More Taxpayer Money down the Ethanol Rathole

In its December 19 issue, Chemical and Engineering News reports that a joint venture of Mascoma and Valero will build an ethanol plant. The ethanol will be manufactured from cellulosic raw materials, which is a favorite of the Obama administration.

However, you will recall from my previous writings that ethanol cannot compete cost-wise with gasoline, without a continuing taxpayer subsidy on the ethanol produced. In addition, the new joint venture plant will be financed by an $80 million "cost-sharing agreement" from the Department of Energy and a $23.5 million grant from the state of Michigan.

Here we have not only the Federal Government using taxpayer money to put down the rat hole of renewable energy, but also now the state of Michigan. This operation obviously does not make basic economic sense, when compared with the availability of low-cost gasoline from crude oil. It only becomes competitive when supported by taxpayer funds. The motivations are ideological considerations of the Obama Administration and individuals who want to develop new jobs for themselves at taxpayer expense.

The Losing Economics of Solar Energy

I continue my objection to government use of taxpayer money to support ridiculous projects. The present case involves subsidies for solar energy. It makes no difference whether the subsidy is in the form of loan guarantees,(Solyndra), grants, tax credits or any other form of subsidy, it's a atrocious use of taxpayer money, especially in these times of budget deficits and tremendous national debt.

To support my position, I refer to an article in the December 19 issue of Chemical and Engineering News,. The article is entitled, "Polysilicon Makers Shrink Capacity".

Before I present the detail, let's have a little primer on solar energy. The basic idea is to use sunshine to generate electricity. This is done by a process, which scientists called photovoltaics. However, it is simply a process by which sunlight shines on a photovoltaic material, such as polysilicon. Some of the sun's energy is converted into electricity. However, to make a practical system, one needs to insert the polysilicon into a manufactured device, subject the device to the sun's rays, and lastly channel the generated electricity to a usable location such as lighting or electric motors.

One of the major problems with solar energy generated in this manner, is that the sun does not shine continuously. It doesn't shine at night nor does it shine during rainy or cloudy days. At those times, there is no generation of electricity, and in order to have continuity in use, it is necessary to have battery storage, which is both expensive and space consuming. Collectively, the whole process of generating solar energy and using it is considerably more expensive than the average consumer purchasing his electricity from a power generating station, usually operated on burning coal and using steam to run turbines for electricity generation.

With that cost limitation in mind, we can now refer to the detail of polysilicon makers' shrinking capacity. Wacker Chemie will close its Hikari, Japan plant in 2012 and move a portion of this operation to Singapore and Portland. It will put 500 people out of work. MEMC will reduce its workforce by 1300 jobs, including 250 jobs in the US. This is part of a program involving a 6000 ton per year polysilicon plant in Merano, Italy, which also may ultimately close. Both of these operations are in response to weakening demand for polysilicon wafers used in the manufacture of devices to generate solar electricity.

If the world market for polysilicon devices to generate solar energy is so weak, how do we justify continually pumping in taxpayer dollars to support this losing operation?

The Case against Any Energy Subsidies

In the December 19 issue of Chemical and Engineering News, Jeff Johnson reports on a long history of US energy subsidies. The report is based on a historical study performed by Yale University economists, who concluded that the study finds a paucity of government support for a new energy sources compared with past government subsidies to gas, oil, and coal.

It is interesting that to make the statement, the Yale economists compare 15 years of expenditures for renewable subsidies with 91 years of subsidies for oil and gas. We have here the usual problem of figures don't lie, but liars figure. I need to also point out the faulty logic of complaining about subsidies for something which obviously should not be subsidized. We have ample reserves of oil, gas, and coal, all of which can be harvested to give an energy cost considerably lower than that obtained from "new energy sources". When the Yale people talk about "new energy sources", they mean renewable sources, which are agriculture-based. This presently includes ethanol from corn, with "pie in the sky" hope that we can eventually obtain significant ethanol from cellulosic materials, such as grass. We can actually do this now, but the cost far exceeds that of energy from traditional sources. This is also true of ethanol from corn, which requires continuing subsidy to make it market-competitive with gasoline.

Over the years we have spent a tremendous amount of money on agricultural subsidies. By the same logic, which Yale uses, should we now be subsidizing dandelion research?

I'm not solely criticizing subsidization of energy from renewable sources. I am criticizing subsidies for energy from any source, be it wind, solar, coal, oil, gas, or manpower. We have market forces, which will decide which of those is the most competitive form of energy. We do not need taxpayer money injected to confuse the situation, based upon one or a few people's ideas of the best approach. Market forces are determined by a preponderance of the population. It is industry's job to make available various choices for consumer judgment. It is not government's responsibility to be involved.

Some say that the people don't have the foresight to see that we will eventually run out of fossil fuels, and that is up to government to look toward the future. This is an erroneous conception. Before the discovery of oil, only coal was a legitimate fossil fuel. Candles were made from beef tallow and heating was primarily done with wood. There was no air-conditioning. After the discovery of oil and the continued development of coal usage, beef tallow and wood were unable to compete, in order to give us the modern day conveniences we have. Need I mention that beef tallow and wood are renewable sources.

More significantly, government did not foresee the discovery of oil, nor did it foresee the availability of nuclear energy. Government is not all-seeing. However, it can, with its superior attitude, fleece the American public from hard-earned dollars to foster ridiculous programs.

