The Discerning Texan

All that is necessary for evil to triumph, is for good men to do nothing.
-- Edmund Burke
Wednesday, June 18, 2008

Oil Exploration Policy: Common Sense and Nonsense

President Bush laid down the gauntlet today on Oil exploration, while the Democrats... well to be kind they looked like blithering idiots. Of course from my perspective this is not necessarily anything that should stop the presses, but today their level of blather had red-lined into the territory of dangerously or criminally insane. Let's break it down.

First, the President:
High oil prices are at the root of high gasoline prices. And behind those prices is the basic law of supply and demand. In recent years, the world's demand for oil has grown dramatically. Meanwhile, the supply of oil has grown much more slowly. As a result, oil prices have risen sharply, and that increase has been reflected at American gasoline pumps. Now much of the oil consumed in America comes from abroad -- that's what's changed dramatically over the last couple of decades. Some of that energy comes from unstable regions and unfriendly regimes. This makes us more vulnerable to supply shocks and price spikes beyond our control -- and that puts both our economy and our security at risk.

In the long run, the solution is to reduce demand for oil by promoting alternative energy technologies. My administration has worked with Congress to invest in gas-saving technologies like advanced batteries and hydrogen fuel cells. We've mandated a large expansion in the use of alternative fuels. We've raised fuel efficiency standards to ambitious new levels. With all these steps, we are bringing America closer to the day when we can end our addiction to oil, which will allow us to become better stewards of the environment.

In the short run, the American economy will continue to rely largely on oil. And that means we need to increase supply, especially here at home. So my administration has repeatedly called on Congress to expand domestic oil production. Unfortunately, Democrats on Capitol Hill have rejected virtually every proposal -- and now Americans are paying the price at the pump for this obstruction. Congress must face a hard reality: Unless Members are willing to accept gas prices at today's painful levels -- or even higher -- our nation must produce more oil. And we must start now. So this morning, I ask Democratic Congressional leaders to move forward with four steps to expand American oil and gasoline production.

First, we should expand American oil production by increasing access to the Outer Continental Shelf, or OCS. Experts believe that the OCS could produce about 18 billion barrels of oil. That would be enough to match America's current oil production for almost ten years. The problem is that Congress has restricted access to key parts of the OCS since the early 1980s. Since then, advances in technology have made it possible to conduct oil exploration in the OCS that is out of sight, protects coral reefs and habitats, and protects against oil spills. With these advances -- and a dramatic increase in oil prices -- congressional restrictions on OCS exploration have become outdated and counterproductive.

Republicans in Congress have proposed several promising bills that would lift the legislative ban on oil exploration in the OCS. I call on the House and the Senate to pass good legislation as soon as possible. This legislation should give the states the option of opening up OCS resources off their shores, provide a way for the federal government and states to share new leasing revenues, and ensure that our environment is protected. There's also an executive prohibition on exploration in the OCS. When Congress lifts the legislative ban, I will lift the executive prohibition.

Second, we should expand oil production by tapping into the extraordinary potential of oil shale. Oil shale is a type of rock that can produce oil when exposed to heat or other process[es]. In one major deposit -- the Green River Basin of Colorado, Utah, and Wyoming -- there lies the equivalent of about 800 billion barrels of recoverable oil. That's more than three times larger than the proven oil reserves of Saudi Arabia. And it can be fully recovered -- and if it can be fully recovered it would be equal to more than a century's worth of currently projected oil imports.

For many years, the high cost of extracting oil from shale exceeded the benefit. But today the calculus is changing. Companies have invested in technology to make oil shale production more affordable and efficient. And while the cost of extracting oil from shale is still more than the cost of traditional production, it is also less than the current market price of oil. This makes oil shale a highly promising resource.

Unfortunately, Democrats in Congress are standing in the way of further development. In last year's omnibus spending bill, Democratic leaders inserted a provision blocking oil shale leasing on federal lands. That provision can be taken out as easily as it was slipped in -- and Congress should do so immediately.

