Obama's Continued Assault On Fossil Fuel Energy

(presented at Mel's breadfast forum on 3/23/2012

by Carl G. Langner

When Mr. Obama suggests that he has in some manner helped to increase the production of oil or natural gas in this country, he is basically lying. He is fond of saying, over and over again, that: “We have less than two percent of the world’s oil reserves. We are running out of oil. We are running out of places to drill. We need to end our four billion dollars in annual taxpayer subsidies to oil companies. We need to invest in clean renewable energy.”

If the president were honest he would say instead: “We are running out of oil that my administration and my radical environmentalist allies will let this country produce. We’re running out of places where we’ll let our citizens drill. We have only two percent of world oil reserves because we’ve placed most of our nation’s resources off-limits to drilling.” If he were honest, he would also say: “We intend to demonize, penalize, hyper-regulate, tax, and kill all hydrocarbons. But we will mandate and subsidize wind, solar, and ethanol, while ignoring their environmental and human costs, and we’ll extol the measly, expensive, and unreliable energy they produce.” Ref. [1]

That’s the kind of leadership our current Obama administration is providing in the area of U.S national energy policies.

Among the most egregious of Obama’s offenses has been his use of “Monument” and “Wilderness” designations to lock up millions of acres of potentially productive lands to prevent energy development, and Obama’s use of “Endangered Species” designations to shut down producing oil and gas fields across the country. For example, over the last three years, whenever any oil or coal deposits have been found on public lands in the states of Utah, Wyoming, Montana, or North Dakota, the Department of Interior has stepped in to declare that land unavailable for resource development. As another example, the Permian Basin in west Texas and eastern New Mexico, which has produced more than 20% of our domestic crude oil over the past 50 years, and which still employs tens of thousands of workers, is now being shut down because of a 3-inch sand-dunes lizard, through Obama’s use of the Endangered Species Act.

Additional offenses include Obama’s use of the Environmental Protection Agency to shut down dozens of coal-fired power plants and several oil refineries, including, recently, the huge Exxon Refinery in New Jersey. Also, Obama’s various moratoria continue to prohibit offshore oil drilling throughout 85 percent of U.S. federal waters, and his infamous “permitorium” continues to retard employment and production of oil and gas in the Gulf of Mexico. These offenses are serious and have enormous consequences for our economy and for each one of us.
Obama’s steadfast refusal, since last fall, to approve the Keystone XL pipeline is well known. Contrary to what some Democrats are saying, however, there are no downsides to building this pipeline. The pipeline would bring much-needed oil from the tar sands of Alberta, as well as from the Bakken field in North Dakota and Montana, to refineries in Texas and Louisiana. This oil would replace crude oil that we currently import from the Middle East and other foreign countries – obviously a good thing. Suggestions that our Texas refineries will export this oil to China are absurd. While some Alaskan oil is being shipped to Japan, no oil reaching Texas has ever been exported overseas.

In a time of high unemployment, the Keystone pipeline would create thousands of high-paying jobs, including both temporary construction jobs and permanent jobs in Alberta, North Dakota, and Texas. The millions of miles of oil pipelines crossing our country are by far the safest means for transporting crude oil, with spill rates far below those of railroads or ocean-going tankers.

Equally absurd is the belief by Obama and his radial environmentalists that the earth will become uninhabitable because of “man-made global warming,” which is merely the latest in a series of pseudo-science fads and hoaxes that have helped to fuel our politicians’ lust for power. The current global warming trend (0.6 C per century) is almost certainly a continuation of the 1000-1500 year temperature cycles that include the Roman Warm Period (0-500 BC) and the Medieval Warm Period (900-1100 AD), both of which reached higher temperatures than today. There is no evidence at this time that carbon dioxide levels had any effect on these temperature variations. In fact the best correlations suggest that today’s rising CO2 levels are to a large extent caused by the warming oceans, not the other way around.

There’s been a lot of talk recently about high gasoline prices. Over the past two months the national average has risen to more than $3.80 per gallon, 60 cents higher than a year ago, with a few places experiencing more than five dollars a gallon. Even higher prices are expected during next summer’s traveling season. President Obama seems baffled by all this, stating that he is powerless to affect the high gas prices. Meanwhile, throughout the Rocky Mountain region gas prices are lower than elsewhere – typically 30-40 cents lower than the national average. Could these lower prices be due to locally produced oil, which also is refined locally into gasoline, and thus is independent of the international oil companies and cartels?

Undoubtedly, the Bakken oil-shale field in North Dakota and eastern Montana, which now produces 510,000 barrels of oil per day, has contributed to the lower gas prices in the Rocky Mountain region. The response of the Obama adminis-tration, in June 2010, to the newfound prosperity across the Dakotas and Montana, was to halt all oil and gas lease sales on federal lands in that area. Note that the U.S. still imports about 50% of the crude oil consumed in this country – down from 62% five years ago.
A much better response by our federal government would be to help expand the production of oil and gas across all western states, by allowing resource development on much of the 110 million acres (more than 50% of most states) that are now held by the government. This could be accomplished by selling (or giving) these “federal lands” back to the western states, who then could schedule development activities in accordance with the needs of their citizens. By creating additional “Bakken fields” in this manner, local communities would prosper, and the entire country would reap the benefits of lower fuel costs.

Under pressure to do something about the high gas prices, on March 17, President Obama responded by giving us another speech on energy. However, instead of actually doing something to expand domestic oil or gas production: (1) he called for reforms to force oil-traders to stop manipulating the energy markets; (2) he pushed hard for unrealistic fuel economy standards – his famous 56.2 mpg fleet average; and (3) he proposed to end the $4 billion annual subsidies to the greedy oil com-panies. And, like a stuck record, he repeated his mantra that “we are producing more oil than at any time in the last eight years,” and “since we have only 2% of the world’s proven reserves, drilling alone is not a solution.”

