Somewhere over the wind farm

Somewhere over the wind farm

By David Rosenthal

Somewhere over the wind farm, way up high, there’s a land full of oil, so why did the industry die?
The oil patch has always had its ups and downs, but it has always provided well paying jobs to a wide array of employees.  From divers to doodelbuggers, technicians to toolpushers, geoscientists to general counsel, cooks to ….   You get the picture.  While the oil patch has always been a scapegoat for greed, high gas prices, overall inflation, it is now under threat of extinction.  Environmental fascists, and an ideological government, with help from an uninformed public, using overblown threats of planetary disaster, are the predatory warriors. 
Increased government regulation, removal of tax breaks, especially those enjoyed by other industries, restrictions on offshore and onshore drillable acreage, and windfall profits taxes, will make it impossible for many private sector exploration companies to function.  Many would argue that the push for cleaner energy will, as Obama put it, “necessarily cause energy prices to spike,” resulting in favorable commodity prices.  However, the war on fossil fuels will negate the benefit of these higher prices.  
Many private sector firms typically analyze the profit to investment ratios (P/I) prior to drilling exploration prospects.  This is calculated by dividing the mean expected value (minus taxes and operating expenses) by the real and estimated investment costs (land and leasing, geological and geophysical, drilling, and completion expenses).  Mean expected value is the probability of success (POS), or risk, multiplied by the mean reserves at a certain commodity price.  Both POS and mean reserves are estimated by geologists, geophysicists, and engineers and are derived by interpreting many attributes and elements of an exploration prospect.  A POS can range from 10% for a deep wildcat to 90% for a simple development or infill well.  Often these estimates of POS and reserves can be subjective and based on experience.  The mean expected value is therefore a risked estimate. 
Anything that increases the investment (I) expenses, like increased drilling or completion regulations, higher lease costs, etc, reduces the P/I.  Increased operating regulations, taxes, and post BP spill, the potential for exorbitant liability expenses, directly reduces profits, further decreasing P/I.  What this means is that companies will explore and test only prospects with huge mean reserves.  These are the prospects in the deepwater Gulf of Mexico, and despite the POS of only 20-25%, are still economic.  Unfortunately, only the large multinational firms like Exxon, Chevron, Shell, and other foreign owned companies will be able to absorb the increased liabilities and risk, necessary to drill these prospects.  These elephants will thus be off limits for small and medium sized companies, even though several have been successful. 
Another result of higher costs and regulations will be that the smaller, conventional targets, onshore and on the Gulf of Mexico shelf, become uneconomic, and therefore stay in the ground.  This is when many small to medium size companies either merge or go out of business.  Each of these options creates more unemployment and less energy output.  As energy prices continue to soar and Americans finally realize that the conveniences enjoyed over the past several generations are rapidly diminishing, the clamoring demand for more energy will force the government to act.  And continuing down the socialistic path they will act, resulting in the creation of Big Government Oil Co (BGOC). 
For petroleum geophysicists like me, BGOC will be a blessing.  No longer will we have to worry about the economics of exploration targets.  One word never mentioned on a government agency mission statement; profit.  If it glows (anomalous event) drill it!  Too small, drill it!  Too risky, drill it!  Decisions are easy when someone else is paying the tab.  Especially when it’s the American taxpayer! 
One must wonder if this scenario hasn’t already been planned, especially considering the awkward comments of Congresswoman Maxine Waters, who in 2008 told energy executives that “the government will take over your companies?”  Who would be in charge of BGOC?   Perhaps it will be Nancy the Wicked Witch of the West, Harry the Wizard of Nothing, or Barack the Scarecrow.  Whoever it is, this dream will certainly not win an academy award.

White House will appeal ruling on drilling

White House will appeal ruling on drilling

WASHINGTON
Tue Jun 22, 2010 1:57pm EDT

WASHINGTON (Reuters) – The government will immediately appeal a U.S. judge’s ruling on Tuesday against the Obama administration’s six-month moratorium on deepwater drilling in the wake of the oil spill in the Gulf of Mexico.