Criminal Prosecution of Oil Drilling Employees

Open e-mail to Rep. Neugebauer:

Rep. Neugebauer:

I have to hand to the Obama Administration for developing innovative ways to accomplish its goals. I say this in the same context that I admire the ability of thieves to develop new ways to steal.

I just heard on Fox News that the Justice Department is investigating criminal prosecution of managers and engineers of BP for the Gulf oil spill.

With this new development, any oil drilling executives and engineers would have to be out of their minds to continue drilling for oil and gas in the traditional manner of facing the hazards of natural forces and some beleageurment with government regulations. They would now have to worry about personal fines and jail time.

It would not even be necessary for the Justice Department to actually conduct an investigation with intent to prosecute. The mere threat that this is a possibility will put the fear of God into operators.

The outcome of this will be that oil and gas drillers will either go out of business, which is highly unlikely, or more likely they will be developing a strategy to deal with it. The most obvious strategy is to reduce the risk of natural disaster. This can be done by cutting back on deep water drilling and only drill far off the coasts of populated areas. This has two negative effects. The big possibilities of large oil reserves being discovered is considerably reduced. Any oil and gas which would be discovered in remote regions would involve significant costs for transportation either through pipeline or tankers.

A second strategy is to not move a muscle, unless all details of an operation are approved in writing by federal inspectors. This would include development of horrendous safety plans, with details on composition and manufacturing techniques of all physical parts used in the drilling operation and a complete (perhaps thousands of pages) of corrective actions which might be taken in case of accident. This would include details of financial compensations and a multitude of associated legal documents. The net result would be to hamstring the already half hamstrung operation of drilling. Oil and gas production would be significantly reduced and the cost of any production would be significantly higher, with correspondingly higher prices to the consuming public.

Rep. Neugebauer, what are you going to do about this atrocity perpetrated on your constituency?

Department of Energy Waste

In the October 17th issue of Chemical & engineering News, Jeff Johnson has a nicely informative article on the Department of Energy's expenditures for loan guarantees and grants to promote "clean" energy.

At the end of September, the Department of Energy awarded $4.7 billion loan support for four photovoltaic solar projects in California, $1.5 billion to install ground-level solar panels, $1.4 billion to install rooftop solar panels, $1.2 billion for a solar "ranch", and $646 million for a thin-film solar project. This is all based on Congress' passage of the American Recovery & Reinvestment Act of 2009, which I have previously strongly recommended should be repealed by Congress and removed from separate funding.

The DOE also offers another $10.6 billion for clean energy projects through a separate loan guarantee program that is not dependent on stimulus money.Two other guarantees would support solar installations in the West—$737 million for a 110-MW concentrating solar power tower project in Nevada and $337 million for a 150-MW PV facility in Arizona. The remainder would guarantee a $132 million loan for a commercial-scale cellulosic ethanol plant in Kansas.

In all, $13.3 billion of the $16.1 billion American Recovery & Reinvestment Act (ARRA) funded program supports loans for solar-related projects.

Also at the end of September, DOE announced $156 million in grants to 60 research teams under DOE’s ARPA-E program, which funds transformative energy research projects. It is the fourth round of ARPA-E grants.

In the two years since it was first funded, ARPA-E has provided $522 million to 180 projects,

The ARPA-E grant projects involve biofuel production, alternatives to rare earth minerals, storage transport and use of thermal energy, automating the electricity grid, and grid connection of PV (solar) generated electricity. Those funds are almost equally distributed among universities, small businesses, and large businesses.
I have previously said, and I will say again, that these programs are a complete waste of taxpayer money. There is absolutely no need to try to replace the traditional sources of energy, such as natural gas and petroleum with solar and wind. US fossil fuel reserves can be harvested at costs significantly below anything that could involve solar energy.

I have recommended previously that the Department of Energy be eliminated. It was originally set up by Congress and can also be removed by Congress. From a practical consideration, the Senate will obviously vote for continued existence, as will the President. However, the House must go on record as having taken the initiative, and after the forthcoming elections of 2012, we will be able to see some positive action through a new Senate and President.

Too Many Eggheads Pushing Uneconomical Solar Energy

Jeff Johnson has a two-page article entitled "Uncertainties Slows Energy Investments", with a subtitle, "House-led DOE investigation is likely to reduce US clean energy investments, growth", in the November 21 issue of C&E News. The essence of the article is that the investigation of the Solyndra bankruptcy could involve shutdown of other solar energy companies and cost the American taxpayers.

Johnson makes the point that the Solyndra investigation has put the kabosh on private investments for solar energy development. I judge that to be a good thing. The only reason private investors would possibly be interested in solar energy is because of the complete absence of risk for their investment through government loan guarantees and the possibility of greater profits through government subsidies, if at project is successful.

The Senate is not following a similar Solyndra investigation. Bill Wicker, the Communications Director, of the Senate Energy and Natural Resources Committee said, "A more thoughtful look at the financial gap for advanced energy technologies between the US and its international competitors, like China, does make sense". I completely disagree. The implication that solar energy is an advanced technology is completely unjustified in the present economy. In addition, the Chinese government has contributed only a pittance in the support of its solar energy equipment producers. It has done so, not because it is a strong believer in the economics of solar energy, but that because the US is a good potential market for this equipment.

