Tuesday’s State of the Union address is noteworthy because it appears to signal a change in the Administration’s approach to US energy development. If so, this is welcome news. Truly embracing an “all of the above” energy strategy that allows for the robust development of our oil and natural gas resources in the immediate term would boost economic development, lessen our dependence on hostile oil regimes, and save American consumers from record-high fuel costs.

However, while these words are encouraging, the Administration’s actions over the last three years tell a different story.

One highlight was the President’s emphasis on natural gas — a game-changer for the US economy. President Obama mentioned the words “manufacturing” and “manufacturers” fifteen times. This is because manufacturers of such commodities as steel, paint, fertilizer and chemicals, who use natural gas as a feedstock, have seen record low prices for the commodity in the United States. The boom in natural gas, created by the combination of two old technologies – horizontal drilling and hydraulic fracturing — has made the resource abundant and extremely affordable. Low energy prices, driven by an increased supply, benefits all Americans. This resource has been and should continue to be developed safely and without jeopardizing our environment. Unfortunately, the Environmental Protection Agency has spent considerable time and effort over the past few years trying to impose new regulations on natural gas production that could, in effect, render future production uneconomical.

The President also failed to mention the Keystone XL pipeline. His Administration’s decision just last week to reject the Keystone XL pipeline, a $7 billion energy infrastructure project built completely with private funds, could bring over 700,000 barrels of oil from Montana, North Dakota, and our trusted friend Canada and create thousands of union jobs during construction. If his Administration is serious about generating new jobs and economic growth through energy policy, there is no better, or more immediate, way than approving this “shovel ready” project.

While his emphasis on the return of domestic manufacturing rightfully deserves attention, he left out several other key energy issues – some of which could strengthen energy security and put Americans back to work in weeks, not years. (more…)

“Scientific misconduct” within key federal agencies has given rise to counterproductive regulatory policies that further burden an already beleaguered economy and erode the public trust, Sen. David Vitter (R-La.) warns in a letter addressed to the White House.

At issue, is a report from the U.S. Department of Interior (DOI)’s Office of Inspector General (OIG) that describes how the agency manipulated and altered a 30-day report from the National Academy of Engineers. Sen. Vitter and several House colleagues, including Rep. Steve Scalise (R-La.), Rep. Bill Cassidy (R-La.) and Rep. John Fleming (R-La.), called for the OIG investigation in response to allegations that officials with Interior had deliberately misrepresented scientific opinion on the merits of the deepwater drilling moratorium in the Gulf of Mexico.

“We’ve seen facts manipulated and science ignored across the administration while they’ve developed policies with huge negative effects on the economy,” Sen. Vitter said. “We want the public to be aware of the administration’s misconduct, but we also want agencies to be transparent and explain their methods.”

The letter from Vitter co-authored by Sen. James Inhofe (R-Okla.) and Rep. Darrel Issa (R-Calif.). is addressed to John Holdren, President Obama’s science advisor, is co-authored by Sen. James Inhofe (R-Okla.) and Rep. Darrel Issa (R-Calif.).

“The IG investigation showed that not only had Interior violated the Information Quality Act (IQA), but there was direct involvement by the White House, specifically Carol Browner, to manipulate the summary documentation in violation of peer-review protocol,” the letter says. “…The investigation revealed blatant political influence, on what should have been an independent scientific assessment, to inaccurately represent the views of a particular team of scientists.”

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Even as the Obama administration postures on behalf of deficit reduction and job creation, it continues to advance policies that undermine energy production in the Gulf region and lower federal revenue, Sen. David Vitter (R-La.) has pointed out in his correspondence with top officials in Washington D.C.

Most recently, in a letter addressed to Interior Secretary Ken Salazar and Bureau of Ocean Energy Management Regulation and Enforcement (BOEMRE) Director Michael Bromwich, warned of a severe revenue fall off attached to declining energy lease sales.

