(continued from last week’s blog)
In his February 27 weekly address, Obama acknowledged “pain at the pump” as gas marches toward $4 per gallon, and went on to say this:
Now, some politicians always see this as a political opportunity. And since it’s an election year, they’re already dusting off their three-point plans for $2 gas. I’ll save you the suspense: Step one is drill, step two is drill, and step three is keep drilling. We hear the same thing every year.
Well the American people aren’t stupid. You know that’s not a plan – especially since we’re already drilling. It’s a bumper sticker. It’s not a strategy to solve our energy challenge. It’s a strategy to get politicians through an election.
Drilling isn't a plan?
Obama has auctioned off only half the number of leases during his administration compared to the previous Democrat administration of Bill Clinton. With gas prices rising, he continues to restrict federal lands to oil and gas production calling drilling a “bumper sticker solution.” In 2008, when President Bush lifted the executive drilling moratorium that applied to most of the Outer Continental Shelf (OCS), the price of oil immediately dropped more than $9 per barrel. Since oil is a globally traded commodity, markets closely follow the decisions of policymakers to determine what future supply will look like. Did a $9 per barrel price drop make opening the OCS for drilling a “bumper sticker solution”?
Nevertheless, Candidate Obama dismissed the Bush move, saying "it would merely prolong the failed energy policies we have seen from Washington for 30 years. Offshore drilling," Obama said, "would not lower gas prices today, it would not lower gas prices next year and it would not lower gas prices five years from now." And yet, prices came down.
In the first weeks of his administration, almost before he had even had time to get his Oval Office desk arranged, President Obama canceled Bush’s opening of OCS. Choking off production on federal land was always a priority of Obama from the moment of his swearing in.
Obama continued.
You know there are no quick fixes to this problem, and you know we can’t just drill our way to lower gas prices. If we’re going to take control of our energy future and avoid these gas price spikes down the line, then we need a sustained, all-of-the-above strategy that develops every available source of American energy – oil, gas, wind, solar, nuclear, biofuels, and more. We need to keep developing the technology that allows us to use less oil in our cars and trucks; in our buildings and plants. That’s the strategy we’re pursuing, and that’s the only real solution to this challenge.
Rather than go full bore on the one asset in which we clearly have world superiority – fossil fuels – Obama considers wind, solar, and bio-fuels as viable energy sources. Why make using less oil in our cars, trucks, and buildings with the abundance of energy we already have?
Obama’s fixation on green energy lost the American taxpayer a half-billion dollars in the Solyndra boondoggle. [See my blog It's Not Easy Being Green, September 24, 2011]. Ignoring the disastrous $40,000 Volt, he is still calling for a million electric cars by 2014 and further calling for fuel economy standards that will take decades to impact consumption due to the number of cars now on the road.
Gas prices are up 93% since Obama took office, giving us a glimpse of just how well the green energy approach works Supported by decades of subsidies, wind power today provides only 1% of our electricity compared with 49% from coal, 22% from natural gas, 19% from nuclear power and 7% from hydroelectric. Wind turbines generally operate at an efficiency of only 20% compared with 85% for coal, gas and nuclear power plants.
So, Obama blabs on …
Now, we absolutely need safe, responsible oil production here in America. That’s why under my Administration, America is producing more oil today than at any time in the last eight years. In 2010, our dependence on foreign oil was under 50% for the first time in more than a decade. And while there are no short-term silver bullets when it comes to gas prices, I’ve directed my administration to look for every single area where we can make an impact and help consumers in the months ahead, from permitting to delivery bottlenecks to what’s going on in the oil markets.
Permitting? When he has denied more permits than the last five presidents?
And yeah, America is producing more oil today than at any time in the last eight years. Obama had nothing to do with it. As I noted last week, improvements in fracking and the increased production on private land explains the increase. Production on federal land has decreased because it’s hamstrung by prohibitions and regulations. Only 2.2% of federal offshore land is currently leased for production. The 10 billion barrels of oil in the Arctic Wildlife Reserve would require leasing 2,000 out of 19 million acres. Obama refused.
Obama rescinded 77 oil and gas lease permits in Utah and has held up production on others in Utah, Colorado, and Wyoming – called the Persia of the Plains – which holds over 1.5 trillion barrels of oil, the largest oil shale deposit in the world!
Leases in the US western states on federal property are down 44% and permits for new well drilling are down 39% since Obama took office according to the American Petroleum Institute.
