Proud to be part of the industry

By Chris John

Last month, the Joint Investigation Team of the Bureau of Ocean Energy Management, Regulation, and Enforcement and the U.S. Coast Guard released their final report analyzing the Macondo incident that occurred in 2010.
Within the detailed and thorough report, there were recommendations made on how best to upgrade and enhance the regulatory structure and industrial prowess for offshore drilling at the BOEMRE. In reading these, I was struck by the similarities in the suggestions made in the report and the overhauls already enacted at the BOEMRE and the additional, voluntary requirements industry has adopted.
Throughout what I still consider to be an unnecessary six-month moratorium, the oil and gas industry remained committed to the highest levels of safety by voluntarily creating and designing the Marine Well Containment Company. This is part of an effort to improve prevention, well-intervention and spill response. When it became evident that the permit process needed drastic improvement, the industry and state government officials worked with the BOEMRE to improve the efficiency of the permit review process. While we are still not happy with the pace of things by any stretch of the matter, they are getting marginally better.
Despite this slowdown, the industry is getting back to work.

For example, just last month, Chevron announced a major discovery in the deepwater Gulf of Mexico on a well it began drilling in early 2010. Also last month, BP submitted its first deepwater exploration plan since Deepwater Horizon. Its 212-page plan includes a number of measures that go above and beyond current BOEMRE requirements. This indicates BP’s confidence in its lessons learned from its detailed analysis of what led to the Macondo incident. BP’s pledge and singular focus to doing the job safely are guiding it through the next steps as it returns to the Gulf of Mexico.

Week after week, more and more companies are getting back to work in the Gulf of Mexico, and this commitment to the region underscores its importance to this country’s energy mix. I am proud to be part of an industry that is answering the call in a responsible and safe way, all while continuing to provide good, high-paying jobs that fuel Americas’ energy security.



http://www.dailycomet.com/article/20111013/LETTERS/111019824?p=1&tc=pg

Ethanol Idiocy Will Not Die

When Al Gore drops an environmental fad, it has truly reached its expiration date.

By Rich Lowry

In his wisdom, the Goracle recently acknowledged what almost all disinterested observers concluded long ago: Ethanol is a fraud. It has no environmental benefits, and harmful side effects. The subsidies that support its use are an object lesson in the incorrigibility of Washington's gross special-interest politics. It is the monster that ate America's corn crop.

"It is not good policy to have these massive subsidies for first-generation ethanol," the former vice president and Noble Peace Prize recipient said, referring to corn-based ethanol. He called the fuel "a mistake," and confessed one reason he fell so hard for it is that he "had a certain fondness for the farmers in the state of Iowa." These farmers vote in the First in the Nation caucuses and practically insist that their favored presidential candidates drink ethanol at breakfast and hail it as the nectar of the gods.

Gore's ethanol apostasy is a symptom of a left-right coalition that has arisen to expose the former wonder fuel. (The Gore of old insisted that "the more we can make this home-grown fuel a successful, widely used product, the better off our farmers and our environment will be.") But common sense, even cross-ideological, bipartisan common sense with all the evidence on its side, is no match for Congress' boundless appetite for expensive favors for powerful lobbies and constituent groups.

Tom Harkin and Chuck Grassley, the Democratic and Republican senators from Iowa, stand at the doors of Congress declaring: Ethanol now, ethanol forever. They have graced the Obama-McConnell tax bargain with an extension of a tax credit for ethanol that costs about $6 billion a year, and with an extension of a tariff on ethanol imports. Ethanol is so uneconomical that Congress supports it three different ways -- with a mandate for its use, a tax credit to subsidize it and a tariff to keep out competitors. Rarely are so many levers of government used to prop up one woeful product.

During the last decade, ethanol enjoyed a good run as a notional part of the solution to global warming. Then, environmentalists began to realize it might actually increase greenhouse emissions. Ethanol releases less carbon dioxide per gallon than gasoline. Once the emissions necessary to convert land to corn production and then grow and process it are taken into account, though, ethanol doesn't look so green anymore.

So much corn -- about 40 percent of the US crop -- is feeding into the maw of government-created demand for the fuel that it could be increasing world-wide food prices. In short, in exchange for not reducing greenhouse emissions, ethanol reduces the availability of food to the poor.

The multiple layers of subsidization have their own perversity. Since there's already a mandate to blend ethanol into gasoline, the tax credit is giving away money for something that would happen anyway. Environmental groups say this pads the bottom line of Big Oil. Harry de Gorter of the free-market Cato Institute has a more complicated take -- the subsidy decreases the cost and therefore the price of gasoline, effectively subsidizing its consumption. Your Congress at work.