Cliff Stearns, Chairman of the House Committee on Energy and Commerce Oversight And Investigations Subcommittee, hit the nail on the head, when he said, "Even with oil at $140 a barrel, the idea that solar energy will be breakeven is questionable." As a reminder, the present price of oil is about $100 per barrel, and this has been artificially propped up by the Obama Administration by refusing drilling leases to oil production companies in the US. The latest situation is Obama's refusal to allow construction of an oil pipeline from Canada to the Gulf Coast. The Obama Administration is doing everything it can through DOE Secretary Chu to prop up the price of oil and gasoline, in order to justify taxpayer expenditures for solar energy. This is an ideological consideration unjustified by the economics of present reality. The problem is that we have too many eggheads confusing the situation.

One is Frank Laird, a professor at the University of Denver. He says, "The size of credit matters less than keeping it in place long enough to provide consistency for investors". He apparently doesn't understand money. As an example, suppose we allocate $1 trillion of taxpayer money for solar energy development each year for the next 10 years. Is this going to attract private investment? The answer is obviously yes. Private investment will have no risk for its own money, because of loan guarantees with taxpayer money. In addition, if by slight chance there is a profit to be made, it will become significant through further government subsidies. While this tends to support Laird's statement, consider the fact that an equal amount of energy could probably have been produced at significantly less cost through the oil and gas route and without the use of taxpayer money.

Another egghead is David Goldston, who is the Director of Government Affairs for the Natural Resources Defense Council, an environmental group. He says, "To develop energy sources beyond the current mix of coal, oil and petroleum takes government support." I could possibly agree with that, but then I have to ask the question, why would we want to do that? Coal, oil, and petroleum are already doing the job even with the inhibitions placed on it by the Obama Administration. Even the most ardent supporters of solar energy, when caught in a rational state of mind, will admit that solar energy can not compete economically. We should not be dumping taxpayer money down this rat hole.

Cheap Energy Will Make the US More Economically Competitive

Open e-mail to Rep. Neugebauer:

Randy,


More talk in the News on clean energy. In spite of Solyndra and others, the White House continues to push "clean energy". The latest comment is that we must keep up with the rest of the world.

"Clean energy" are the buzzwords of the Obama Administration for anything that does not release CO2 in its final use. They mean wind and solar energy. The Administration doesn't want to talk about nuclear energy.

If you do the math, one of the problems is that one can't get more than about 10% of our energy needs from wind and solar, even with extensive commercial development. In addition, wind and solar are considerably less efficient dollarwise than using fossil fuels in our traditional generation of electricity from coal burning power plants and the use of gasoline in automotive vehicles.

Why the condemnation of CO2 as a bad actor? There are no data to show that it is detrimental to the environment. In fact, CO2 in air is a raw material source for plant growth.

I strongly suspect that ideology and taxation are behind the Administration's continuing push for clean energy. If the US follows the "clean energy" program, it will be operating an industrial economy at considerably less efficiency, than there would be with use of fossil tools. This would then put the US economy at a level more equal to Third World countries, which is one of the objectives of Marxists ideology.

The Obama Administration is using a twofold approach; throw taxpayer money at the development of inefficient energy processes and simultaneously inhibit production and use of fossil fuels. Inhibition of fossil fuel production has been demonstrated in the continued withholding of oil drilling permits from drilling companies, and the recent postponement (killing) of the Canadian oil pipeline to the Gulf Coast.

Postponement/killing of the Canadian oil pipeline project also does not make available thousands of US jobs for its construction. More importantly, it tends to maintain oil and its associated products, such as gasoline, at high prices. The US labor force is high priced compared to labor forces in most other developed countries, which is why much manufacturing has gone from the United States to those other countries. However, a little noticed fact is that with use of cheap energy, high-priced American labor could actually be more efficient (lower cost) than third country labor.

Randy, we have an opportunity to get the US economy back on track, but it will involve fighting a misplaced ideology of the Obama Administration. Please do your best.

EPA Has Control Power of Plant Emissions but Must Use Discretion

Open e-mail to Rep. Neugebauer:

Randy,

As you know from my previous e-mails, I'm not a big supporter of the EPA and Democratic (socialistic) philosophy. However, Democrats and even Pres. Obama will occasionally do something right.

According to C&E News, there was a recent effort in the Senate to allow only the states to control emissions from coal-burning electricity generating power plants. The present EPA regulation involves national control. The measure attempting to revert back to state control was defeated, which is a good thing.

The fact is that gaseous and particulate emissions of coal-burning power plants do cross state lines, and therefore are a National problem, rather than a State problem.

In addition, we know from previous experience that at least some emissions of coal-burning power plants are significantly detrimental to the environment. Some years ago, the Northeast was particularly affected by acid rain, which significantly increased the acidity of lakes and ponds. The acidity changed the floriculture of these water reservoirs and in many cases was detrimental to fish population. Actual monetary harm to the economy was probably negligible, but most people believe that we have an obligation to preserve the natural environment, wherever possible, and within the limits of economic good sense.

The acid rain problem was technically traced to sulfur contamination in coal being burned in the power plants. The sulfur contaminant burned to give gaseous sulfur dioxide. The sulfur dioxide later oxidized in the atmosphere to sulfur trioxide, which in turn reacted with rainwater to form sulfuric acid. It was the sulfuric acid content of rainwater which caused the environmental change. The problem was resolved by reducing the sulfur content of coal burned at the power plants. We hear no more about acid rain.

