Palone's Comments, Comments on Energy Issues and other issues of interest.
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The Inmates Are Running The Asylum!!
My March 19 through 25, 2010 issue of the Rocky Mountain Oil Journal contains an article that I cannot believe. The Montana BLM has suspended 61 Oil and Gas Leases issued in 2008, due to a lawsuit filed by a group of environmental zealots. The lawsuit claims that the BLM failed to assess if the climate change might be impacted should those tracts be auctioned at the four regularly scheduled sales held in 2008. The surprise is that the BLM capitulated and entered into a settlement agreement with the plaintiffs.
This has some very far reaching implications. I would imagine that protests are being written (as this is being written) for every other western states sales. With this move, they can shut down the access to federal minerals until the cows come home. Let's be honest, the current administration and his appointees, want to shut down all exploration and production from federal lands. I am more and more becoming convinced that they are deliberately destroying America for a reason that we can't see yet. It may be that they want total control over everything.
November is just around the corner. I would suggest that we find out just exactly where every candidate stands on all the issues, including our access to federal minerals. Then and only then, should we offer any support. In fact, if none of the candidates are supportive, then we should wage campaigns against them all. Pointing out to the public just how important it is that the energy companies have access to the federal minerals. I think most people like being warm in the winter and keeping cool in the summer. If access to federal minerals is curtailed, that nicety may be in jeopardy.
EPA to Study Fracturing??
This makes me feel all warm and fuzzy. These are the same people that have declared CO2 a dangerous substance, you know that gas we all exhale. In the article I read, "EPA Launches Hydraulic Fracturing Study", by Nick Snow, dated March 18, 2010 and appearing in the Oil & Gas Journal (online), they purportedly state that it will be peer reviewed and that significant stakeholders would have input.
If the proposed tax changes aren't enough, then this should be a sign to get it done now. I'm guessing that the twisted zealots in the EPA will find some way to get their finger in here. They have wanted to get control in the oil and gas industry for years. I hope everyone has enjoyed staying warm in the winter and cool in the summer, because those days may be numbered with the current administration.
Is It Time To Be Investing In Oil?
Exploration should continue and should even probably escalate. Why? Well, Mohammed Al-Qahtani, the executive director, petroleum engineering and development of Saudi Aramco, states that the world will need an additional 90 million barrels a day production to offset production declines and demand growth by 2030. (Source: Oil & Gas Journal, October 12, 2009, Volume 107.38, page 10.)
This is coming from the country that everyone believes can just turn on the spout to meet the world's energy needs. I think it should be a wake up call to the rest of the world. Oil is not going to be cheap any more, as demand will be outstripping supply just as soon as the world economy starts to pick back up. I eluded to this in an earlier post.
So, yes it is time. One should be engaging in exploration, exploitation and buying of production. Yes, we will be moving away from oil, but is years off and the Unites States Government is not leading the way. They are just going to make the whole transition more painful and less efficient. Every barrel counts, and the United States needs to wake up and be encouraging the Mom and Pop producers that produce most of the domestic oil. Most of our oil is produced from stripper wells that make less than 10 barrels a day, most of them make considerably less.
Now, we need to keep after our congressmen to not penalize the industry out of existence. The current Administration and the current majority seem to believe that we are all evil and should be put out of business. So, it is more important than ever to educate the public about our industry.
The Greenies Will Really Like This!!
China talking about banning the export of Rare Earth Metals, see www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/60824/World-faces-hi-tech-crunch-as-China-eyes-ban-on-rare-metal-exports.html. If they do limit or completely quit exports, it will affect many things we all take for granted. Not only that, but it will affect the plans of the current administration to move us into the 'Green Economy'.
Our computers will become more expensive, as the hard drives use some of these metals. The new generation of light bulbs that we are all supposed to migrate to will be affected also. I am sure that many of the tech advances we (the oil and gas service companies) have made over the last few years will be affected too.
China is not the only source of these metals, but they drove most everyone out of business witht their cheap prices. The shut down mines can be reopened, but that takes time. New reserves can be located, but again that takes time. So, we may be in for more increased prices for things we now need.
Now, for the good part. It even affects wind turbines.
