosic ethanol economically available, that's a real concern in terms of supplying future fuel needs.
API held a blogger conference phone call on Tuesday, July 31. The subject was energy policy in general, and in particular the proposed legislation being discussed in the House of Representatives. A somewhat different version of the House legislation was passed on Saturday, August 4. The Senate passed its version of energy legislation in June. Compromise legislation will now need to be developed, taking into account both the House and Senate versions. President Bush has indicated that he may veto the resulting legislation.
The purpose of this discussion is to better understand the position of the API. It is possible that this will also give us a better understanding of the position of George W. Bush, since he is from the oil and gas industry.
Participants on the call were
Host: Jane Van Ryan, Senior Manager, Communications API
Red Cavaney -- President and CEO API
Mark Kibbe -- Senior Policy Analyst API
Erik Milito -- Office of General Counsel API
Jim Ford -- VP, Federal Relations API
Sara Banaszak -- Senior Economist API
Doug Morris -- Group Director, Upstream API
Richard Ranger -- Manager, Upstream API
Bloggers:
Anne McGregor -- Smarter Missouri Energy Policy
Jeff McIntire-Strasburg -- Treehugger
Chris Miller -- Maine Commonwealth
Geoff Styles -- Energy Outlook
Gail Tverberg -- The Oil Drum
Nate Hagens -- The Oil Drum
Robert Rapier -- R-Squared, The Oil Drum
"McQ" -- The QandO Blog
Carter Wood -- ShopFloor.org
Gerald Karey -- Platts
Pejman Yousefzadeh -- Red State
Besides the points made above, a few other points made on the call:
According to Red Cavaney of API, one of the big concerns is that there are a number of provisions in the proposed legislation that amount to a complete turn around in energy policy from the Energy Policy Act of 2005. Energy companies require very long lead times because of the nature of their operations. Rapid changes in energy policy make it difficult for oil companies to plan.
Robert Rapier asked about the rollback of tax breaks for the petroleum industry. Mark Kibbe said that these were problematic. Some of the rollbacks make costs of production in the US higher, so oil companies have the incentive to more production to non-US locations --not the intended result. Others potentially expose US oil companies to double taxation on a portion of foreign income - making them less competitive with foreign oil companies.
Chris Miller asked about royalty payments in kind. With this type of royalties, instead of determining a price equivalent for every barrel of oil pumped, royalty payments are made in oil, as a percentage of oil produced. Erik Milito, office of the general council at API, indicated that the industry is very much in favor of these, because they are easy to audit.
There was also some discussion about re-writing leases that were erroneously written. According to Red Cavaney, API is very much opposed to this, because it involves changing a signed contract. API's position is that the contracts should remain in place as they are.
Red Cavaney also discussed price gouging legislation. API is very much opposed to this, because it is very difficult to tell which price increases are lawful and which are not. API feels that it will act much like a price cap. Previous experience in the 1970s and 80s shows that such caps work poorly. Such a cap will also tend to increase the chance of outages if it discourages oil companies from finding additional supply at higher prices in time of emergency.
Robert Rapier asked about API's position on CAFE standards. API would like to stay out of this discussion - they feel it is between the auto industry and regulators.
When asked about carbon caps, Red Cavaney indicated that API is concerned that the US will adopt carbon caps, while countries like China will have none. API is concerned that if this happens, the US will be at a competitive disadvantage. Mr. Cavaney does not believe that the American public really understands the costs associated with these proposals.
When asked to sum up the position of API on the current legislation, Mr. Cavaney said that their biggest concern is that the current legislation should "Do no harm".
At this point, it is not yet clear what provisions will end up in the compromise legislation. It seems to me that one combination that would be particularly harmful from the industry's point of view would be legislation which includes both a price gouging provision and a rollback of tax breaks. The rollback of tax breaks would raise taxes for the industry. If the price gouging provision were in effect as well, it seems like it would be very difficult for the industry to pass the higher taxes through to the customer.
We have talked on The Oil Drum about the possibility of using higher taxes on gasoline and other petroleum products so as to encourage conservation. If the higher taxes on the oil industry could be passed through to the customer, it seems like the impact would be somewhat similar to higher taxes on the end products, since the higher cost would act to encourage conservation. If the oil companies can really pass the cost on, this might be a more palatable way of discouraging consumption than a direct tax. If the higher taxes cannot be passed on, they become problematic -- the oil and gas industry has a huge need for investment in the future, and removing profit which could be used for this investment seems counterproductive.
I guess the Dems took their marching orders from Archer Daniels on the Ethanol two-card Montey game.
Ethanol is horrifically destructive to the enviroment and isn't cost effective, thus the billions being snuckered out of the American taxpayer.
Just more evidence that the government is incapable of solving our energy problem. The free-market is the best solution for our energy crisis.
The ethanol provision (36 billion barrels by 2022) is only in the Senate version of the bill. We will have to wait and see how it comes out in the Conference Committee. I agree that ramping up ethanol to 36 billion barrels a day doesn't look like a good solution, based on what we know today.