Third, we should expand American oil production by permitting exploration in the Arctic National Wildlife Refuge, or ANWR. When ANWR was created in 1980, Congress specifically reserved a portion for energy development. In 1995, Congress passed legislation allowing oil production in this small fraction of ANWR's 19 million acres. With a drilling footprint of less than 2,000 acres -- less than one-tenth of 1 percent of this distant Alaskan terrain -- America could produce an estimated 10 billion barrels of oil. That is roughly the equivalent of two decades of imported oil from Saudi Arabia. Yet my predecessor vetoed this bill.

In the years since, the price of oil has increased seven-fold, and the price of American gasoline has more than tripled. Meanwhile, scientists have developed innovative techniques to reach ANWR's oil with virtually no impact on the land or local wildlife. I urge members of Congress to allow this remote region to bring enormous benefits to the American people.

And finally, we need to expand and enhance our refining capacity. Refineries are the critical link between crude oil and the gasoline and diesel fuel that drivers put in their tanks. With recent changes in the makeup of our fuel supply, upgrades in our refining capacity are urgently needed. Yet it has been nearly 30 years since our nation built a new refinery, and lawsuits and red tape have made it extremely costly to expand or modify existing refineries. The result is that America now imports millions of barrels of fully-refined gasoline from abroad. This imposes needless costs on American consumers. It deprives American workers of good jobs. And it needs to change.

So today I'm proposing measures to expedite the refinery permitting process. Under the reformed process that I propose, challenges to refineries and other energy project permits must be brought before the D.C. Circuit Court of Appeals within 60 days of the issuance of a permit decision. Congress should also empower the Secretary of Energy to establish binding deadlines for permit decisions, and to ensure that the various levels of approval required in the refinery permitting process are handled in a timely way.

With these four steps, we will take pressure off gas prices over time by expanding the amount of American-made oil and gasoline. We will strengthen our national security by reducing our reliance on foreign oil. We will benefit American workers by keeping our nation competitive in the global economy -- and by creating good jobs in construction, and engineering, and refining, maintenance, and many other areas.

The proposals I've outlined will take years to have their full impact. There is no excuse for delay -- as a matter of fact, it's a reason to move swiftly. I know the Democratic leaders have opposed some of these policies in the past. Now that their opposition has helped drive gas prices to record levels, I ask them to reconsider their positions. If congressional leaders leave for the 4th of July recess without taking action, they will need to explain why $4-a-gallon gasoline is not enough incentive for them to act. And Americans will rightly ask how high oil -- how high gas prices have to rise before the Democratic-controlled Congress will do something about it.

Simple enough, right? OK, now to the Democrat reaction, at the "official" press conference, courtesy of The Swamp:

At a Capitol Hill press conference following Bush's White House Rose Garden appearance, Rep. Ed Markey of Massachusetts ridiculed the president as essentially a mouthpiece for the oil and gas industry.

Then he urged Bush to support legislation that would charge oil companies fees that would increase the longer the companies hold onto the leases without producing oil on them:

And you know, today is an historic day. The president has decided to take out some of the oldest ideas which the oil and gas industry have had for destroying the most pristine wilderness and shoreline that we have in the United States. After eight years, President Bush and Dick Cheney have turned the GOP into the "Gas and Oil Party." That's the legacy that they are going to leave.

Even though there is still 68 million acres of land that they have under lease that they could drill on, they have decided rather than drilling there, they want to drill where we want, as a nation, to protect because of the sacred nature of that land, which is where our beaches and our pristine wilderness areas are.

And what we're going to do, Mr. (Rahm) Emanuel, Mr. (Nick) Rahall, Mr. (Maurice) Hinchey and the Democratic Party is going to do, is we're going to give them a chance in the White House to put their money where their mouth is. We're going to give them a chance to impose fees on the oil industry on the public lands where they do not drill, where the American people have already given them an opportunity to drill. And we will increase the fees as the years go by, because otherwise, they will have wound up warehousing where the oil is in the United States that the American people, the Democratic Party, everyone wants them to drill, but they're refusing to drill, and at the same time, they're insisting that we should go to places that should be preserved forever.

The oil industry has argued that it doesn't produce oil on much of the land and ocean floor it has leased from the federal government because there often isn't enough energy in those areas to make it profitable to do so.