Here is a state that is wallowing in debt and revenue shortfalls, that can't see fit to accept an Oil and Gas proposal that is supported by the local environmental zealots. The deal would of given the state an immediate influx of $100,000,000 and a continuing inflow over an anticipated thirteen year lifespan of up to $2,300,000,000. The assembly voted out this little tidbit when they approved the emergency budget package.
It just goes to prove that one does not have to have any sense to become a politician. The deal wouldn't of solved their problems, but it would of eased some of the pain. It also could of demonstrated that oil and gas could be produced from the coastal waters in an environmentally friendly way. Once again, the elected employees have dealt from the bottom of the deck to their employers, causing them to lose.
Another Green Dream
The following was found on Slashdot, a news for nerds site:
A company called Joule Biotech claims to have a breakthrough in biofuel production. Their process can create 20,000 gallons of fuel per acre per year at a cost of about $50 per barrel. 'Algae-based biofuels come closest to Joule's technology, with potential yields of 2,000 to 6,000 gallons per acre; yet even so, the new process would represent an order of magnitude improvement. What's more, for the best current algae fuels technologies to be competitive with fossil fuels, crude oil would have to cost over $800 a barrel says Philip Pienkos, a researcher at the National Renewable Energy Laboratory in Golden, CO. Joule claims that its process will be competitive with crude oil at $50 a barrel. In recent weeks, oil has sold for $60 to $70 a barrel.
I went to their site http://www.joulebio.com and found that they say that their proprietary photosynthetic organism uses sunlight and CO2 to synthesize its nutrients. Now, I read that to mean the organisms need food other than CO2 and sunlight. Is that food something we have very little of or something that we need but is plentiful at the moment. It's all a big mystery, which they are being very coy about.
It smells a lot like snake oil, to me. Then maybe the food for the organisms is solyent green, which is not that far off if the wizards in Washington get their health care.
Industry in Distress?
With the following information, it looks kind of bleak:
Last quarter exploratory drilling down 63% (year to year)
Last quarter development drilling down 46%
Drilling for Gas down 43%
Drilling for Oil down 53%
Petroleum product demand down 5.8% from last year.
None of the above sounds good. The ultra low sulfur diesel (that used by vehicles on the highway) was down 6.6% from last year, which indicates that the economic decline isn't over. It means that there isn't as much freight being moved, which indicates a sluggish economy. However, I had to make a short trip yesterday on the Interstate Highway and it did seem that there were more trucks on the road than I had been seeing.
Then we have some 'Guru' stating that we will see $20 oil by the end of this year. It brings back some not so pleasant memories of years past, for those of us that have been in this industry for 25 or more years. I personally don't think we will get that low, but I have been wrong before. China has a growing economy and they have been one of the leading consumption growth areas for the last few years. I haven't heard how India's economy is doing, but they were also a consumption growth area. I don't know if their (China & India) current growth rate is enough to offset the declines in the rest of the world or not.
But, once the rest of the world starts to recover from the current economic decline we will see the price of Crude Oil rebound quite quickly. The Natural Gas market, is another issue. Some claim that we have created another bubble with the shale plays. I question that, since most of the shale plays that I have seen, the decline curves are very tough. They will produce a lot of gas, but it takes a lot of years to produce that gas.
Now, if we can just keep the government from nailing the coffin lid down with punitive taxes and programs. Maybe we can all survive this slump.
Some Interesting Numbers.
The following is taken from the 'Measuring the Economic and Energy Impacts of Proposals to Regulate Hydraulic Fracturing' prepared by IHS Global Insight for the American Petroleum Institute (api.com).
All the following are their predictions for 2014:
A No Frac scenario would result in a 17% reduction in oil production, and a 45% reduction in natural gas production. Add to that the normal decline rates and we get 23% decline in oil and 57% decline in gas.
Fluid Restriction scenario would decrease natural gas production by 22% and oil by 8%.
UIC Compliance scenario would decrease natural gas production by 10% and no mention of oil decline.
Now, to think that the elected officials in Washington could look at this and realize what a mistake it would be, is probably wishful thinking. They continue to astound us with their grand moves of idiocy every single day. We in the industry and the state regulators need to make them understand that the individual state agencies are better equipped and have a far better understanding of what is appropriate when setting up a Frac program. If the federal government gets involved it will only add costs and not accomplish anything.