As if this weren’t enough, Obama in January refused to allow Canada’s Keystone XL pipeline to cross our shared border and provide oil to refineries in Texas. The XL pipeline would have had the capacity to move 830,000 barrels of oil per day – including oil produced in North Dakota and Montana – to Texas. It would have provided 20,000 direct jobs and possibly hundreds of thousands indirect jobs to build this $7 billion private project in a time of record Obama unemployment.
In another tip of the hat to environmental radicals, Obama claimed he didn't have time to evaluate the XL pipeline – an odd statement since the request has been around since September 2008, almost four months before he became president. He was able to cancel the Bush OCS drilling permits within a week of taking office and he pushed through a massive stimulus bill within the first month of taking office, but he had no time to study the XL pipeline in a time of over 9% unemployment.
Democratic Minority Leader Nancy Pelosi covered Obama’s back by saying the pipeline had no value to the US. Remarkable. "This oil was always destined for overseas,” she said. “It's just a question of whether it leaves Canada by way of Canada, or it leaves Canada by way of the United States." This airhead doesn’t grasp the fact that the refiners at the end of this pipeline don’t export crude oil, they export its high value petro-products and create a lot of jobs in the process.
Finishing up his speech, Obama concluded:
But over the long term, an all-of-the-above energy strategy means we have to do more. It means we have to make some choices.
Here’s one example. Right now, four billion of your tax dollars subsidize the oil industry every year. Four billion dollars.
Imagine that. Maybe some of you are listening to this in your car right now, pulling into a gas station to fill up. As you watch those numbers rise, know that oil company profits have never been higher. Yet somehow, Congress is still giving those same companies another four billion dollars of your money. That’s outrageous. It’s inexcusable. And it has to stop.
A century of subsidies to the oil companies is long enough. It’s time to end taxpayer giveaways to an industry that’s never been more profitable, and use that money to reduce our deficit and double-down on a clean energy industry that’s never been more promising. Because of the investments we’ve already made, the use of wind and solar energy in this country has nearly doubled – and thousands of Americans have jobs because of it. And because we put in place the toughest fuel economy standards in history, our cars will average nearly 55 miles per gallon by the middle of the next decade – something that, over time, will save the typical family more than $8,000 at the pump. Now Congress needs to keep that momentum going by renewing the clean energy tax credits that will lead to more jobs and less dependence on foreign oil.
It’s hard to know where to start with this bit of demagoguery.
Here’s a guy who has run trillion dollar deficits every year he’s been in office and he’s fuming over four billion dollars in oil company subsidies. Here is a guy who wasted $500 million taxpayer dollars on just one of his green energy projects, Solyndra, not to mention all of the other subsidized green projects that have done nothing to compete viably against fossil fuels.
Obama’s attack on tax “subsidies” for oil companies reveals his real agenda. Subsidies for oil companies have always served as an incentive for oil companies -- like copyrights and patents -- to take the risks associated with exploration and production and to expand the nation’s access to energy. The oil companies pay the highest effective tax rates of any American industry when special federal and sales taxes at the pump are taken into account. Eliminating subsidies would single out oil companies for punitive taxing which would reduce the incentive to engage in exploration risks.
In his State of the Union address this past January, Obama had this to say about his energy policy:
Over the last three years, we've opened millions of new acres for oil and gas exploration, and tonight, I'm directing my administration to open more than 75 percent of our potential offshore oil and gas resources. Right now -- right now -- American oil production is the highest that it's been in eight years. That's right -- eight years. Not only that -- last year, we relied less on foreign oil than in any of the past 16 years.
As I’ve already said in this blog, Obama had nothing to do with increased oil production.
When he said, "I’m directing my administration to open more than 75 percent of our potential offshore oil-and-gas resources," to undiscerning ears that sounds like Obama is finally getting on the right side of the domestic energy issue. But the operative word in his announcement is “potential.”
Let me explain. Last year the Interior Department severely restricted the number of places where leases would be sold. No drilling on the Atlantic coast, for example. No drilling in most places. Drilling would only be allowed in these severely restricted places and Obama is restricting offshore drilling to 75% of these places. It’s like saying, “of the 100 places you could drill if you had a choice, Interior has limited drilling to one place and I’m opening up 75% of that one place for drilling.” It’s a shell game.
Even then, it’s an empty offer. Offshore drill rigs cost hundreds of millions of dollars to build. If they aren’t drilling and pumping oil, they can’t be used for sunbathing. Therefore, when Obama shut down all drilling in the Gulf of Mexico after the Deepwater explosion, the owners of those idle rigs were losing millions of dollars each month. Predictably, they moved them to Brazil, the coast of Africa, and other locations at great expense just to get them back into production.