The likelihood is that some sulfur is still being burned in power plants leading to sulfuric acid, but the concentration is now so low as to basically alleviate the acid rain problem. The key point here is not only recognizing emission contaminants potentially detrimental to the environment, but also recognizing concentrations that actually do damage.

The accent on power plant emissions at present involves sulfur dioxide, carbon dioxide, nitrogen oxides, and mercury.

We have experience to know that sulfur dioxide is a detrimental environmental contaminant, which concentration must be controlled to a non-detrimental level.

Carbon dioxide has become a political football for purposes of redistribution of wealth through taxation. It is a natural constituent of the atmosphere, and there is no data to show that even significant increases in concentration are detrimental to the environment.

NOx is a mixture of NO and NO2. One of these gases has been traced to further atmospheric reaction to form ozone, which is environmentally protective at high atmospheric levels, but detrimental to humans at ground-level. In addition to human toxicity, it is generally considered to be involved in smog formation. There is some justification for control of NOx from power plants. The question remains as to what is a reasonable level of permissible concentration, where there is no obviously significant damage. It is also possible that power plants can install catalytic systems to reduce NOx concentrations. This has already been accomplished in automotive vehicles. It will cost the power plants to install such catalytic equipment, and the cost will be transferred to increased electricity cost for the consumer. There is a level of justification, but it should not be overdone.

I have previously written about mercury emission. Mercury in the atmosphere is brought to ground level by rain. In swampy areas, microbiological action converts the mercury to methylmercury, which is toxic to humans and wildlife. However, note that the conversion to methylmercury is only applicable to a very limited ground area, and even in that area, we have not noticed detriment to the environment. In effect, there is no significant case for controlling mercury emissions. For those who still have doubt, we could justify spending a little money on research.

Congress Must Move on Canada-US Oil Pipeline

E-mail to Rep.Neugebauer:

Pres. Obama has just scuttled the proposed oil pipeline from Canada to the US. The expected advantages to the US were a large number of US construction jobs and availability of low-priced oil in the US.

Why would Pres. Obama scuttle such an obviously advantageous program? There are several considerations, all of which are of importance to Pres. Obama. A low crude oil price in the US would give lower gasoline prices. This would be disadvantageous to Pres. Obama's personal program of converting the automobile industry into electric vehicles. Low-cost energy would foster the general economy of the US. This could be disadvantageous to Pres. Obama's program to redistribute wealth globally. We have previously pointed out that environmental groups in the US have been taken over by Communists, who also support global redistribution of wealth. Environmentalists are also large contributors to Pres. Obama's reelection campaign. Environmentalists use devious mechanisms, such as spotted owls, snail darters, and now possible contamination of aquifers in order to stymie any economic growth in the US.

In scuttling the pipeline proposal, Pres. Obama only indicated a postponement. However, the Canadians realistically said they would follow a different route of oil export to China. Once that is set up, the US will be on the outside looking in.

As implied above, Pres. Obama's stated excuse was possible contamination of a drinking water aquifer. An aquifer is an underground layer of permeable rock, gravel, sand, or silt which can contain and through which water can flow. For example, Lubbock is at the terminus of the Ogallala aquifer, which originates in Colorado and allows water to flow underground from melting snows and rains in Colorado. There is no such thing as a drinking water aquifer. Aquifers can become contaminated with pollutants, similar to what can happen in lakes and streams, but usually the aquifer size is so great that pollution is generally insignificant. In addition, the underground layer of permeable rock etc. is usually so broad, in relation to the diameter of a pipeline, that even a burst pipeline would have little effect on aquifer contamination. This is especially true when it would be obvious to pipeline operators that not repairing a significant pipeline leak will cost them a significant loss in oil revenue. Another comparison is that even in the design of the human body, a potential pollutant pipeline in the form of intestine passes through areas close to vital organs, such as heart, kidneys etc. without difficulty.

For various reasons, Pres. Obama has scuttled this pipeline. It may not be too late to resurrect it, but the longer we wait, the more difficult will be a reversal. Congress should not accept this obvious opportunity to increase jobs and improve the general economy of the US. Congress should take some action now, against Pres. Obama and the Department of Energy or whichever agency is ostensibly responsible for this atrocity.

..

Repeal the Energy Policy Act of 2005 and the Energy Independence & Security Act of 2007.

Open e-mail to Rep. Neugebauer:

Randy,

On October 27, 2011, I e-mailed you asking that you energize the Congress to repeal the Energy Policy Act of 2005 and the Energy Independence & Security Act of 2007. They were ill conceived originally. They involve unnecessary government subsidies, which we cannot afford, and contain restrictions on private business development.

I now present additional information, which supports this position. Another way to look at it is that, in establishing the two Acts, Congress did not take into consideration the power of subsequent technology development from existing private industry. I refer specifically to the ethanol provisions of the two Acts, which mandates ethanol use in motor fuels, even though gasoline is less expensive on the market.

The ideal fuel for motor vehicles is liquid form, which can be carried and enable the vehicle to have an operating range of several hundred miles. Gasoline admirably satisfies this requirement. Electricity and natural gas have enough deficiencies that they are not competitive. However, other liquid fuels might also be acceptable, including ethanol. But again, we need to consider price and availability.

In the October 24 issue of Chemical and Engineering News, there is an article by Alexander Tullo entitled, "Celanese Takes an Ethanol Plunge".