Red Cavaney, president of the American Petroleum Institute, put forward the argument on Fox News Sunday just days ago:

CAVANEY: Well, we are developing. And there's a big misunderstanding. If they understood the industry, they would appreciate the fact that we bid for those leases competitively in the open market. We pay the government to get them.

We have to pay annual lease fees on those particular leases. And at the end of the lease term -- five years, six years, whatever it may be -- if we haven't done anything on those leases, they go back to the government to be bid again.

What's going on is they -- the first step in our industry is called exploration. In other words, the creator didn't put oil and gas on every plot of land. So we have to go and explore.

We're willing to put our capital at risk to find out whether or not there's oil and gas there. And there's been very few cases where there is oil and gas in amounts that are commercially usable. And those are the ones that you can develop.

The rest of them, why drill where you know there's no oil or gas? And let those things go back to the government.

Capitol Hill Democrats have heard these arguments but sound like they don't believe them.

This was Rep. Rahm Emanuel today from the Democrats' response to Bush.

As you know, the four of us introduced legislation last week, the use-it- or-lose-it legislation, to the oil companies as it relates to these 68 million acres and the leases that they hold on those acres to drill, and as Nick said, are equivalent of 14 years worth of consumption of oil by the United States, import and export -- imported and produced domestically, 14 years worth that they are not drilling today and leases have been issued.

We sponsored that legislation because we do believe, unlike the White House, that you have to have both a supply and a demand approach to energy policy. But when it comes to the president's approach, and the Republicans, they have a one-trick-pony approach. They've been saying this since day one. It's all about drilling.

We were the party that put together fuel efficiency standards for this country and finally passed, after 32 years of debate, that legislation. This morning Ed and I sent a letter to the president to agree with the EPA so you can accelerate the fuel efficiency standards of the auto industry... Even since we passed this legislation, you can do it faster by changing the assumptions in there. And the EPA's own study says that, and we'd hope the president would adopt what the EPA has now worked up.

At one point during press conference, Hinchey of New York seemed to veer from the Democratic talking points to suggest that U.S. refineries be nationalized.

Our Republican friends also talk about the need to, you know, set up ways in which the material can be refined; refineries. Well, do we own refineries? No, the oil companies own refineries.

Should the people of the United States own refineries? Maybe so. Frankly I think that's a good idea. Then we could control the amount of refined product much more capably that gets out on the market.

When it came time for reporters to ask questions, a reporter jumped on this:

Q I've got a question about the issue of -- you mentioned the issue of nationalizing refineries and having nationally owned refinery capacity. A lot of other countries have nationalized their oil industry. You mentioned that the oil and gas companies may not want to drill on these lands, so that they can take advantage of ever- higher gas prices. Is there any thought to having bills that would nationalize some of these refineries or start a national oil company?...

... REP. HINCHEY: Yeah, there's thought going on about this. Frankly, this is something that I think is essential. And I think it's only a matter of time before it takes place. I think that the -- we'll -- what we have to do has to be in the interest of the American people, primarily, basically, in the interest of the American people, not in the interest of some major corporations. And the determination as to how much of this very important material gets refined, and consequently out on the market, is in the hands of the oil companies. And they just do. They make those decisions based upon their efforts to drive up the price as high as they can and keep it as high as they can for as long as they can.

So I think that this is something that this Congress should be thinking about. And certainly it's something that I'm thinking about, and I think that there are a few others already in the Congress who are thinking about it as well.

REP. EMANUEL: Let me just add one thing -- and then I you know have a question, and then we got to get going -- is as it relates to the refinery issue, there's been a tremendous amount of incentives, tax and otherwise, given to the oil and gas companies to expand or build new ones.

As I -- now I'm a little on weaker grounds. I think it's been, what, 20 years since a new refinery has been built.

REP. : Yeah.

REP. EMANUEL: And then clearly, the need is there. They haven't met that. And I think whether you support or don't nationalization, the question is what it is going to take to get the energy industry, given that we've given both direct and otherwise assistance, to build more refining capacity.