When Obama allows Gulf drilling – if ever and assuming he remains the President, which I hope not – those rigs won’t be rushing back to the Gulf until their contracts are over. Moreover, it is more profitable for them to stay where they are if there is work nearby than to move them again at great expense, measured in millions of dollars. As long as Obama is the President with his known bias against fossil fuels, no rig owner will return to the Gulf and risk another shutdown.
The Gulf of Mexico is a parking lot of rigs waiting to go elsewhere. Of 51 platforms there now, only 21 are under contract and only 15 actually drilling, a utilization of only 4%. The utilization in rest of the world is 83% and in Europe and the Mediterranean it’s 96%. Fourteen rigs have left the Gulf during the past two years and more are scheduled to leave soon. The Gulf provides 30% of our domestic production. With reduced production equipment, this will impact energy independence and gas prices. Obama’s policies have probably wrecked the Gulf economy for decades. And when I say Obama’s offer is an empty one, it’s because he can offer to open areas for drilling when there are no rigs to do it!
As if that weren’t enough, many of our refineries are under economic pressure. Unlike rigs, they can’t move. If they can’t be profitable they shut down and the work force scatters. But high crude costs, more exacting fuel standards, environment regulations, and foreign competition are taking their toll on our older refineries. Two will close this summer in Pennsylvania. Since 2008 the Northeast has been losing refinery capacity. When these two close, the total will be 700,000 barrels less per day going to market.
In January, Hess announced it would close its refinery operation in the Virgin Islands. This facility is a large supplier of gasoline, heating oil, and jet fuel to the Northeast.
The East coast had 12 refineries in 2010 in the middle of the Obama administration. Now there are eight. The global refining system can take up the slack, but unfortunately they are in the wrong places – outside of the US where they don’t hire Americans or help our economy.
If the Gulf Coast refineries could expand access to Canadian crude, they could become world-class with a competitive advantage in the world. Their production of low-cost natural gas combined with currently installed processing technologies would put US refiners in a strong position to expand their access to markets throughout the Western hemisphere and into Europe. By canceling the Keystone XL pipeline, Obama essentially killed this opportunity.
But wait! There’s more.
The EPA is finalizing rules that would require drill rigs to capture natural gas emissions rather than burning them off as you might have seen in photographs. As I mentioned near the beginning of last week’s blog, production of oil and gas on private and state properties have been beyond the regulatory reach of Obama who only had the authority to restrict use of federal lands. If successful, this would be the first time the EPA has tried to regulate energy production on private and state land under the heavy hand of the Clean Air Act. Once again the administration has tried to disguise its agenda by saying the capture rule will pay for itself since the captured gas could be sold. But the industry, which makes its living by knowing such things, says the cost of capturing emissions will far outweigh the economic value.
The EPA also plans to implement “Tier 3” standards for vehicles and gasoline. This would increase the cost of gasoline by 25 cents per gallon, increase the price of cars, and shut down as many as seven more refineries, decreasing gasoline supplies from domestic refineries by 15%. Other punitive EPA regulations will further reduce gasoline supplies.
So far the opponents of fracking on the Left have not been able to make the case that it contaminates ground water. Researchers, notably those at the University of Texas, have proven that fracking procedures are not a harm to drinking water. But the EPA has been drawn into an investigation of the Eagle Ford Shale in South Texas, the Permian Basin in Texas where the feds seek to protect an endangered lizard, and the Bakken Shale in North Dakota. Combined, private and state land drilling in these areas now make up about 40% of the nation's land-based oil output. And they are beyond the federal government’s reach. But if the EPA can make the case for contamination, it can reach into drilling operations on private and state lands and shut down the principal technology that has made recovery so productive – fracking – and thereby further reduce domestic oil and gas production.
And there you have it. Either Obama is incompetent in solving America’s energy problems or, since he is allegedly the smartest person to hold the office, he knows precisely what he is doing and is pandering to radical environmentalism to accomplish his vision of a transformed America reliant on green energy.
There’s no arguing that affordable energy is the lifeblood of a strong economy. The abundant supplies of energy reserves in North America are our best hope for creating jobs, reviving our economy, and becoming once again the world’s leader in energy production – fully independent of foreign sources. Yet these possibilities are increasingly blocked by the interference and growing burden of heavy-handed government regulatory agencies. This has made the people’s property an ideological hostage and caused a 40-year decline in energy production.
The American people deserve better. Whether they believe that will be revealed this November.
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