We have in the US tremendous coal reserves. It has been a long-standing objective of the chemical industry to convert coal to a liquid fuel for automotive use. Several processes have been developed, but none of these have met the cost requirements to compete with gasoline. However, Celanese now claims to be able to do this.

In order to analyze whether Celanese really has something, we need to be first concerned with measurement. Since petroleum is a prevalent energy source, it has been convenient to relate any other sources to petroleum. In their announcement, Celanese has used figures involving Barrel of Oil Equivalents (BOEs), but most liquids are sold on a per gallon basis. First, we need to understand a BOE and second, we need to be able to convert $ / BOE to $ / gallon.

A standard petroleum barrel contains 42 US gallons. Inherent in the barrel of oil is a quantity of available energy, which is 5,800,000 British Thermal Units (BTUs). Other fuels may then be calculated for their energy contents relating to the energy content of a barrel of oil. The term is a "Barrel of Oil Equivalent", or a BOE. Therefore, if I want a comparative prices of alternative fuels, I can compare their BOE prices with the price of an actual barrel of oil. However, a fixed barrel volume is only applicable to 42 gallons of petroleum. BOEs for other fuels are not true barrels. For example, gasoline has an energy content of 125,000 BTUs per gallon. To have the same quantity of energy as a barrel of crude oil, 46.4 gallons (5,800,000 / 125,000) are required. The BOE for gasoline is then, 46.4 gallons, not 42 gallons

In its announcement of the a low-cost route to ethanol from coal, Celanese has forecast that, with its new TCX Process, it could produce ethanol at a selling price (not cost) of $60 per BOE. For comparison, Celanese said that petroleum and corn fermented ethanol were both selling at $100 per BOE. A check of the market prices confirmed the price of $100 per barrel of crude oil, which is the same as the BOE. There is no reported price for a BOE of ethanol, but spot price at Chicago is $1.68/ gallon

The above figures are not really comparable, because they do not take into account differences in taxes and subsidies. In addition, crude oil cannot be used directly in automotive vehicles, while ethanol can be used directly, even if only at low rates of mixing with gasoline. Therefore, we need adjustments to obtain comparable figures. These adjustments have been made in the attachment.

The net result is that gasoline price at the refinery is $2.39 per gallon. Corn fermented ethanol, when corrected for subsidy and less energy content as compared to gasoline is $3.60 per gallon. It makes no sense to use corn fermented ethanol as a motor fuel, especially when we have ample reserves of crude oil, which can be tapped and refined to gasoline. Note also that even with the giveaway of a $.51 gal subsidy, corn fermented ethanol costs $3.09 per gallon, compared to gasoline at $2.39 per gallon.

Finally, Celanese's TCX ethanol looks to be cheaper than gasoline on a comparable energy basis ($1.30 per gallon versus $2.39). We can be hopeful that it will come to realization, but it is presently pie-in-the-sky. There are also two other disadvantages. Automotive vehicles are now constructed to only be able to use a blend of ethanol with gasoline. This could be solved to allow complete ethanol use, but likely at considerable cost to vehicle modification. In addition, the lower energy content of ethanol versus gasoline will reduce the driving range, unless there is an increase in carrying capacity.

Randy, we go back to the start. Congress must repeal the Energy Policy Act of 2005 and the Energy Independence & Security Act of 2007.

Ref: http://www.eia.gov/oog/info/gdu/gasdiesel.asp

Understanding Cap & Trade

Cheryl Hogue has an article entitled, "Unfriendly Skies" in the October 17 issue of Chemical and Engineering News. It is basically about an argument between international air lines and the European Union. The European Union (EU) says that when airlines fly into EU airspace, they generate significant quantities of carbon dioxide through the burning of their jet fuel. The EU says the airlines are subject to "Cap & Trade", which essentially means they must pay a tax. The airlines object because it will cost them money.


This is only a small segment of the many arguments which involve Cap & Trade in the EU. It may be interesting to review Cap & Trade, for what it really is; a government tax.

Since the end of the Cold War and the collapse of the Soviet Union, Western Europe has been continually moving toward a socialist culture. However, the bad economics of socialism is starting to catch up. We see this in the economic problems of Greece, followed by Italy and Spain. Even Germany will eventually not be exempt. I believe the existing governments will all go down to defeat as the EU is unable to meet its obligations to the population. These obligations involve government benefits of unemployment insurance, free housing, free medical care, etc.. In an effort to maintain solvency in the various governmental coffers, and the EU in total, various tax forms have been developed. The latest of these is the "Carbon Tax", which has been previously previously disguised under the term Cap & Trade.

The Obama Administration has seen Cap & Trade operating in Western Europe and has been impressed by its success, in spite of various difficulties that have emerged. The attractive aspect has been a potential source of tremendous government revenue to support a socialistic program of giveaways and maintain governmental power.

In order to sell Cap & Trade to its populations, the EU and the United States have developed a sales technique. The EU has already established the program, while the US is still toying with it. The sales technique is routine for the devious selling of all goods and services. Scare the customer into buying to avoid perilous consequences and convince him that it doesn't cost anything. Ancillary to that is the use of complexity, new terminology and scientific innuendo, so that the customer normally cannot understand what is occurring, without significant effort on his part, and usually which he is unwilling to contribute. Cap & Trade very adequately covers all these points, but it behooves some of us to try to explain it, so that the public has an opportunity to adequately understand what it is buying.