Barack Obama

“The president strongly believes… that continuing to drill at these depths without knowing what happened does not make any sense, and puts the safety of those involved…and the environment in the Gulf at a danger that the president does not believe we can afford right now,” White House spokesman Robert Gibbs said.

Judge halts Obama’s oil-drilling ban

Judge halts Obama’s oil-drilling ban

** FILE ** Vessels operate near the Q4000 drilling rig at the site of the Deepwater Horizon well in the Gulf of Mexico on Sunday, June 13, 2010. (AP Photo/Dave Martin)

By Stephen Dinan

Bottom of Form

A federal judge in New Orleans halted President Obama’s deepwater drilling moratorium on Tuesday, saying the government never justified the ban and appeared to mislead the public in the wake of the Gulf of Mexico oil spill.

Judge Martin L.C. Feldman issued an injunction, saying that the moratorium will hurt drilling-rig operators and suppliers and that the government has not proved an outright ban is needed, rather than a more limited moratorium.

He also said the Interior Department also misstated the opinion of the experts it consulted. Those experts from the National Academy of Engineering have said they don’t support the blanket ban.

“Much to the government’s discomfort and this Court’s uneasiness, the summary also states that ‘the recommendations contained in this report have been peer-reviewed by seven experts identified by the National Academy of Engineering.’ As the plaintiffs, and the experts themselves, pointedly observe, this statement was misleading,” Judge Feldman said in his 22-page ruling.

White House press secretary Robert Gibbs said the administration will appeal the decision, and said Mr. Obama believes the government must figure out what went wrong with the Deepwater Horizon rig before deepwater drilling goes forward. Still, the ruling is another setback as Mr. Obama seeks to show he’s in control of the 2-month-old spill.

Democrats and Republicans from the Gulf states have called on the president to end the blanket moratorium, saying it is hurting the region.

Oil company executives told Congress last week they would have to move their rigs to other countries because they lose up to $1 million a day per idle rig, and said there are opportunities elsewhere.

© Copyright 2010 The Washington Times, LLC. Click here for reprint permission.

Sarah Palin: Fuel America with Terrorist-Tarred Oil Instead of Drilling Our Own, Baby?

Sarah Palin: Fuel America with Terrorist-Tarred Oil Instead of Drilling Our Own, Baby?

Fuel America with Terrorist-Tarred Oil Instead of Drilling Our Own, Baby?
 Yesterday at 12:20pm
Am I the only one who wonders what could possibly be the agenda of any politician who would thwart our drive toward energy independence? Continuing to lock up America’s domestic energy reserves, including the energy-rich Last Frontier of Alaska, only equips dangerous foreign regimes as they fund terrorist organizations to harm us and our allies. I’m going to keep speaking and writing about this in the simplest of terms until someone can provide a simple answer as to why liberal Democrats don’t understand that we have safe, warehoused onshore and shallow water reserves waiting for permission to be extracted. They either choose not to understand the geology, science, and technology behind an “all-of-the-above” approach to energy security, or they understand it, yet for whatever frightening reason choose to be lap dogs to Chavez and Ahmadinejad.

Shoot, I must have lived such a doggoned sheltered life as a normal, independent American up there in the Last Frontier, schooled with only public education and a lowly state university degree, because obviously I haven’t learned enough to dismiss common sense (a prerequisite for power in Washington these days). Help me out, friends! Help someone like me – and the majority of Americans – understand why we would ever kowtow and bow to foreign regimes that hate us, instead of doing all we can to starve the beast of terrorism in our plight for security, prosperity, and peace.

There’s an obvious common sense answer to our need for security and energy independence, but don’t hold your breath waiting for common sense to surface in Washington – it’s an endangered species there. Obviously we must responsibly develop our God-given domestic oil and gas reserves right here, right now; we must conserve energy; and we must develop renewables that are based on sound science, not snake oil and favors for political pals.