The one thing that the Senate provision has going for it is a 2022 date - 15 years away. If cellulosic ethanol is still going nowhere in a few years, there would seem to be time to readjust the goal to a lower level. In an earlier conference call, API expressed concern about the disruption that would be caused by ramping up the oil industry's ability to use ethanol (additional truck and barge transportation and processing facilities), especially if additional production never materialized. With a 2022 target date, there would seem to be a long enough lead time that this disruption would be less of a problem.
Yup, that good ole "free market" is the solution. Now let me see, just how many solutions has the market thrown up as possible solutions? Hmmmm. Nuclear? Nope, too many subsidies. Solar? Nope, not economical yet. Wind? looks, good, but the market hasn't figured out how to power a car on it yet. Coal? Ah, yes, there we go. What? what's that you're saying about CO2?
To be fair, maybe the "free market" could solve our problems, but seeing has how we don't have one, it's hard to see what difference it makes.
The "free" market is a myth and always has been. It is a buzz phrase the right wingers use when they have nothing else to say. It simplifies everything and gets rid of all those details that you have to think about to actually make anything really work.
It simplifies everything and gets rid of all those details that you have to think about to actually make anything really work
Right. Like the corrput government we have, as exemplified by this failed de-energy bill, has a solution?
Just look at Los Angles and the rest of California. As far as their energy policy has gone, and it is as leftist as it gets, it's a failure.
They don't call it "metrofail" for nothing.
"corrput government" like a meeting of a VP guy in a undisclosed location with a bunch of undisclosed cronies?
hmmmmm..I live in Los Angeles and when Enron was busy turning off the grid in Santa Monica and Pasadena my good old Department of Water and Power kept chugging along.
"Department of Water and Power kept chugging along."
Yeah, like good old TVA keeps rolling along as well, despite being 'public power'. I believe that LADWP was run at that time by a former Chattanoogan and TVA board chairman, S David Freeman.
S David Freeman.
Yea- Freedman introduced several important fixes the LADWP, he laid off several employees and cut expenses, the unions whined but the mayor was Republican and the councilman felt that they had no choice because of the debt load the dept was running.
The best move he made was sticking the the general plan, thats estimated the amount of population the city proper would have then aquiring the power to match it before useage.
The plan went under fire in the early 90's when the population was declining (riots, earthquakes) but the dept stuck to it and acquired 50% ownership in two Utah coal power plants. Had a private firm been in change the plants would have never been bought and Enron would have the city shut down literally.
Freeman before he left had a solar program in place and wanted to create local gas power plants. I guess it would be powered with LNG. I don't think the plan went anywhere.
Just look at Los Angles and the rest of California. As far as their energy policy has gone, and it is as leftist as it gets, it's a failure.
They don't call it "metrofail" for nothing.
I have lived in Los Angeles for 28 years. Please help me understand exactly what I am supposed to be calling "metrofail". I have never heard the term before.
Also, please explain how CA's energy policy is "leftist". I too remember the tax payers of this state being ripped off royally by the free market forces of Enron.
Currently the rightist minority elements in Sacramento have an outrageous impact over the annual budget process, which requires a super majority, and appear to have successfully cut funding to much needed, energy efficient light rail, while continuing to fund freeway expansion. Not very leftist to me.
I have lived in Los Angeles for 28 years. Please help me understand exactly what I am supposed to be calling "metrofail". I have never heard the term before.
A. Do you remember Proposition AA on the November 1982 ballot and what they said the funds would do as far as metrofail?
B. Ridership is horrible. They promised us Metrofail would cure our traffic problems.
C. Unless you're a shut-in and don't get out, do you dare argue that the traffic has gotten horribly worse the last few years?
Also, please explain how CA's energy policy is "leftist". I too remember the tax payers of this state being ripped off royally by the free market forces of Enron.
Uhm...are you sure you lived in Cal as long as you said you did? I lived there 44 years and STILL work there 8 months out of the year.
Currently the rightist minority elements in Sacramento have an outrageous impact over the annual budget process, which requires a super majority, and appear to have successfully cut funding to much needed, energy efficient light rail, while continuing to fund freeway expansion. Not very leftist to me.
Actually it has been AG Brown who has stopped any new construction desigend to alleviate the traffic problems which wasted untold millions of gasonline and pollute the air.
Brown, who was also the former governor, is a hard-core leftist enviromentalist.
So all of Arnolds bonds which passed last November have been for naught as far as fixing the roads and building new ones.
Oh yeah, Arnold, the "green" governor, stopped a Ligth-rail project from getting on the ballot.
You gotta love that one.
You mean to say there are parts of L.A. that have not been paved over yet? If highways, byways, overpasses, and concrete were the answer to traffic problems, then L.A. would be heaven on earth. I drove in L.A. as far back as 1977; it was hell on earth then and it dominated by freeways even then. You say it's gotten horrible in the last few years? Try the last 40 years.
Maybe Brown is stopping new construction because he knows how futile that is. Denver, where I live, just spent billions on a new, improved interstate system through downtown. Yeh, things are just rosy there now and all problems are solved. To their credit, they have been doing a fairly good job expanding their light rail which does, in fact, make it easier to get to and from downtown and will be even better in the future.