We have already covered the government motivation for instituting Cap & Trade. We now concentrate on the specific selling techniques. First, the fear factor. If government can relate carbon dioxide emissions from burning fossil fuels to climate change, with disastrous results of such climate change, the fear factor has been established. Projections for climate change can easily result in dire consequences without any proof that those consequences will really occur. A few of the proposed dire consequences of climate change are melting of the polar ice sheets with rising sea levels to flood civilized areas, eliminating ice at the North Pole which will lead to the destruction of polar bears, the development of more violent storms and tsunamis as oceans are warmed, etc.. The Obama administration has already spent many millions of dollars in research to establish such connection between carbon dioxide atmospheric concentration and climate change, but has been unsuccessful.

With respect to Cap & Trade cost to the public, yhere is general government admission that there will be an increased cost, but that will be minimal considering the advantages of eliminating the dire consequences of climate change previously mentioned.

The matter of complexity is beautiful in its development to confuse the public. However with a little attention to logic and patience. it can be understood and considered in its proper perspective. Let's use the present EU system, which is functioning, and which is probably a model for anything that the US might adopt.

The EU has surveyed the various sources of CO2 emission, which are generally electricity generating plants using coal, oil, and natural gas. Note that the objective here is to identify entities which can be easily taxed. Note also that airlines have now been added to this list. Conversely, while private automobiles generate significant carbon dioxide, it would be more complex to tax each automobile user. Apparently the thought has not yet come to EU officials that they could apply Cap & Trade to automobile manufacturers.

For the moment, consider only electricity generating plants. The EU survey has already established "normal" CO2 emissions from each of those plants. Simple addition then gives total CO2 emissions in a year. Each of the CO2 emission producers is given an EU permit to emit its "normal" amount of CO2. The next year, the EU says all emitters must reduce their CO2 emissions by 10%. Power Plant A has several choices. It can reduce its supply of electricity to its customers, install equipment to capture carbon dioxide from its emission stream, or purchase permits from other power plants who may not be using their allocation permits for one reason or another. Notice that any of these options increase costs to the producer, which passes the costs on to the consumers as price increases. At this point, the EU has not collected a nickel in taxes.

The next year, the EU says everybody must cut their CO2 emissions by 30%. The same options as previous exist for each power plant. Power Plant A takes a responsible attitude that it cannot reduce its electricity supply to its customers by 30%. Similarly, preliminary calculations on installing CO2 sequestration equipment shows it would be more expensive than the possible purchase of allowances from other permit holders. However, when it goes to the market to purchase CO2 allowances from other power plants, it finds that none are available. The EU recognizes, and has already predicted that this would occur, and allows another option, which is the purchase of an additional allocation permit issued by the EU. Since there are now many power plants that need additional CO2 allocation permits, the EU makes new permits available by auction. Let's guess that the auction price is $15 per ton of CO2. Power Plant A needs 10,000 tons of additional permit allocation to keep supplying its customers. Therefore, it pays the EU $150,000 for the additional permit. Power Plant A considers this an additional cost of doing business and passes along that cost as a price increase to each of its customers. It might be a few hundred dollars to each customer. Notice that the EU receives $150,000 and that $150,000 is paid by the electricity consumers. In effect, Cap & Trade is a use tax.

It could get worse. In the next year, the EU could say all emissions are now being cut by 50%. We go back to the auction block for new allocation permits. The auction price is now established at $50 per ton. Power Plant A needs another 10,000-ton allocation permit. This time it costs $500,000, which goes to the EU as a use tax paid by the electricity customers. However, there are the other two options to avoid this tax. That is to go out of business, or install CO2 sequestration equipment. It is only the latter which presents some semblance of control on the tax gouging by the EU. Remember also that this is the model for any similar operation in the United States. It is fraudulent to the extent that there is no clear indication that CO2 emissions must be controlled.

The Department of Energy Continues to Pour Taxpayer Money Down a Rar Hole

In the October 17th issue of Chemical & Engineering News, Jeff Johnson has a nice informative article on the Department of Energy's expenditures for loan guarantees and grants to promote "Clean" energy.


At the end of September, the Department of Energy awarded $4.7 billion loan support for four photovoltaic solar projects in California, $1.5 billion to install ground-level solar panels, $1.4 billion to install rooftop solar panels, $1.2 billion for a Solar Ranch, and $646 million for a thin-film solar project. This is all funded by the American Recovery & Reinvestment of 2009, which I previously strongly recommend should be repealed by Congress. In separate funding, the Department of Energy added another $1.12 billion in loan guarantees. Collectively, the Department of Energy is committing $26 billion to clean energy loans.

in addition, the Department has expenditures of $156 billion in Advanced Research Projects Agency-Energy (ARPA-E) grants to inventors and "technology entrepreneurs". The ARPA-E grant projects involve biofuel production, alternatives to rare earth minerals, storage/transport/use of thermal energy, automating the electricity grid, and grid connection of photovoltaic (solar) generated electricity. Those funds are almost equally distributed among universities, small businesses, and large business.

I have previously said and will say again that these programs are a complete waste of taxpayer money. There is absolutely no need to try to replace the traditional sources of energy, such as natural gas and petroleum with solar and wind. We have in the US large reserves of oil, natural gas, and coal. These energy sources can be tapped at costs significantly below anything that could involve solar energy or wind.