“Under the Obama administration’s management, revenue from our offshore lease sale program has gone from $10 billion to nothing in just three years,” Vitter said. “Revenue cannot be generated from sales that do not happen, and jobs cannot be created on leases that private industry cannot acquire. We’re in a severe fiscal crisis and we’re facing significant economic challenges related to job creation, yet the administration continues to neglect our offshore resources.”

In fiscal year (FY) 2008 revenue from bonus bids on offshore leases was approximately $10 billion, but for FY 2011 that amount is down to $0, according to Vitter’s letter. “Revenue cannot be generated from lease sales that do not occur, and jobs cannot be created on leases that private industry cannot acquire,” he continued.

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Ten oil rigs have left the Gulf of Mexico since the Obama Administration imposed a moratorium on deepwater oil and gas drilling in May 2010, according to documentation the Pelican Institute obtained from Sen. David Vitter’s (R-La.) office.

The ten rigs named in the document are: Marinas, Discover Americas, Ocean Endeavor, Ocean Confidence, Stena Forth, Clyde Bourdeaux, Ensco 8503, Deep Ocean Clarion, Discover Spirit, and Amirante. The rigs have left the Gulf for locations in Egypt, Congo, French Guiana, Liberia, Nigeria and Brazil.

“This highlights the problem we have with losing domestic energy production as a result of the drilling moratorium and the slow permitting,” David Kreutzer, a research fellow in Energy Economics and Climate Change at the Heritage Foundation, said. “We must also keep in mind that the impacts are not instantaneous, the rigs may be idle for a while, but once they move it’s going to be difficult to move them back once they are drilling in say Nigeria or Brazil.  The oil companies must have confidence they can move forward with their drilling plans and to know these plans won’t be revoked. Only certainty will bring them back.”

Although federal officials announced they were lifting the restrictions last October, a “de-facto moratorium” remains in effect that stifles energy production and undermines large and small businesses in the Gulf region, industry officials have argued. (more…)

Blocking oil companies’ ability to benefit from two key tax relief provisions could drive up the deficit and the national debt, according to a study released Tuesday by Louisiana State University professor Dr. Jospeh R. Mason (PDF).

The study, sponsored by the American Energy Alliance, focuses on two tax relief provisions: dual capacity (foreign tax credits) and the Section 199 deduction, currently available to nearly all American businesses.  It concludes that while eliminating the availability of the provisions to oil companies would increase revenue by tens of billions in the short term, it would cost the country hundreds of billions in economic output, provoke about 155,000 job losses (with consequent impacts on wages and employment-derived tax revenues), and ultimately result in a net fiscal loss of $53.5 billion in tax revenues.

“The administration’s proposal to eliminate tax deductions on U.S. oil and gas companies is grossly counterproductive toward the goal of increasing federal revenues,” said Dr. Mason in a statement. “Such a move would have a net negative impact on revenue, thereby increasing federal deficits.”

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The world price of crude oil has been on a roller coaster lately, gyrating above and below $100 a barrel. Several weeks ago, prices at the pump reached $5 a gallon in some places but seem to have settled down, at least temporarily, to less than $4 in many parts of the country. The elevated cost of gasoline—and of heating oil, aviation fuel and other energy products derived from “black gold”—understandably is a matter of great concern to most Americans.

Rising energy costs already have changed many families’ summer vacation plans, threatened to short-circuit the weak recovery from the Great Recession and, combined with recent increases in food prices, contributed to incipient inflationary pressures that foreshadow a lower standard of living and a return to the stagflation of Jimmy Carter’s presidency.

Fluctuations in crude oil prices are being driven mostly by uncertainty over supplies from oil-producing countries in North Africa and the Middle East, along with a weakening U.S. dollar and other political factors that largely are beyond the control of the much-maligned U.S. oil industry.

But they are not totally beyond Washington’s control. Just recently, President Obama reversed course once again, announcing policy initiatives that the White House claims will increase domestic oil production.

The president says he now wants to lease more drilling areas in the Gulf of Mexico and reduce bureaucratic delays in issuing permits for energy exploration and recovery.