If you want to build a transit system that is utilized it is counterproductive to make auto travel easier simultaneously. As far as burning fuel stuck in traffic goes, this can and will be solved by the widespread implemenation of hybrid vehicles with start/stop mode.
Taking the long view, at some point you just have to stop building more and "better" roads. All you do is create a hopeless treadmill. Besides, we're supposed to be running out of oil. And your solution is to create more demand for oil.
And why are you complaining about Arnold. So, he's not really all that green is he. You should be happy. Arnold's solution to global warming is to build the hydrogen highway. Please!! And he would be traveling that hydrogen highway with his Hummer yet. Yes, you should be happy. Arnold is not the hard core, left wing environmentalist you seem to detest so much.
Your solution to the hole L.A. and much of the rest of the country is in is to build a bigger hole. With taxpayer money, of course, even though you are mister conservative.
I think there is a basic conflict between having a great or even good mass transit system and a road system which has lots of excess capacity. As soon as the transit system starts to meaningfully take the load off the road system, then people tend to gravitate back to the road system. Let those who choose to do so, drive through hell every day, but provide them an alternative.
I nominally lived in the Peoples Republik of Kalifornia from about 1968 to 2002. To go any further left you would be talking Khmer Rouge or something like that.
Los Angeles isn't as "leftist" as it gets.
LA has cars cars cars and zillions of roads.
Europe has much more rail investment and it is actually quite successful. Are they full of super-humans? No, same sort of people.
Like the corrput government we have, as exemplified by this failed de-energy bill, has a solution?
This again is the right winger's non answer: "destroy and thwart everything the government does because it's intrinsically bad."
The alternative is to insist on less corrupt and effective programs with significant impact.
I'm for eliminating subsidies AND restrictions on all of them. If Solar is economically viable than I'm all for it. We know that it isnt' and won't be in our lifetime, but hey, let the cards fall where they may.
Anything the free-market offers is better than what these clowns in D.C. have suggested.
Good idea - last time I looked "anything" in my gas tank got me 0 mpg. When my local electric company put "anything" into their coal-fired plant we got "nothing."
Cheering the "free-market" as an ideology is all fine and good. But when it comes right down to it, the market we have now (and it ain't free by any stretch of the imagination) would offer us oil until its more expensive than coal and then it would switch to coal. That is the market's answer and I'm not sure that it is better than the 3-ringer in DC.
http://en.wikipedia.org/wiki/Natural_monopoly
The problem with infrastructure is it cannot involve a totally absent of any regulation - in part because the cost of entry to add to the grid is way too high and the maintenance is “externalized” to government agencies.
I think that we need to remove all regulation regarding property owners with power generation – if someone wants to add a windmill then so be it, we need to encourage the property owners to view power as something they have to, in part, provide by themselves.
As I understand it, the grid has to be able to accept the fluctuating power of the various windmills that are added. I suppose there are also issues of needing to properly connect up with the grid. It seems like some regulations will be needed.
Yes, I meant having a windmill power the properties directly not feed into the grid. If everyplace has a standardized battery hookup then market activity can start taking place at some local level.
I guess I don't know all that, but hey, maybe that's just me.
In certain applications, solar is viable today-- Passive solar, solar lighting, thermal solar, remote off-grid PV systems, PV power in Hawaii, Italy. (ref)
According to the DOE solar timeline: "Within 10 years, photovoltaic power will be competitive in price with traditional sources of electricity." (ref)
The National Renewable Energy Lab has a 2015 target price of solar PV of 5-10 cents/kWh, which would be viable for net metered grid-tie systems. Increased production, as from tax incentives, would get us to "grid parity" sooner. (ref)
Germany, with its financial incentives (feed-in tariffs) is competitive with commercial electric rates today. (ref)
The world is full of conventional wisdoms, things that will never come to pass in our lifetime, that do indeed come to pass. I can remember people saying that LCD displays would never replace CRTs, yet they did. And isn't there currently a very similar CW running around about peak oil?
There is retail PV being sold now for $3.00/Watt and wholesale PV being sold for $1.29/Watt.
I would say that 7 cents/kWh is happening today so 4 cents/kWh by 2015 should not be a problem.
Chris
WaltC - You have a highly non-pedestrian and scientific approach - who here uses references - are you inside or outside the solar industry?
Thanks, I'll take that as a complement. I'm a retired telecom engineer, so I'm about as 'outside' as you can get.
BRNM,
There was a guy on CSPAN this morning talking about how our government-propped infrastructure is at every level aimed towards supporting the car-centric life style.
On the local level, police spend most of their energy enforcing traffic laws. There are traffic lights and highway signs everywhere; etc.
On the Federal level, our armies are out and about the world to secure the oil over "there" because we plum ran out of it over "here".
There is nothing "economical" or uneconomical about oil versus solar. Our government entirely props up (subsidizes) the petroleum way of life and then accounts for it in whatever funny way is necessary so as to make it sound "economical".
I really don't know what kind of "economical" thinking you are engaging in. We as a society are sinking all our resources, time and energy into an infrastructure that is destined for failure. Have you noticed a couple of little things "collapsing" as of late? Any bridges? Coal mines? Dried out forests? Bankrupt cities? Off-shored jobs? These might be clues.