I need to hear nothing about "clean" energy. Carbon dioxide from burning fossil fuels is well-handled by the natural environment. All efforts by the Administration to connect CO2 atmospheric concentration with climate change have failed, in spite of the millions of dollars the various government agencies have poured into research to prove otherwise.

I have also recommended previously that the Department of Energy should be eliminated. It was originally set up by Congress and can be removed by Congress. From practical considerations, the Senate will obviously vote for its continued existence and the President will support it. However, the House must go on record as having taken the initiative, and after the forthcoming elections of 2012, we will be able to see some positive action through a new Senate and President.

Eliminate Subsidies and Loan Guarantees for Energy Production & Use

Open e-mail to Rep. Neugebauer:

SUMMARY

Government should not be involved in subsidies for solar module production, nor in installation for their use.

DETAIL

The October 10 issue of Chemical and Engineering News has a nice article by Melody Bomgardner on the solar industry. She clearly points out that there two aspects to this industry, which are economically different. The first is production of solar modules, and the second is their use or installation.

We are already familiar with the bankruptcies of Solyndra and Evergreen. In addition, two German firms recently announced that they would close US factories. SpectraWatt, which is a spinoff of Intel filed for bankruptcy in August. All of these companies were unable to compete with low-priced polycrystalline silicon from China.

There are three commercial materials which have photovoltaic properties. They are polycrystalline silicon, copper indium gallium disulfide, and cadmium telluride. Calisolar is one of the few US silicon producers still trying to compete with the Chinese. First Solar is competing with its low-cost cadmium telluride. All told, strong production competition in the global solar module market pushes down prices for solar modules. This has the advantage of improving the market for installation.

However, Germany has recently been shrinking its solar subsidies and Italy has instituted a cap on payments for solar installations. Western Europe is generally deficient in oil and has attempted to increase energy availability through solar installations. The US government has been trying to mimic these European efforts, but is behind the curve. Western Europe is starting to recognize the futility of the operation, as it cuts its subsidies. The US Government is still gung ho.

Considering the oil factor, the market for solar installations in the US is significantly reduced to specialty cases, which is as it should be, since without subsidies, it cannot compete with oil us as a primary energy source. Therefore, it is ridiculous for the US government to be propping up a less efficient energy operations through taxpayer subsidies in these times of budget deficits and huge national debt.

I strongly urge Congress to eliminate all subsidies for production of solar modules and their installation, as well as stopping the administration from granting loan guarantees to solar energy companies, which must fail in a competitive in a competitive energy market.

Repeal Two Laws Requiring Use of Ethanol in Automobiles

Open e-mail to Rep. Neugebauer:

Randy,

Summary

Repeal the Energy Policy Act of 2005 and the Energy Independence & Security Act of 2007. They were ill conceived originally. They involve unnecessary government subsidies, which we cannot afford, and contain restrictions on private business development.

Detail

Congress passed the Energy Policy Act (EPAct) in 2005. It included a basket of energy issues. For the present, we wish to consider only ethanol as a replacement for gasoline in motor vehicles and its unnecessary subsidization.

EpAct defined two types of ethanol. Ethanol derived from cellulose is known as "Cellulosic Biomass Ethanol".

Ethanol derived from cellulose and ethanol derived from corn are collectively known as "Renewable Fuels". Notice that "Renewable Fuels" includes both cellulosic and corn derived ethanol, while "Cellulosic Biomass Ethanol" is a single entity. The amount of ethanol, from both sources, mandated for use in 2022 was based on a formula. No quantity was considered for the separate cellulosic ethanol.

Congress passed the Energy Independence and Security Act (EISA) in 2007. The stated purpose of the act was to move the US toward greater energy independence and security, to increase the production of clean renewable fuels, to protect consumers, to increase the efficiency of products, buildings, and vehicles, to promote research on and deploy greenhouse gas capture and storage options, and to improve the energy performance of the Federal Government, and for other purposes.

EISA requires that the total amount of Renewable Fuels added to gasoline must increase to 36 billion gallons by 2022. Of that total, 21 billion gallons must be cellulosic ethanol. Another source specifies 16 billion gallons of cellulosic ethanol, but this is not a significant difference is context. A side issue is that the EPA was given the responsibility to implement the laws, and it has translated the requirements as a Renewable Fuel Standard. However, the numbers are the same.

The National Research Council has recently investigated the progress of cellulosic ethanol production and has concluded that there is no way the requirement of EISA can be met by normal development procedures.

This leaves two options. Change the law or throw billions of dollars of government money into development, which would hopefully increase production of cellulosic ethanol to the specified level. It is certain that private capital would not consider this a viable investment.

The key point is that we don't need ethanol as an automotive fuel. Since the two laws were passed, we have significantly increased our petroleum reserves and private industry is available to tap it. If the Dept of Energy will allow drilling permits. Gasoline from petroleum is always cheaper than ethanol from any source, and we need to scrap all considerations of ethanol use as a major constituent of motor fuel.

The answer to the cellulosic ethanol production dilemma is obvious. Repeal EPAct and EISA and simultaneously remove restrictions on crude oil production, so that private industry can get on with its job of providing the public with cheap automotive fuel.

Shut Down the US Department of Energy

The October 3 issue of Chemical & Engineering News has an article by Jeff Johnson entitled, "DOE Plans Shift in R&D Direction".