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There seemed to have been a collective sigh of relief across the country. After over two years of waging war on domestic energy production which helped to boost gas prices over four dollars/gallon ($4.58 in my neighborhood), President Obama announced a new energy plan that would allow an increase and acceleration of domestic energy production.

Well…that’s until one examines his words. That’s when you realize that the POTUS left himself enough “outs” to make his plan worthless.

I am directing the Department of Interior to conduct annual lease sales in Alaska’s National Petroleum Reserve, while respecting sensitive areas, and to speed up the evaluation of oil and gas resources in the mid and south Atlantic.  We plan to lease new areas in the Gulf of Mexico as well, and work to create new incentives for industry to develop their unused leases both on and offshore.

Oh great! Finally drilling at ANWR? Not on your life. The National Petroleum Reserve is not ANWR it’s next the desired drilling area.  Kind of  like telling a new president that instead of the White House he would have to live at 1700 Pennsylvania Avenue.

The President didn’t mention drilling in ANWR, he said “respecting sensitive areas,” which was a signal to the important environmentalist constituency, that he did not mean ANWR

The map above describes the ANWAR situation. ANWR sits within a 20 million-acre refuge (the size of South Carolina), but thanks to advanced technology like directional drilling, the aggregated drilling footprint (the dot pointed to by the arrow) would be less than 2,000 acres (about one-quarter the size of Dulles Airport). This is like laying a 2-by-3-foot welcome mat on a basketball court.

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On Friday, we all woke up to the happy news that gas prices might go down a teensy little bit after Memorial Day. Even though that “teensy bit” might just mean “down to $3.50, that news was welcome in a slow economic climate that an administration pre-occupied with it’s own image seems unwilling to acknowledge. But Americans should make no mistake: the tiny decline in gas prices has little to do with the administration’s energy policies, and this week, they’re going to demonstrate that to the nation as they put “Big Oil” on the chopping block in a new round of finance committee hearings chaired by that perennial failure at basic economics, Chairman Max Baucus.

From Politico:

Senate Democrats are looking to bring to the floor next week a plan to strike billions of dollars in annual tax incentives for the five biggest oil companies.

“That’s what we’re thinking,” a Senate Democratic leadership aide told POLITICO Thursday evening, adding there won’t likely be a vote on the measure next week.

Finance Committee Chairman Max Baucus (D-Mont.) will also hold a hearing next Thursday on gas prices and oil tax incentives for the biggest oil companies — including ExxonMobil, BP, Chevron, Shell and ConocoPhillips.

One major question for the Senate leaders: how any money saved from reducing the tax incentives would ultimately be used. Many Democrats are pushing for the money to go toward deficit reduction, the leadership aide said.

Now this all might sound well and good, using money that we pour into domestic industry to pay down the deficit…but that’s merely a sound bite being used by Democrats to sway a public they think will respond to lip service and key words, and won’t dig deeper into their nefarious plans. The truth is, oil companies, like other companies, rely on tax breaks to be competitive in the world market and to spur on a thriving American industry in times of economic recession, like now.

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As oil prices continue to climb, a backlog of more than 100 offshore drilling plans for the Gulf of Mexico are awaiting approval from the Obama administration, according to federal data.

The federal government has not approved a single new exploratory drilling plan in the Gulf of Mexico since lifting its deepwater drilling moratorium on Oct. 12. There are currently 103 plans awaiting review by the Bureau of Ocean Energy Management, Regulation and Enforcement.

The information reveals that the Obama administration — not the oil industry — is the culprit for the slowdown of drilling activity in the Gulf. The Gulf of Mexico accounts for more than 25 percent of domestic oil production.

“These new findings prove that BOEMRE cannot claim it isn’t receiving job-creating plans from oil exploration and production companies,” said Gregory Rusovich, chairman of the Business Council of Greater New Orleans and the River Region. “The plans are there. Until BOEMRE reviews the 103 plans awaiting approval, our economy’s stability remains in jeopardy.”