But who cares about the facts? Once we have fired up a vast machine that from cornfield to distilleries produces 38 million gallons of ethanol a day, it will be nearly impossible to turn it off. Too many people will have a vested interest in continuing the scam, and its supporters -- like Harkin and Grassley now -- will always argue that any change is too disruptive. We'll still be mandating ethanol long after the internal-combustion engine is obsolete.

The ethanol experience should counsel against blithely creating new government-supported industries on the basis of dubious promises of cost-free environmental benefits. Judging by the tax bargain, festooned with all manner of other green subsidies and credits, it's a lesson ignored. In Washington, the boondoggles may lose their luster, but they never die.

http://www.realclearpolitics.com/articles/2010/12/14/ethanol_idiocy_will_not_die_108241.html

Alaska Candidates: Oil is declining, so what do we do?

Tim Bradner
adn.com Economy


When the debate topic turns to state economic policy in the governor's race, the first thing out of the chute is usually petroleum policy and oil taxes, and what we can do to stimulate this industry, which many fear is declining.
Oil is vital to Alaska. Royalties and oil taxes pay for 90 percent of the state budget, the Department of Revenue says. Overall, the industry supports about a third of Alaska's economy directly and indirectly, according to University of Alaska studies.
However, the trends in this vital industry are headed the wrong way. Production is declining, employment is down and new exploration may hit a record low this year.
Don't think a gas pipeline will bail us out, either. State revenues generated by gas will be very modest compared with oil and a pipeline is 10 years away, if then.
What do our governor candidates say about this? Sean Parnell, the incumbent, talks about expanding targeted tax credits for field work. His major opponent, Ethan Berkowitz, talks about negotiation of special fiscal terms for new fields as a way of inducing development.
Both ideas have merit and both are done in Alaska today on a more modest scale, and with success. But neither packs the punch to really turn this industry around. The big problem, which no major party candidate will talk about, is that Alaska's oil taxes are just too high, period.
Retired state economist Roger Marks has authored a new paper showing that Alaska's marginal oil tax rate, in essence the tax rate on profits from new investment, can exceed 80 percent. Alaska now has the dubious distinction of having one of the heaviest tax rates among major oil producing regions of the world, Marks says.
With production, drilling and jobs declining, is this where we want to be? I want to hear some discussion from candidates that we may have overshot in 2007 when we did major surgery on the state oil tax law and adopted a very aggressive tax formula. Do our politicians have the stomach to admit they possibly made a mistake? The proof of this is in the declining production and drilling. Only Ralph Samuels, a candidate in the Republican governor's primary, had the guts to talk about this.
Some legislators raised this in Juneau earlier this year, State Rep. Craig Johnson among them. Most lawmakers weren't interested in taking the issue on, however.
It's not that political leaders are clueless. In fact, our state has adopted some very innovative incentives with very generous investment tax credits for exploration and special royalty terms for development that have brought new companies here, most recently Apache Oil.
These help, particularly for small independent companies, but the problem is that the high overall tax rate really dampens the economics of major exploration projects, the very high-cost, high-risk ventures aimed at making really big discoveries. These are the kind that can really turn things around.
When exploration managers model their risk/reward balance with a new exploration project, for example in a high-cost, remote area, they seek a balance between the small chance they could make a very profitable find and the high probability of failure. The high state tax on a profitable discovery skews this balance, in that if the company wins its gamble the state takes almost all the gain, as Roger Marks shows. The state's current drilling incentives help ease the risk a bit but not enough to overcome the disadvantage of the high tax rate.
We need more discussion of this. Gov. Parnell says he likes targeted investment tax credits because no credit occurs unless the investment is made. He worries that there is no guarantee investment dollars will follow if a general tax reduction is made. Parnell's challenger, Berkowitz, basically follows a similar safe strategy: Unless a company agrees to invest in a negotiated deal, no fiscal agreement occurs.
Again, nothing is wrong with these tried-and-true strategies but they're too cautious. We need something more daring to turn things around. The Legislature had real guts last session in offering up a radical incentive for new drilling in Cook Inlet, a state offer to pay most of the costs of the first three test wells drilled with a jack-up rig. As a result we now have new companies investing in the Inlet. We need something similar for the North Slope, our largest oil basis, and we should engage the discussion now.