On the Federal level, our armies are out and about the world to secure the oil over "there" because we plum ran out of it over "here".
Good. I know you're not sitting in some carbon-neutral home, nor are you driving some car that runs on solar or wind power. If we listened to luddites such as yourself the country would be in a deep-recession right now. And guys like you would be blaming Washington for not doing something about it.
There is nothing "economical" or uneconomical about oil versus solar. Our government entirely props up (subsidizes) the petroleum way of life and then accounts for it in whatever funny way is necessary so as to make it sound "economical".
I'm all for taking away said subsidies on both petroleum and solar. Solar would die on the vine while the oil industry could keep going on.
I really don't know what kind of "economical" thinking you are engaging in. We as a society are sinking all our resources, time and energy into an infrastructure that is destined for failure. Have you noticed a couple of little things "collapsing" as of late? Any bridges? Coal mines? Dried out forests? Bankrupt cities? Off-shored jobs? These might be clues.
Coal mines? Geez, digging for coal has always had the risk of "collapsing". Nice try to link what is happening in Utah to the energy crisis. No cigar though.
My goodness! You're just a font of conventional wisdoms! I'll have to start jotting some of these down just for future reference.
I can see why someone might be against subsidies, but based on the few posts of yours I've read you also seem to be against solar. Is there something that you are a fan of, or are you also against all other alternative energy sources as well? In which case, what are your plans in a post peak oil world?
What part of Selling-Congress-to-The-Highest-Bidders (SC2-THB) is there that you don't understand?
Of course we have a free market.
Just leave the cold cash in your representative's fridge.
You didn't see the memo? All bribes are now regulated by the ATF.
BrussellNM,
I'm afraid you haven't thought this through, but are making a statement without looking at the facts, which is also the flaw with the new Energy Bill.
87% of the world oil production, and all of the prospective areas in the world are controlled by national oil companies and national governments. The big oil companies don't set prices or make investment decisions except on their 1/8th of world production. They can't deal with national governments, it takes our own goverment. And that's the truth.
Even in the United States, the home of the free markets and many of the big oil companies, the only places to look for giant fields are owned by the Federal Government. They own all of the offshore waters more than 3 miles offshore except in Texas, where its 7 miles offshore. They own most of the state of Alaska, and they own the National Forests and Grazing Lands where exploration is restricted. The rest has been drilled up. And this isn't some new rule, all land title comes from the Sovereignty, and always has, its a principle of English Common Law and predates the Constitution.
Everbody needs a dose of reality here. Congress wants to blame somebody, so they blame big oil. Don't believe me, ask API. The fact is that big oil has done a magnificant job of bring cheap energy to the people of the world for the last 100 years. On this website I read constantly how energy is underpriced, and they are the guys who brought us all the cheap production. You can give all the credit you want to some mythical Free Market Fairy, but it was the sweat, knowledge and money of people in the oil and gas business that have formed the basis of our prosperity in the whole world.
The problem is that we were too damn good. We got the cheap to produce, easy to refine oil out of the ground and sold it cheap. Whats left now is stuff like the Alberta tar sands that costs $100,000 dollars per barrel per day of synthetic crude to get out of the ground, plus the transportation down to the US, the production costs and the refining costs, or the oil shale, which nobody has figured out how to make economic. The cheap oil that's left? The Mideast governments nationalised it 30 years ago. And very other exporter-the national governments control how its produced, the production rate and the taxes and royalties that they charge big oil. Look at Hugo Chavez, the Venezuelans are the third largest exporter to the US and they just changed the deal. The consumers of the world are paying that bill if they want Venezuelian oil.
And now Congress and the Consumers want to get all whiney and blame somebody, so they slap on punative taxation and blame everbody except the consumer. Its the consumers fault, because they don't restrain their useage. If everbody in the US would just moderate and use 10% less the price of oil would drop like a rock, just as it did in the 1980's when we conserved and cut oil prices from $32 a barrel down to $12 in 1988. And, if you want to stop global warming, conserve. Its not someone else's behaviour, its the consumer who leave the AC on and burns coal generated electricity. That's true conservatism, take responsibility for your own behaviour and conserve. Its everybody's fault, not the guys who bring you gasoline cheaper than a liter of water at the same convenience store.
Punative taxation, if it isn't unconstitutional it sure should be. Everbody owes society taxes. Its how we pay for our world, but its no more right to charge big oil comanies more than it is to charge a working guy higher taxes than his rich employer. Ask Warren Buffet about that.
And the API needs to get a dose of reality too. Its simple equity to pay royalties. The big oil companies want 25% for a lease on their minerals, the big oil companies should pay the people of the US the same for their minerals. And its a principle of law. Judges have always set aside totally inequitable contracts, and they'll do it here too. The big oil companies are going to owe penalties and interest and fantastic legal bills if they refuse to pay the people for their leases. And if it happens with the companies I own stock in, I'm going to sue their asses for irresponsibility, and that's a promise.