Every two weeks Greater New Orleans Inc. releases a Gulf Permit Index based on publicly available federal data. Thursday’s index revealed an 88 percent decline in deepwater permits compared to the historical average. Not a single deepwater permit was approved in January. (more…)

In a visit to Washington, D.C., yesterday, a group of about fifty energy industry workers and representatives from the Gulf of Mexico area told lawmakers, reporters and bloggers that if the Obama administration and Congress are serious about creating and saving jobs, they will lift the moratorium on energy exploration in the Gulf.

The workers were joined by Sen. John Cornyn (R-Texas) and former Rep. John Peterson (R-Pa.), outspoken opponents of both the moratorium and tax changes proposed by Democrats that opponents charge would hammer the energy industry.

Thomas Pyle, President of the American Energy Alliance, a group focused on maintaining energy industry jobs in the Gulf area said in a statement, “In an economy like this, the President and Congress should be looking for ways to strengthen U.S. businesses, not weaken them.”

Several of those who traveled to the Hill for meetings with members of Congress say they are suffering financially in the wake of the moratorium’s imposition, and that layoffs and business closures will be unavoidable should it remain in effect.

“My job matters,” said Thomas Clements, co-owner of Oilfield CNC Machining in Broussard, Louisiana. “So I’ve come to Washington to find somebody to hear me, to see my hopelessness, my no-man’s-land that I’m in because of these proposed tax changes to the energy industry and the moratorium.”  Clements elaborated, saying that he had planned to hire more workers this year, but the six-month moratorium on drilling has halted those plans.  All orders for new metal parts used in drilling have been canceled and no new orders are anticipated, said the small businessman, who questioned how his business could survive for the full six months of the moratorium during a lunch attended by Washington, D.C.-based reporters and bloggers.

(more…)

During a 45-minute conference call with journalists from 40 major media outlets this morning, Jack Gerard shared some startling predictions about the future health of the nation’s oil and natural gas industry if the Obama Administration gets its way in adding more regulation and increasing taxes on offshore drilling in the Gulf of Mexico. The biggest one of all is enough to cause anyone to take pause:

“The administration’s moratorium, if continued indefinitely — or similar legislative proposals which would make the deep water unavailable or uneconomic — would cost this country 175,000 jobs every year between now and 2035, according to our latest analysis,” said Gerard, president of the American Petroleum Institute, a group representing some 400 oil and natural gas companies.

And that’s not all!

“The Gulf of Mexico accounts for 30 percent of our domestic oil production and 13 percent of natural gas,” Gerard explained. “The deepwater areas account for 80 percent of the Gulf’s oil production and 45 percent of its natural gas production. Twenty of the highest-producing leases are in the deep water.”

When one considers that the oil and natural gas industry, according to Gerard, supports 9.2 million workers and 7.5 percent of all U.S. gross domestic product, even a small percent of decline can have a tremendous impact on the economy.

According to an API-produced report released today, the economic impact of a complete shutdown of deepwater drilling would yield some awful results. For instance:

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An old family friend, Daniel Sinykin, sends in the following video of his potential solution to the BP Oil disaster. His idea is an improvement on the hair based techniques that have received attention in the wake of the ongoing spill. (According to one report the hair booms are not being used because in early tests they became water logged and sank.)

In the following clips, Daniel demonstrates the potential effectiveness of using high density wool to soak up the oil.

Daniel is hoping for two things over the coming days and weeks. First, he hopes that field trials in the Gulf prove successful. And second, he hopes that he can get the attention of BP and Federal Government.

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President Barack Obama made news on The Today Show when he talked about kicking some ass over the BP oil spill in the Gulf of Mexico.

If he is interested in punishing those responsible for what is shaping up as one of the worst environmental disasters in U.S. history, he should think about giving himself a boot.

While BP is ultimately responsible for the spill (and for cleaning it up), the federal government is a major player in the problem for at least three reasons:

1. It owns the property on which the oil well is located.

2. It regulates offshore drilling. And

3. In order to protect small players in the drilling industry, it capped economic damages from this sort of spill at just $75 million, a way-too-low cap that encourages risky behavior.