It is clear that all three of Obama’s proposals will have negative effects by further restricting oil production and further increasing gasoline prices. Oil-traders provide funds to people and places where they are needed for most efficient allocation of our energy resources. Obama’s proposal would seriously interfere with these natural market forces. His proposal to implement historically high fuel economy standards, if enforced, would eliminate private trucks, SUVs, and even medium-size autos from our highways, and would basically leave us with electric-powered cars and small motorcycle-like vehicles. Do we really want this to happen?

Obama’s proposal to eliminate oil company “subsidies” would seriously harm the 5000 or so small independent operators and could drive some large oil compan-ies overseas. In fact there are no oil subsidies – no taxpayer money actually is given to any oil company, in contrast with the government handouts routinely given to wind, solar, and biofuels companies. The opposite is true for oil – the oil industry pays more taxes than any other industry. Last year, for example, Exxon and Shell both paid U.S. federal taxes of about $13 billion, in addition to their expenses and investments in U.S. energy projects of about $20 billion each.

What Obama calls “subsidies” are actually tax incentives that include intangible drilling costs, which offset money spent on risky exploration and can be deducted from company profits at tax time, and the depletion allowance, a method that allows small companies to recover their lease investment in a mineral interest through a percentage of gross income from each well. The depletion allowance is available to all extractive industries, but it is not available to companies that produce oil as well as refine and market petroleum products.

Finally, Obama’s mantra is not entirely true either. U.S. oil production declined steadily from its peak of 11 million barrels per day (mbpd) in 1970, reaching a minimum of just over 7 mbpd in 2006. Domestic production is now back up to about 8.5 mbpd, thanks almost entirely to the “fracking revolution” in which tens of thousands of wells have been drilled since the early 2000s. While these wells primarily produce natural gas, most of them also produce natural gas liquids – or condensate – which accounts for the recent increases in domestic “oil production.” Almost all these “fracked” wells have been drilled on private lands, since drilling is prohibited on the vast majority of federal lands.

Obama’s statement that the U.S. possesses only 2% of world oil reserves is also misleading, since that figure applies only to existing wells. Current knowledge suggests that the potential for recoverable oil in this country has recently risen to at least one trillion barrels, or 30% of known world oil reserves. So much for the environmentalists’ “Peak Oil” scare!

Last September I prepared a 20-page report, Ref. [2], describing the various activities, almost too numerous to name, that the Obama administration and their ideologically driven agencies have carried out in their first two and a half years in office, which are crippling our nation’s energy industry. Not surprisingly, since I wrote that report, Obama and his hired hands have continued to cripple and shut down our abundant and affordable fossil fuel energy sources, while continuing to waste our precious tax resources on expensive and unreliable so-called “green energy.” The current report describes some of these more recent offenses by the Obama administration. The author will be happy to e-mail a copy of either report to anyone wanting to learn more about how the Obama administration is destroying our fossil fuel energy industry.

1. First two paragraphs adapted from Paul Dressen’s article in Environment & Climate News, The Heartland Institute, Chicago, July 2011 issue.

2. C. G. Langner, An Industry Under Assault, report presented as the Keynote Address to the 2011 International Offshore Pipeline Forum, Houston, Oct. 19, 2011.

APPENDIX: A Robust National Energy Policy

A popular vision of the United States’ energy future is based on increasing reliance on solar and wind energy for electrical production, and biofuels for transportation. These technologies are not economically viable today, and are unlikely to be viable over the next 20-30 years. If forced upon our population by government mandates and/or massive subsidies, the outcome of such “green energy” initiatives will be much higher energy prices, energy rationing, and increased unemployment, as is now being experienced in Spain, and to a lesser degree in California, both of which have embraced the green energy myth.

A more robust vision of our nation’s energy future, one that would foster prosperity instead of poverty, is outlined below:

Promote industry to build at least 300 new nuclear power plants over the next 50-60 years, together with sufficient spent-fuel recycling plants to extract the full energy content of the fuel, as currently practiced in Canada, England, France, Russia, and Japan. These 300 new plants, together with many of the 104 exist-ing plants, could supply 70-80 percent of U.S. electrical power for more than a century into the future. This program must begin now, so that these plants are operational by the time the current boom in natural gas starts to wane.

2. Promote industry to continue expanding production of oil and natural gas by “fracking” of shale deposits, and to continue producing our vast coal resources. These fossil fuel sources would provide interim electrical power generation while our nuclear industry ramps up its capacity.

3. Schedule regular lease sales across all U.S. offshore waters, and across all onshore federal lands throughout the western states and Alaska, to expand oil and gas production. These actions, in conjunction with halting the Federal Reserve’s inflation of our money, would guarantee adequate supplies and lower prices of transportation fuels for all Americans.

4. As economics dictate, promote industry to convert both coal and natural gas into liquid transportation fuels.

5. Phase out all government subsidies for “green energy,” including wind, solar, and corn ethanol, which have proven to be ineffective, uneconomical, and destructive to the environment. None of these so-called energy sources has yet to produce any net energy (i.e. provide revenues after paying for themselves), even while receiving billions of dollars in subsidies over the past 35 years.

6. Because intermittent power sources, at this time, cannot be integrated into the national electrical grid except in small percentages (up to about 5%), redirect existing wind and solar farms to power local off-grid applications, such as pump-ing freshwater, desalinating seawater, or recharging batteries. Such applications would enable intermittent wind and solar sources to be utilized at their full power capabilities, while avoiding the need to build expensive backup power plants and cross-country transmission lines.