It probably wouldn't surprise anyone if, before the day is out, House Republicans picked up this nationalization-of-refineries idea and used it as a cudgel to beat on their Democratic colleagues, portraying them as socialists of the Hugo Chavez variety. In American politics, this is what could be easily described as low-hanging fruit.

Ya think?? Hell Charles Manson and Timothy McVeigh put on better defenses...

So how to separate the public from the fantasy of the Lefties? Economist Robert Samuelson weighs in in an article written for Newsweek--not exactly a right-wing rag:
Do not underestimate oil's fallout. The world may have arrived at Peak Oil, when dwindling oil reserves no longer permit much annual increase in production. This may not be literally true; estimates of vast undiscovered oil reservoirs imply that Peak Oil is decades away. But governments that control 75 percent or more of known reserves are behaving as if Peak Oil is already here. They're hoarding a scarce commodity by limiting new exploration projects. Meanwhile, production at some old fields is dropping rapidly. Spare capacity has been depleted, as demand outruns new supply.

High prices close the gap. The grim price outlook by Rubin and others presumes that this situation persists. Of course, they could be wrong if higher prices cause demand to drop sharply and supplies increase unexpectedly. In the United States, prices have already led to less driving. In March, highway travel was down 4.3 percent from a year earlier. Buying patterns for vehicles have shifted. Through May, sales of SUVs dropped 31 percent from a year earlier, reports Oil demand is also stagnating in Europe and Japan.

But higher demand from developing countries and oil producers is offsetting the lower demand of wealthy countries. Consumption in these countries will rise 3 percent in 2008, projects the International Energy Agency.

There's been a huge transfer of power to oil producers. Even at $100 a barrel, Saudi Arabia, Kuwait and the United Arab Emirates will earn almost $8 trillion in oil revenues between now and 2020, estimates the McKinsey Global Institute. More troubling are the political implications. "This has really strengthened the Iranians, Russians and Venezuelans to be more provocative in the world," says Larry Goldstein of the Energy Policy Research Foundation. Although governments control crude supplies, private companies have dominated distribution. Anyone can buy oil at a price. Now oil could become a political commodity offered to friends at a discount, withheld from rivals.

How can we retrieve some of our lost power? The first thing is to get out of denial. Stop blaming oil companies and "speculators." Next, we need to expand domestic oil and natural-gas drilling, including Alaska. Although we can't "drill our way" out of this problem, we can augment oil supplies and lessen price strains. It might take 10 years or more, because new projects are huge undertakings. But delay will only aggravate our future problems.

Suddenly, John McCain--and any other Republican with a lick of common sense--have an issue that could take them to the promised land. All he/they have to do is to step up, stop being so damn wishy-washy about ANWR and other drilling, and take this opportunity to drive a stake in the heart of Democrats. This is a winning issue. 2/3 of the American public is behind this now, and those numbers are trending upward by the week. And--quite frankly--the quotes coming from the Democrats today in response to the President's challenge sounded much more like Hugo Chavez or some other Marxist banana republic tinpot dictator than it did like United States Representatives and Senators. They are way out of their comfort zone.

But make no mistake. For the Republicans to turn this issue into a winning one, they are going to have to continue to hit the Democrats hard on this; and that starts at the very top. More of the same from Mr. Ruffle No Feathers And Do No Harm is not going to cut it--John McCain needs to be Presidential if he wants the job--and that means cutting through the crap when the situation warrants it. That time is now.

The Democrats have always known that elections are bloodsport, and have treated them as such. And the Republicans do have them cornered on this issue right now. But if McCain, the President, and the Republican Congressional leadership do not keep the heat on; if they do not move in for the kill here, the Democrats may find an escape hatch to wiggle out of the jam they are in.

This election depends on the Republicans not allowing this to happen.

The ball is lying on the field. The goal line is dead ahead, open field. All the Republicans have to do is to pick up the ball and run with it. To paydirt.

The McCain camp can be contacted here.
Contact your Representative here.
Contact both of your Senators here.
Contact the White House here.

Tell them all to keep the heat on. And while you are at it, sign the petition.
DiscerningTexan, 6/18/2008 08:53:00 PM |