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We are almost seven weeks and counting into the massive oil spill wreaking havoc in the Gulf of Mexico and causing an unprecedented ecological disaster along the Louisiana coast.  Neither the owners of the well, BP America, or their contractual partners, rig owner, Transocean LTD or oil servicer, Halliburton Co., have yet been able to stop the flow, and so the duration and total damages, measured either in economic or environmental terms are yet to be known.

It should be obvious by now that getting control of the leak and, even after six weeks, limiting the disaster should be the only short-term objective of the President of the United States, federal regulators and Congress.  Finding the root cause to prevent a reoccurrence, assigning blame and allocating liability for damages can wait until all the facts are in.  As might be expected, however, all of the responsible parties have a different focus.

As far as the oil company executives are concerned, they feed us a daily dose of technological drivel, public relations statements and finger pointing.  At Congressional hearings each of the three companies blamed one another.  The truth is, since the accident occurred at a depth of almost one mile below the ocean’s surface, none of them know for sure what went wrong.  And how could they?  In an aviation disaster weeks and months go by before there is something akin to a conclusive finding, even though investigators from the airline involved and air traffic regulators are usually aided by either one or more of a black box (which offers a treasure trove of information), survivor accounts, witnesses, or air traffic recordings.  Moreover, with the nation’s contingency fee trial lawyers on the sidelines taking in every word of testimony for the soon to come class-action lawsuits and with the president publicly demanding, ex post facto, to raise the legal liability limit for the well’s owners and operators, it is a wonder they “voluntarily” testified at all.

With regard to the gulf oil spill we have no physical proof yet of what caused a cascade of problems, so why are almost all our elected officials focused on allocating blame.  Clearly, it is not for the purpose of learning from this disaster to prevent a reoccurrence.  Instead, as is almost invariably the case in Washington, a huge and important fact finding investigation is hijacked to score political points.

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With oil flowing into the Gulf of Mexico for weeks, we’ve known about efforts to stop the flow. We’ve heard details about 75 ton concrete domes, freezing methane gas, catheter piping siphoning off 20% of the flow, top kill. So it at least seems, that round-the-clock efforts were underway from the beginning.

What about the containment side of the problem? We originally heard about oil containment booms and the challenges with deploying them in choppy Gulf waters. However, it then went quiet. We’ve not heard much lately. We’ve held our breath, assuming – or at least hoping – that these challenges have been overcome or worked around. We’ve hoped that critically sensitive areas were being closely monitored and guarded, that contingencies (to utilize booms or naturally or commercially available oil-adherent or oil-absorbent products) had been identified and were ready to be deployed as a last line of defense.

Now we learn that oil is upon us, that beaches are slicked over, that marshes are impacted, that some critical estuaries are lethally inundated. It seems now that our hopes and assumptions have been wrong. Where is the federal government? Is this just BP’s problem? Is this just Louisiana’s problem? Is just another localized economy in shambles, not a problem to the rest of the country, not a concern to the federal government? Is destruction acceptable if it furthers an agenda?

What happened to the last line of defense?

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At this point, we’re guessing that the Administration doesn’t really want to plug the oil leak in the Gulf. It would help them argue against any future deep sea drilling and allow their allies in the environmental community to fundraise for decades. Cynical? Yes. But, how else to explain the situation?

The BP oil rig explosion will be President Obama’s ‘Katrina’ — in fact, it will potentially be much worse in terms of long term effect. While President Bush took a matter of a few days to mobilize federal assistance to flooded New Orleans, Obama has demonstrated near-complete incompetence and inaction over a month and counting. Still, there is no leadership or clear-cut solution to answer one of the worst environmental disasters in modern time. Eleven people are dead, fisheries and scores of fragile ecosystems dying day-by-day. President Obama finds himself deservedly being attacked from the left and the right.

Environmental activist Robert Redford is demanding action from the administration. When Barack Obama starts losing the Robert Redfords of the world — something is terribly wrong. Redford has even taken to the airwaves with the Natural Resources Defense Council, a liberal special interest group, to call the President out on the lackluster response to the spill and feet-dragging on energy legislation. Robert Redford has every right to be angry, along with boaters, fishermen, Governors, Mayors and the millions who live, vacation and work on the Gulf. I suspect there will be more than a few NRA members who will dearly miss duck hunting along Lousiana’s once-pristine marshlands.