We need every bit of energy we can produce domestically. They are trying to move the country off of fossil fuels, but that isn't going to happen any time soon. The technologies they are trying to send us to won't work, but they don't know that or refuse to admit it. We don't know what the answer is for tomorrow, but it isn't electric cars and windmills. So, visit with your elected officials and your state regulators. We need to keep producing what we can here at home, while we search for and find the answer for tomorrow.
We Are Not Dead Yet!
We blew it in the House, but the Senate can rise to the occasion. As you know by now, that is if you could get anything other than Michael Jackson is Dead from any of the news outlets, that the House approved the Cap & Trade Bill. As we all know, it is a terrible bit of legislation that if allowed to reach the President's desk will wreck what is left of our economy.
So, get your fingers limbered up and write to your Senators, call them, or even go see them. Let them know that this needs to be stopped. America can't stand under the massive taxes proposed by this moronic legislation.
Well it appears that we may have some allies appearing to oppose the Cap and Trade legislation. The Environmental crowd is coming out in opposition to the Choke & Gag, I mean Cap and Trade proposal. They are not opposing for the reasons we are, but they are opposing it. This may be some of the best news we have heard on this item. Maybe, just maybe, we can see the legislation firmly defeated and that would be a blessing to all of America, not just the energy companies.
The same old lies are being told by the administration in an effort to garner support. They devise an exotic tax scheme, and then try to tell the public that the energy companies are going to pay for it. Yeah, right. The tax and spenders are clueless as the intelligence of the average person out here, but it doesn't take a degree in economics to figure out who is going to pay.
Get the telephone hot, get the keyboard hot, even get the old pen and paper hot. But, whatever you do, let your elected officials know where you stand on this. It might also be worth mentioning that they work for us, not themselves. Their employers may decide it is time for a change in the not to distant future. (That change isn't the change we got the last election either.)
The Cost of Cap & Trade
The wonder of Cap & Trade, never fails surprise me. The gall of our elected employees to think that we, their employers, are so stupid that we won't see Cap & Trade for what it really is, is just astounding. This is to be the funding source for socialized medicine and we are not supposed to notice the increase in our cost of living and the accompanying loss of jobs.
Here are some numbers from 'The climate bill's costs' in the June 8, 2009 edition of the Oil & Gas Journal. The GDP will decrease by 9.6 Trillion, that is ... what about 4.5 times the anticipated deficit for this year. Along with that it will destroy 1,105 jobs. Increase electricity rates by 90% and that doesn't include any price increases due to shortage of fuels to generate it. Raise the cost of gasoline 74%, again this doesn't take into account increases due to increased crude prices. Residential natural gas will go up by 55%, again commodity prices are not considered.
This looks like a wonderful way to demonize the energy industry. We all know just how popular we are any way. Then they can nationalize the industry because we are being just to greedy and the American public will cheer them on. So, the cost of Cap & Trade for the energy industry may be everything.
We need to do everything possible to get the word out to the public about the cost of Cap & Trade. We also need to let our elected officials know just how detrimental this legislation will be to America, its economy and energy security.
Let's Not Cap & Trade.
Cap & Trade is nothing more than an elaborate tax scheme that punishes those least able to afford it. However, there is a glimmer of hope out of Washington, of all places. It appears that the House Republicans are trying to introduce an Energy Bill that will encourage exploration rather than tax everybody to death.
It is called the The American Energy Act and we all need to be letting our elected officials know that it needs to see the light of day. Better yet, it needs to replace the Cap & Trade proposal. America can't stand the additional costs of the Choke & Gag, er Cap & Trade, legislation.
Hydraulic Fracturing, How Dare We Try to Produce More!!
It appears that Rep. Diana DeGette (Democrat - Colorado) is going to try once again to remove the exemption of Hydraulic Well Fracturing from the Safe Drinking Water Act (SDWA). To do this, would increase the cost an additional $150,000 per well and in all probability not make any difference in the safety of the our drinking water. It would just be another layer of bureaucracy costing the producer, and ultimately the consumer, more money.
We all know that we need to use this technique to recover the hydrocarbons our society desires and needs. We also know that the individual states do a very good job of regulating our activities to protect the water and other resources. They are familiar with the geological characteristics of the given areas and only allow appropriate procedures to be used in stimulating wells. But, here again we see that our elected employees feel that they know better than their employers.