Please read the following Newsmax article (posted below) summarizing GOP efforts to push the Obama Administration to produce a plan to potentially wean us off one source of dangerous foreign oil. (Of course, I think the prodding should be even more aggressive to shake up the naïve complacency of anti-development Democrats and some deer-in-the-headlights mainstream reporters who are finally realizing they’d been buffaloed into believing any politician had all the answers.)

We must understand the imperative nature of energy security, along with America’s life and death need to secure our borders. Baby, this is why I won’t sit down and shut up about the need to drill.

– Sarah Palin

Senators Demand Answers on Venezuela’s Links to Terrorism

A dozen Republican senators have sent a letter challenging the Obama administration to explain what it knows about Venezuela’s support for terrorism and suggesting that the country be declared a “state sponsor of terrorism.”

“Hugo Chavez’s relationships with Iran and other foreign terrorist organizations continue to grow and pose a serious threat to our hemisphere,” Sen. George LeMieux of Florida, one signer of the letter, said of the Venezuelan president.

“I encourage the State Department to thoroughly evaluate Venezuela’s actions and determine if the country needs to be added to the official U.S. list of state sponsors of terrorism.”

John Ensign of Nevada, who drafted the letter along with LeMieux, declared: “It’s no secret to the American people that Venezuela wishes harm to the United States. What is secret is how many more ties to terrorist organizations and state sponsors of terrorism does Venezuela need to be declared a state sponsor of terrorism.”

The letter addressed to Secretary of State Hillary Clinton points to a number of concerns raised by Chavez’s Venezuela:

  • Surface-to-air missiles and other weapons have reportedly been provided by Venezuela to FARC guerrillas in Colombia. An arms cache captured from FARC in 2008 included Swedish-made anti-tank rocket launchers that had been sold to Venezuela.
  • Venezuela provides cross-border sanctuaries for Colombian guerrillas.
  • A United Nations report last year disclosed that nearly one-third of all cocaine produced in the Andean region passes through Venezuela. The senators question how much terrorist groups such as al-Qaida profit from trafficking drugs that originate in or flow through Venezuela.
  • The U.S. has frozen the assets of two Venezuelans, including one working for Chavez, for providing direct support to the terrorist group Hezbollah. The senators ask the State Department for an assessment of the activities of Hezbollah inside Venezuela.
  • Chavez’s “extensive support” of the Castro regime in Cuba is calculated to amount to $1 billion a year, and Cuban advisors are involved in the intelligence and security apparatus of the Venezuelan government.
  • Chavez “has repeatedly expressed support” for Iran’s covert nuclear program and announced a plan for the construction of a “nuclear village” in Venezuela with Iranian assistance. Also, Chavez has pledged to provide Iran with 20,000 barrels of gasoline per day.
  • As for Iran’s Revolutionary Guards, “recent years have witnessed an increased presence in Latin America, particularly Venezuela.”
  • Weekly flights connecting Iran, Syria, and Venezuela raise suspicions of “nefarious purposes” because passengers on these flights have been subject to only “cursory immigration and customs controls.”

Newsmax magazine’s May issue disclosed that Iranian security officers seal off the airport in the Venezuelan capital, Caracas, two hours before Iran Air jets arrived. Those officers supervise cargo unloading with no inspection by local officials.

Iran could easily fly in highly enriched uranium that could then be carried into the U.S. from Mexico, increasing the risk of a terrorist attack with a nuclear weapon.

If the U.S. did declare Venezuela a state sponsor of terrorism, American arms sales to the country would be prohibited, as would U.S. economic assistance, and severe restrictions would be placed on bilateral trade.

“The Obama administration’s decision to pull the trigger on Venezuela may hinge on whether the United States can afford to forfeit petroleum exports from that South American country,” Roger F. Noriega, a former assistant secretary of state and a visiting fellow at the American Enterprise Institute, observes on the Institute’s journal, The American.