The big oil companies need to get real. If you distort the whole govermental process with campaign contributions and fake scientists on global warming, this is the result punative taxation. I'm from Houston. I know who gave George W. Bush the donations to get elected. it was the Alkecks, the Farish's the Fondrens, Ken Lay and just about everybody on Cheney's secret energy task force. If you support a toad don't get upset when he pisses on everybody. Why do you think the Democrats are so mad, you can't suppress a recount on an election flying everbody around in Ken Lay's airplane and not have it come back.
The fact is we are all just about screwed. We have lost in Iraq, we lost any hope of victory when the thugs started torturing people, but if we leave, America isn't getting back in the Persian Gulf. Unless we get through to the American people that they have to cut their consumption or we'll continue to be over a barrel with no KY. The big oil companies had better learn to leave our democracy alone, or there will be no more oil business-it'll be nationalised too. And API needs to learn how to talk to people, not justguys with huge stock options.
rant over. I feel better.
Bob Ebersole
Bob, this is one of the best posts I've ever read on TOD.
"America is not a young land: it is old and dirty and evil before the settlers, before the Indians. The evil is there waiting." William S. Burroughs
Bob, i'll second that. Good rant. clearly, you're mad as heck and not willing to take it anymore.
Bob,
Thanks for the post. I agree that the oil companies have done a good job of providing cheap energy, maybe too good a job.
About not dealing with the consumers, they are the ones that vote. Those soccer moms in the big SUVs vote right on time and every time. As soon as you take something away from them they are looking for the first politician that will give it back to replace you.
The term that was once used to describe the Republican Congressman Randy "Duke" Cunningham, who is now doing time for corruption and taking bribes is "out sized ego". That meant that he felt "entitled" to things, that he deserved better and he was going to get the those things. That might describe some of our American consumers with large SUVs and monster houses.
Thanks Bob.
Great Rant. You should do it more often. Exactly my point why ALL taxes and government overhead should be put on consumption. The more you buy, the more you pay. The more you earn, the more you keep. The more stuff we buy, the more we need police, fire, roads, military, etc. All of it should be correlated to how much we consume. If the rich guy wants to buy a yacht, he pays taxes when he buys it. If someone wants to start a small company, they just call some people and put them to work without hiring 40 tax specialists to figure out the best way to hide their income and inflate expenses, and maybe, just maybe, somebody technical will become a company president and decide that products aren't going to be shipped unless they actually WORK!
There is no more Left and Right, just the Corporatocracy and the scum who take their bribe money and tell us they are 'representing' people. Consumers have been kept childish by lack of responsible leaders.
We can dream that consumers need to change, but they won't without leadership. Individuals will, and do, but as a group, the majority of people do what they see others do either in herds or on TV. The only thing TV shows them is that they need a bigger TV to see all the flashy sports stats and disaster Spectacles as News.
We can either decide how to change, or Nature will make the change for us. Descent Plans need to be implemented NOW! Throw the usury-sucking economists into the river with the lobbyists.
"If you want Change, keep it in your pocket. You vote for a faux president every four years, but you vote for real corporations thousands of times each month. Your money is your only real vote."
Auntiegrav,
I agree that the best statement we can make is how we spend our money. And, I'm very serious that we all need to look at our own behaviour first, the most important change is the one I make. But, sorry about the consumption tax. It means that Warren Buffet would be taxed at the rate of about $0.05 per million dollars because he is a frugal, modest man. And that isn't right.
I don't think anyone needs to inherit more than a couple of million dollars. And I don't think anyone is worth a paycheck of more than a million dollars a year. Its a simple matter of equity in a world where a quarter of the people are starving and can't get a education. So I guess that makes me into some kind of socialist. I personally don't really care that much for possessions. I can only wear one pair of pants at once, and this time of year I just want them to go to the knee. I can only sleep in one bed, and I'm on a diet. But, I want to play with the big boys on some oil deals, and that takes a certain level of prosperity. But, to tell you the truth, I do what I do because its fun.
I've got a good friend named Cleveland Turner, he's a great folk artist, nationally recognised but he's poor. He was raised in Mississippi, never learned to read, and lives very modestly in the third ward.He has a very small social security check, doesn't drive, rides a bicycle and makes art. He told me once a few years ago that you can have too much money and your stuff owns you, or you can have too little and worry about that all the time, but god had blessed him because he has just enough. Google him, his art is pretty amazing found art stuff. I'll be happy to take anyone from the ASPO Convention to meet him-his house is an amazing piece of art, and its on the web under Flower man, Houston.
Bob Ebersole
Why don't you think that a man who lives frugally and puts little burden on the system or his neighbors should be taxed according to the burden he puts on the system?
Because he HAS money? I HAVE a very valuable farm. It doesn't make a profit (yet), but I have to pay huge property taxes on it, even though my children are homeschooled. No matter how small and frugal I would like to live, I have to produce enough to make those taxes and the cost of high priced health insurance.
A consumption tax would mean that the money Buffet has doesn't matter. He would pay taxes according to the burden which is caused by how much he spends. We need police because people steal each other's stuff and it needs to be protected. We need big, expensive fire trucks to protect big, expensive houses full of fire-prone electrical and gas appliances and gizmos. We need a big military to 'maintain the shipping lanes' for things like vanadium, tantalum, and boobaroo, not for any political reasons. Nobody is out there trying to 'wipe out freedom of choice'. Mostly, they are trying to protect themselves from profit-sanctioned destruction. Blind faith in representatives and their crooked system is as bad as blind faith in the FSM (flying spaghetti monster).