The White House answer to the disaster in the Gulf: ‘let BP handle it.’ Put the oil company in charge of the epic disaster they created. Every day, the tendrils of the slick reach further into currents that will carry the sludge to new shores, killing everything in its path. To disperse the oil, BP is dumping hundreds of thousands of gallons of chemicals into the Gulf — to the alarm of the EPA. Increasingly, independent scientific estimates place the amount of oil at 14 times the amount stated by BP. So, what is President Obama’s position on all this? He doesn’t have one. What is the National Oceanic and Atmospheric Administration’s (NOAA) official assessment of the magnitude of this mess? There isn’t one. And that’s the problem.

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One week ago, I shared the text of a message Interior Secretary Ken Salazar sent to all employees of his department two weeks after the BP Deepwater Horizon disaster began in the Gulf of Mexico. It was provided to me by a friend who works for DOI.

Today, I share the text of his most-recent “Secretary’s Priority Message” about the ongoing disaster which includes some decidedly anti-Big Oil rhetoric. See if you can spot it below:

From: Secretary_of_the_Interior@ios.doi.gov [mailto:Secretary_of_the_Interior@ios.doi.gov]
Sent: Tuesday, May 11, 2010 2:16 PM
Subject: Secretary’s Priority Message – Deepwater Horizon

( NOTE TO SUPERVISORS: Please ensure that all employees without e-mail access receive a paper copy of this distribution.)

Dear Team,

I write to thank you for your hard work and service to our Country. Over the last 21 days, many of you have put in long hours, with little sleep, as you help our Nation respond to the Deepwater Horizon tragedy and spill. I extend my heartfelt appreciation.

As we continue to work hard to address and resolve the oil spill in the Gulf, we must not hesitate from making changes and reforms we know are needed. This incident has made it clear that the public servants of the Minerals Management Service deserve more tools at their disposal, more resources, and an organizational structure that fits the missions that you are being asked to carry out. I am proud of the reforms we have already made together – from broadening MMS’s portfolio to include offshore renewable energy production to simplifying royalty collections – but the time has come to make even more fundamental reforms.

Earlier today, I announced to our colleagues in the MMS a set of changes that we as a Department must undertake to strengthen our oversight of the companies that develop energy in our Nation’s waters.

(more…)

In an e-mail message to employees two weeks after an explosion rocked BP’s Deepwater Horizon drilling rig in the Gulf of Mexico, Interior Secretary Ken Salazar continued parroting the Obama Administration lines about “being on the job from Day One” and about BP being responsible.

“From day one, we have been anticipating and preparing for the worst case scenario,” Secretary Salazar writes in the e-mail’s opening paragraph. “Thirteen days into this event, the situation is still dangerous.”

I find it telling that the action words in Secretary Salazar’s message are “anticipating and preparing” instead of acting, fixing, resolving or, if he had wanted to be honest — hoping.

In the fourth paragraph, he writes, “BP has a massive oil spill for which they are responsible,” —–even though no official investigation report has reached that conclusion.

Below, I share the full text of the message:

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From the Associated Press:

WASHINGTON (AP) – Suddenly, everything changed.

For days, as an oil spill spread in the Gulf of Mexico, BP assured the government the plume was manageable, not catastrophic. Federal authorities were content to let the company handle the mess while keeping an eye on the operation.

But then government scientists realized the leak was five times larger than they had been led to believe, and days of lulling statistics and reassuring words gave way Thursday to an all-hands-on-deck emergency response. Now questions are sure to be raised about a self-policing system that trusted a commercial operator to take care of its own mishap even as it grew into a menace imperiling Gulf Coast nature and livelihoods from Florida to Texas.

The pivot point had come Wednesday night, at a news conference at an oil research center in the tiny community of Robert, La. That’s when the nation learned the earlier estimates were way off, and an additional leak had been found. (more…)