Get the pens, keyboards and telephones warmed up once again. Let you representatives know that this is an unnecessary move and educate them to the fact that the individual states are in a much better position to regulate this activity.
Brother Could You Spare a Kilowatt?
As part of the Energy Legislation now pending in Congress there is this wonderful tidbit, called Smart Grid. Within that, they are proposing to give (only what the Government wants to) the power companies, or the utilities, the right to restrict how much power (electricity) and when you may use it. The great Socialist movement thinks they know better than anyone else regarding energy issues.
I don't know about you, but I really don't want some moronic bureaucrat deciding when I can turn my heat or air conditioning on. Or, when my refrigerator or freezer can turn on. We don't have a set time for meals around here either, so my Electric Stove may or may not work when we are ready to eat. They are going to far with this one, along with most everything else they want to do.
It is time for us to stand up and put these elected employees in their place. They work for us, not the other way around. They have lost all touch with reality and are totally out of control.
Cap & Trade
It is not Cap & Trade, it is Choke & Gag. The house has outdone itself with this one. From the last numbers I have seen, this piece of legislation will cost every household in America an additional $3,000 per year. Most households can't afford that, especially in the current economic times. And, I don't think the economic condition is going to improve either. The current administration and party in power are making all the wrong moves to see any improvement.
It does nothing to improve our energy dependence picture, in fact it will make it worse. In fact, all it is, is a gigantic hidden tax for the benefit of the government. They look to take everyone's money, while blaming the energy companies for the high prices. In the end, we as a nation will move backwards with regard to our standard of living. The decision of what fuel/energy to use and who gets to use it will be made by the Government.
Take the time to let your elected officials know just how you feel about this piece of Socialist Legislation. If you don't speak up, you can look forward to sliding into third world status all the while being told just how great we are and what a great job we are doing with the environment. Plus all your beer will be taxed due to the CO2 in it and to top that off, it will be warm.
World Oil Production Peak?
Have we reached that point? Well, Kenneth Deffeyes says that we hit it in 2005 and analysts with Raymond James & Associates Inc. seem to believe that we hit the peak in the first quarter of 2008. So, it would appear that we have in fact reached the point where demand will outstrip supply, once the world economy starts to improve.
With this in mind, it would seem that we as a nation should be doing things to encourage production of oil, not devising hair brained tax schemes that penalize those that produce the oil that we need. Yes, we are going to be forced to make changes in the way we consume fossil fuels. But, we need to let the market place be the driving force behind those changes.
The worlds thirst for oil will not decline overnight. Even if someone comes forward with a solution to our energy needs, tomorrow. As such, we need every drop of oil we can produce. The current administration and its followers, seem to think they can legislate and tax the United States into a position of energy independence. It just isn't going to happen. In fact, what they are proposing will bring great harm to our already ailing economy and greatly diminish our ability to produce domestic oil.
Intangible Drilling Costs (IDC) deductions are very important to the independent producers. The IDC deduction allows them to bring in outside money that wouldn't even consider taking the risks without it. If that deduction is taken away (as they propose to do) there will be fewer wells drilled and as a result less oil available.
With the economic downturn and resulting decline in exploration activity that we are seeing at this time, I project that the previous crude oil price highs won't seem all that high in the future. This will happen because of projects being put on the back burner or just outright canceled. Add to this, the punitive measures being proposed and we have the right mixture to create unbelievably high crude oil prices in the not to distant future.
Chrysler and General Motors Management??
What is it with these two? Here they are struggling financially due to a slow economy (and some other problems, which we will ignore for now), which means slow sales. So, what do they do? Cut their sales force of course!! Most any college freshman knows that isn't a real intelligent move.
So, who is behind this failed logic? The government and the labor unions, some of the very same people that want to dictate our future energy policies. The same ones that think they can implement failed European Energy Policies here with a different outcome. I think we all need to be very, very afraid of the things they want to impose.
Now is the time to become known by your Congressional Representatives. Write them, call them, visit them. Make sure they know what you think and lead them to an understanding of just how bad an idea that Cap and Trade is and most of the other Energy Policies that are going to float around over the the next few years. We all know that the free market system is the best way to address the issues. So, get those pens, keyboards and telephones warmed up, we need to stand and be heard.
Test Post #2
This if fun, one more time.
I want to know if this combo will work
So, here it is, in all it's glory.
Here we are!
A test post for fun.