A million dollars a year. Yeah, right. That would be 'just enough' to pay our health insurance so those companies can build more skyscrapers and landscaped business parks to deduct as 'expenses' from their 'income' so they don't have to pay any taxes, let alone paying 25% on the paper they buy to print propaganda.
Bob,
Removing a tax break is not punative. That's why it was called a tax "break". A break from a certain tax.
If it was called a tax retirement, tax cancellation, etc., you're rant might have value.
As for your fellow noblemen in the oil industry who think the oil on federal land is theirs, well, gee whiz, I guess you won't mind me coming over and digging up your yard in search of gold. And if I find it, I'll give you a dollar. After all, I did all the digging, paid for the shovel, hauled the gold away. And by the way, clean up your damn lawn! All those holes are a blight on the neighborhood.
Please note that some have voluntarily agreed to renegotiate these leases.
House Farm Bill Includes Production Fee For '98-99 Oil Leases
While I do note that my own company has agreed to pay royalties, I can't get past the irony that a farm bill would attempt to rectify the situation. Perhaps in the next energy bill, we can get rid of those darn sugar subsidies. I mean, come on. I can argue a case for corn subsidies. I don't want our corn farmers to be put out of business by cheap imports (even though we get subsidized high-fructose corn syrup as part of the deal). But sugar? Give me a break. Aren't we fat enough already without subsidizing the problem?
Robert;
That's correct, several of the officers have agreed to renegotiate the leases. That's good business policy and a recognition of the situation. I guess I should have made my self a little more clear, what I was addressing is a couple of statements of API in the transcript linked at the top of this thread/ Specificially, API stated about the back royalties that "a signed deal was a deal" and that the leases should at the most be renegotiated for 1/6th, or 0.1666667% or 1/8th, or 0.125% royalty, which is ludicrously low.
Lemme tell you how the cow ate the cabbage.
First, as you and I know, and most of the regulars on this site, API or the American Petroleum Institute, is the lobbying and public education arm of the big oil companies. There's nothing wrong with that, its legal, moral and constituional that there views should be represented.But the fact is that the vast majority of their support comes from companies like Exxon and Chevron.
Secondly, all oil and gas leases have royalties, or a percentage of the production paid to the mineral owners. In the United States these royalties or percentages were given by the Soveriegnty to the people when the land was first patented,or bought from the sovereignty. In every other country in the world all minerals from under the surface were retained by the sovereignty, or government. I could elaborate, but this is a basic, worldwide principle of law from Roman times at least. In the US, Texas was a republic for 10 years before it was annexed, and all unpatented land were retained by the State, along with responsibility for the Mexican war debt, and the Supreme Court decided in the 1950's that our minerals went out to the 7 league limit claimed under Spanish law. In all other states, by statute, the Congress have given the states the land out to three miles from the shore. In Texas these tidelands are managed by the General Land Office, and by state constitution, and leases are sold by auction a couple of times a year and the price and the royalties are negotiable, beyond a certain basic, but tough lease. The same in Louisiana, except its a 3 mile limit. The waters further offshore are managed by the U.S. Minerals Management Service in New Orlean, and have certain minimum terms, which are that 1/6th percentage I mentioned above, but are also sold by competitive bid.
That's the basic info everbody needs to consider the claims.
In about 1988 or 1989, I forget which year,but under King George the Elder, the Minerals Management lowered the royalties to 0 on the deepwater offshore tracts, which are now the subsalt trend and the Eocene trend where Jack 2 and some other fields have been discovered. I thought it was preposterous at the time, but, some things just aren't worth protesting. The leases contained no royalty escalation clause, and thats the money that everybody is argueing about-at least 1/6th of billions of barrels of oil and trillions of cubic feet of gas. Sometime during the early years of the Clinton administration the regular bidding situation was restored, and the barn door shut after the pigs were already in the corn and the cows in the cabbage. These are the sacred signed contracts that the API is defending.
Now if you buy a lease or farm-in minerals from a big oil company in the US, they will charge you at a minimum 1/4th of the oil as a royalty. Ask their land departments. This fair, its an open transaction between a buyer and a seller. That's where I get the 25% that they should pay the people for their royalty for. Its not a tax, its a royalty, and this is an important distinction. Royalties of at least 1/8th have been paid by the industry as a standard since at least 1910 to the mineral owners.
Its also a principle of law that a totally unfair contract can be voided by a judge in a law suit, and I think everyone in the country believes in that. Its why they call it law and equity.
So its my contention that if this goes to a court, Exxon and Chevron et al are going to loose, and I believe that the companies who have decided to negotiate's legal departments have advised them of the same, even though I haven't read their opinions and memorandums.
So if the companies that I own stock in, Chevron and Exxon, go to court and lose, they at a minimum will have to pay the back royalties, pay fantastic legal bills and likely will get punative damages. And I just threatened to join in a stockholders class action suit against the board and management for stupidity and arrogance if they want to try, also my right under securities law.