“Anticipating the argument that Venezuela’s oil supply is too essential to the U.S. economy to risk slapping that country with the terrorist label, the senators ask the administration to explain its ‘contingency plan’ for dealing with a ‘sudden and prolonged unavailability of Venezuelan oil exports to the United States.’”

In answer to the question, the U.S. would likely find new sources of oil on the international market — but Venezuela’s economy will be crippled by the loss of oil revenue and consumer imports, Noriega notes, adding: “Since the last years of the George W. Bush administration, U.S. diplomats have steered clear of Chavez for fear of ‘provoking’ him. Thanks to congressional oversight, we are about to confront the terrible downside of that naïve, passive policy.”

Other senators who signed the letter include John McCain of Arizona, Scott Brown of Massachusetts, and Republican Whip Jon Kyl of Arizona.

White House Rejects Claim It Skewed Expert Opinion to Justify Drilling Ban

White House Rejects Claim It Skewed Expert Opinion to Justify Drilling Ban

June 11th, 2010 Posted By Pat Dollard.

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Fox News:

White House energy adviser Carol Browner on Friday rejected accusations from a panel of experts who claim the administration misrepresented their views to justify a six-month ban on offshore drilling in response to the BP oil rig disaster.

The denial came after the experts alleged that the Interior Department modified a report in late May that was used as the basis for the sweeping moratorium on existing drilling and new permits.

Though the report claimed the analysts, picked by the National Academy of Engineering, “peer reviewed” the department’s recommendations, the experts say the two paragraphs that called for the moratorium were added only after they signed off on it.

To the contrary, the experts warn that such a moratorium could not only harm the economy but make the situation in the Gulf more dangerous. The April 20 oil rig explosion occurred while the Deepwater Horizon well was being shut down — a move that is much more dangerous than continuing ongoing drilling, they said.

“A blanket moratorium is not the answer,” they wrote in a letter claiming Interior Department Secretary Ken Salazar’s report “misrepresents” their position. “A blanket moratorium will have the indirect effect of harming thousands of workers and further impact state and local economies suffering from the spill.”

That’s exactly the argument that Gulf Coast lawmakers and the families of oil rig workers have been making as they fight the administration’s moratorium decision.

“We do not believe that punishing the innocent is the right thing to do. We encourage the secretary of interior to overcome emotion with logic,” the experts wrote.

But while Salazar has acknowledged that the moratorium was his decision, not theirs, Browner argued that the administration did nothing wrong.

“No one’s been deceived or misrepresented,” Browner told Fox News, defending the moratorium as a safety measure. “These experts gave their expert advice, and then a determination was made looking at all of the information, including what these experts provided — that there should be a pause, and that’s exactly what there is. There’s a pause.”

The experts claimed the draft report that they looked at called for a six-month freeze on permits for new exploratory wells 1,000 feet or deeper and a “temporary pause” on current drilling.

Somehow, that was changed to call for a six-month moratorium on permits for new wells being drilled using floating rigs and an “immediate halt” to drilling operations on 33 permitted wells.

“None of us actually reviewed the memorandum as it is in the report,” oil expert Ken Arnold told Fox News. “What was in the report at the time it was reviewed was quite a bit different in its impact to what there is now. So we wanted to distance ourselves from that recommendation.”

The experts also faxed a memo to Louisiana Gov. Bobby Jindal and Louisiana Sens. Mary Landrieu and David Vitter to clarify that they do not believe the report justifies the moratorium.

They also said that because the floating rigs are scarce and in high demand worldwide, they will not simply sit in the Gulf idle for six months. The rigs will go to the North Sea and West Africa, possibly preventing the U.S. from being able to resume drilling for years.

They said the best and most advanced rigs will be the first to go, leaving the U.S. with the older and potentially less safe rights operating in the nation’s coastal waters.

Fox News’ William LaJeunesse contributed to this report.