API has taken the most extreme position of their donors and adopted it as their own, which is one of the main reasons I don't agree with the API. This kind of a position, extreme and stupid, alienates anyone who knows the facts in the situation. By taking the major's donations and spreading their propoganda, they make every other position they support suspect. If their mission is in fact to educate the public so that they don't go for punative taxation, they have thrown out years of good work by people who should be their natural allies.
One thing about representing people, and I represent oil companies in their negotiations, is sometimes you have to tell a client they are wrong and need to settle. If the client is worth a shit, it won't get you fired, because you have truly represented their interests. And, the API needs to truly represent their clients.
I know that's long and boring, but I hope that everybody now understands my position. Bob Ebersole
And, if you want to stop global warming, conserve. Its not someone else's behaviour, its the consumer who leave the AC on and burns coal generated electricity. That's true conservatism, take responsibility for your own behaviour and conserve. Its everybody's fault, not the guys who bring you gasoline cheaper than a liter of water at the same convenience store.
I'll start "conserving" when all those proponents of GW lead a carbon-neutral lifestyle.
When all those people walk away from the combustion engine, I'll know the problem is serious.
Until then I will consider their hysteria to be shilling for the political power of the enviromentalist.
When they walk away from the 28,000 foot masnion while running for President, I'll start conserving.
Until then, enough of the GW hysteria already.
BRussellNM,
Truly, follow what your Fearless Leader Geoge W Bush is saying. He has admitted to Global Warminng! Even the Dinosaurs running Exxon Mobil have stopped funding the Global Warming deniers.
But my point is valid still. The root of conservative is conserve, in other word save. Being frugal was a root value of my Puritan ancestors who moved to this country so they could be just as small-minded and intollerant as they wanted. Saving money and making things go as far as possible was a value of the Founding Fathers. To quote Benjamine Franklin,"A penny saved is a penny earned" and it used to be a value of the Republican Party pre-Reagan. The whole Conservation movement was started by Teddy Rooseveldt, a Republican who started the National Park System.
If you want to send a donation to your utility company, go right ahead, send them a check. But please, for the rest of our sakes, turn off the AC and heat when you aren't using it. Stop sending your oil money overseas to Hugo Chavez and the Saudi's by slowing down on the highway. Do it for your Conservative principles!
And don't worry, 99% of the people on this site accept global warming. The rest of your message gets lost in arguing it, so stick to the thing that you can change you'll have better digestion.
By the way, how's the antelope hunting on your ranch?
I love to hunt and fish.
Bob Ebersole
The Dems are permanently stuck in cornucopian mode, both as a matter of philosophy and source of cash. They will get it wrong endlessly. The race is between hierarchy and resources, but for them to accept that would require accepting limits on scale and policies on redistribution. [Though to be honest, they have a policy on redistribution: the rich get richer - that's their class.]
cfm in Gray, ME
"The Dems are permanently stuck in cornucopian mode."
This is crazy. Do you really accuse Al Gore of being a cornucopian? Or is he not really a Dem? But rather, in your mind, just a mad commie? And are the great bulk of main stream oil executives really clear headed realists? What nonsense! There is plenty of blame to go around, except perhaps for those under 13 (the traditional age of reason in some religions).
I think the recent post of an interview with Hubbert had him expressing a very deep reality: There is something fundementally wrong and unworkable in our financial system. We have good physical science based technology, but woefully inadequate financial system.
Yes, Gore is a cornucopian. Where is it that Truth talks about limits? Where is that Truth discusses distribution? All we need is Will and Will is a renewable resource (paraphrased). Of course he is a Democrat; that "rising tide lifts all boats" is a matter of fundamental belief in the liberal mind (liberals of all colors, not just Democrats). Tell me where Truth challenges growth and technology.
"Inadequate" isn't the right word for our financial system. "Rigged" or "gamed" might be. Freeing capital from national boundaries via "free trade" deals is a big chunk of that, a chunk that Adam Smith did not envision. [Greider, Sirota]
I'd also suggest that technology is not independent of finance, but that the two are wedded - technology is terms of trade, finance and empire. What better examples of American technology than hedge funds, ENRON, Blackwater or food aid (heavily subsidized)? [Hornborg, Daley]
Gore and most Democrats says we need only apply sufficient will and we can do anything - fix global warming, peak oil, end hunger, provide health care for all. That's a cornucopian message designed to appeal to our fat-craving genes. They believe it, but it is still a lie.
cfm in Gray, ME
I'm a loser, baby, so why don' ya kill me...
I hear your message and agree.
Others, I suspect, hear the anger, nothing but the anger. The message gets drowned in all that anger. Try toning it down once in a while.
While watching CSPAN, I hear one politician after another mouthing off sounds like "ingenuity" and "the power of the market".
A big smile creeps out across the entirety of their countenance and a wink in the eye flashes out like a blinding search light into the applauding crowd.
With these bites of sound logic they have moved the universe: "Will, ... Ingenuity, ... Technology, ... Channeling the Power of the Free Market and Technology to Solve all our problems. God Bless only our Country. Sound ideas and Sound Logic.
Now if only Mother Nature weren't deaf and indifferent to the noises the apes make in their respective wood and concrete jungles.
The free-market is the best solution for our energy crisis.
If by "free market" you mean competitive markets, then you can't just say it. There are a wide variety of conditions under which competitive markets fail, and serious economists, including conservative ones, all admit it. So you need to describe a competitive energy market in which (simply to name some of the obvious problems): barriers to entry, asymmetrical information, and externalities. Seriously, as a homework assignment, post a description of an end-to-end competitive market for delivering electricity that addresses those issues and requires no government intervention (beyond, say, enforcement of contract agreements) to function.
We are at peak oil or beyond. The incentives need to be to replace oil through conservation and other alternatives, not just speed up the inevitable decline. If the purpose of the bill is to increase fossil fuel, including oil production, then, yeh, maybe it is a failure. But what you do depends upon where you want to go. The oil companies, obviously, want to continue every subsidy possible. In a world without peak oil and global warming, or a world where we thought those two things didn't exist, then we could say how stupid the legislation was.
The legislation may be stupid, but not on the level the oil companies would like us to believe. If it encourages coal, but discourages oil, then it may be counterproductive from a climate change standpoint. But discouraging oil production, if that is even true, which I doubt given high oil prices, is not a bad thing in itself since the time when we needed to be pursuing alternatives to oil was decades ago.
The oil will peak regardless of investment; that is part of the essence of peak oil. If more and more investment would solve the problem, then, almost by definition, peak oil is a myth, which can just be solved by more investment. There is also the assumption that these tax increases will really affect investment all that much. Well, one might be somewhat cynical given increasing dividends, profits, and buybacks.
Cutting back on investment is not counterproductive if congress used the proceeds of increased taxes to increase alternatives. It is only counterproductive if your paycheck is from the oil companies.
As far as their complaints about ethanol goes, though, that is another story. Congress is placing far too much faith in the ability of biofuels to make up petroleum shortfalls. If we are simply plowing money from the oil industry into the biofuel industry, I think that is very short sighted and destructive.
Hypethically, if the rollbacks on tax breaks cause the oil companies to drill outside the U.S., so what.
I think one of the concerns of the oil companies is that they do not want to be caught in a squeeze between price gouging provisions (which they view as being akin to price controls) and higher taxes.
Oil companies are going to be hit very hard by peak oil. Their most productive wells are declining rapidly. If they continue to drill, it is likely to be in sites that are very expensive to produce. There is also a huge amount of existing infrastructure that needs to be maintained (particularly pipelines). While I agree that there has been a lot of less-than-productive use of the profits in the past (stock buybacks, purchases of other companies), the fact remains that we will need these oil companies in the years ahead, as imports become more and more of a problem.
The oil "majors" are subject to increased competition both from the National Oil Companies (overseas) and the small independent companies in the US. We don't need to make it harder than necessary for them.
The legislation may be stupid, but not on the level the oil companies would like us to believe. If it encourages coal, but discourages oil, then it may be counterproductive from a climate change standpoint. But discouraging oil production, if that is even true, which I doubt given high oil prices, is not a bad thing in itself since the time when we needed to be pursuing alternatives to oil was decades ago.
Climate change, which has been with us since the dawn of mankind, is inevitable with or without man's input.
Thus Coal-to-gas liquification should not be taken off the table. It should be promoted.
If you're one of the ones who believe man is responsible for GW then you should be 150% against this bill since the combustion of ethanol produces CO2.
Even creating ethanol releases CO2. Its a lose-lose proposition.
Ethanol, with its enomous release of CO2, and this bill, only demonstrate the intellectual dishonesty of the liberals running congress. They'll bloviate all day about GW then throw billions at an industry that promises to make GW worse via increased CO2 emissions.
You make it sound like the belief in man caused global warming is some kind of fringe group. Yes, I am one of the many who believe that it has been conclusively demonstrated that man caused co2 emissions are the biggest driver in the current temperature rises that we have seen over the last 100 years.
There are many things in this bill that are positive. Yes, I think it is a mistake to promote biofuels, but that doesn't mean that the bill as a whole is a disaster.
The kind of climate change we are experiencing is only inevitable if we continue to spew the current level or increased amounts of carbon. Coal to liquids is a total disaster.
I believe that virtually every politician is congress is intellectually dishonest. Having said that, all we can do is work for meaningful change and try to convince our congress people the folly of promoting things like biofuels as a solution to both our energy shortfalls and environmental crises.
The Repubicans have been solely devoted to propping up the fossil fuels industries, especially oil. There are problems with this bill, but at least it emphasizes something besides fossil fuels.
You make it sound like the belief in man caused global warming is some kind of fringe group. Yes, I am one of the many who believe that it has been conclusively demonstrated that man caused co2 emissions are the biggest driver in the current temperature rises that we have seen over the last 100 years.
I don't want to drag the discussion about oil into the GW discussion. If you wish to discuss it off-line that is fine by me.
The problem is that Ethanol is a massive contributor to CO2 emmissions, so if you believe that man-made CO2 is causing GW you must be against this de-energy bill.
The Dems are in the hip-pocket of bi