The US Department of Energy has an annual budget of $26 billion. My comment is that the Department of Energy has accomplished nothing with its previous annual budgets and the Department of Energy should be disbanded.

However, looking at the details of Jeff Johnson's article, the present annual budget for research at the Department of Energy is $3 billion. About 50% is for development of clean electricity sources, 19% for improving building and industrial efficiency, 5% for improving the electric grid, and 26% for supporting transportation. Note that the $3 billion does nothing to actually improve these items. The expenditure is only for studies.

Obama has now appointed a select committee of "scientists", which recommends that the research budget should be increased from the present $3 billion, which is a little over 10% of the total DOE budget to 20%. Obama's "scientific" committee recommends more attention (money) to improve vehicle efficiency, electrification of automobiles, deployment of alternative fuels, enhanced building and industrial efficiency, modernization of the electrical grid, and increased deployment of clean energy sources.

This committee is obviously following the Obama party line of ignoring our great potential for continued and increased use of gas and oil, while it fritters away our tax assets on "pie in the sky studies" followed by real losses, such as Solyndra and a larger one yet to come.

My recommendation is to eliminate the Department of Energy, which will eliminate not only its $3-6 billion "studies" budget but also the larger $30 billion annual expenditure of the whole agency. I have written separately on how this can be done.

House Committee Hearings on Continuance of the Department of Energy

Open E-mail to Rep. Neugebauer:

Randy,

I would like you to set up House Committee hearings concerning continuance of the Department of Energy.

Start with the fact that the present annual budget of the DOE is $27 billion. $11 billion each go to Nuclear Security and Energy & Environment. The other $5 billion goes mostly to "Science".

Congress established the DOE in 1977. It was primarily based on the oil crisis of 1973 from the Arab oil embargo. The intent of the DOE was to establish an energy plan, which would make the US less vulnerable to variable oil supply from Arab countries.

The questions that the Committee should now be asking Sec. Chu are:

1. Is our economy now less vulnerable to variable supply from the Arab countries than it was 34 years ago?

2. If it is, what part did the DOE play in the change? Did the improved drilling technology of private companies have a more significant effect? Did and does the DOE help those private companies in any way? If so, how?

3. If our economy is still significantly vulnerable to variable oil supply from Arab countries, what is the DOE now doing about it?

4. The average DOE budget was $20 billion per year over the past 34 years, which totals $680 billion. What did the American public get for its $680 billion?

I'm sure there are other questions that the Committee will develop. Chu will try to defend his position by the use of gobbledygook, meaning pie-in-the-sky predictions of the great things yet to come.

The fact remains that we should be closing down the Department of Energy as a basic money waster. It has accomplished nothing significant in the past, and there is no reason to believe it will be different in the future. I believe we are now less dependent on Arab oil than we were in 1973, but that is the result of positive action on the part of private drilling companies, in spite of DOE regulations to minimize that production particularly through permit control. I will only mention the Splendora and other solar energy fiascos.

We obviously need to maintain Nuclear Security. That responsibility should be transferred to the Department of Defense, where it belonged in the first place. The DOD can the have the responsibility to see that the program is being operated efficiently.

Will we eventually run out of gas and oil? Obviously we will, but exploration even with DOE interferences has continued to increase our reserves. Private industry has all the incentives it needs to supply energy, and we can depend on it to utilize all technology necessary for continued supply in one form or another.

Fire DOE Sec. Chu

EIN News says, "Chu Takes Responsibility for a Loan Deal That Put More Taxpayer Money at Risk in Solyndra Energy Secretary Steven Chu acknowledged making the final decision to allow a struggling solar company to continue receiving taxpayer money after it had technically defaulted on a $535 million federal loan guaranteed by his agency. (washingtonpost.com)".

I'm amazed that anybody in the Obama administration will take responsibility for anything.

Now that Chu has taken this step, let's build on it. This latest half billion dollar mistake is on top of all of the other errors he has committed as head of the Department of Energy. Fire him!

We plan to shut down the whole department anyhow. It has contributed materially to our 4 1/2 trillion dollar debt and every day continues to make it worse.

Oil Production Looking Good for the US

EIN News says, "North American Oil Output Could Top 40-Year-Old Peak North America appears headed for an oil renaissance, with crude production expected to hit an all-time high by 2016, given the current pace of drilling in the U.S. and Canada, according to a study released by an energy research firm this week. (chron.com)".

This is wonderful news, especially since Obama has used his best efforts to thwart it

Turkish Political Conflict Is Based on Need for Oil

EIN News says, "Off Cyprus, the Hunt for Oil and Gas Threatens to Rekindle an Old Conflict Turkey has upped the ante in its dispute with Israel by sending an exploration team into disputed waters south of Cyprus in search of oil and gas. The move sharply escalates Ankara's conflict with its neighbors over energy rights in the eastern Mediterranean. (theglobeandmail.com)".

In 2009, Turkey used 600,000 barrels of oil per day, and produced only 50,000 barrels of oil per day. It probably hasn't changed much in the last two years. The key point is that they have been forced to import 550,000 barrels of oil per day.

Is it a mystery as to why Turkey would be pressing for new oil resources?

Good News for World Oil Production

EIN News says, "In Colombia, Violent Protests Threaten an Oil Boom At first, Pacific Rubiales Energy had the magic touch in Colombia. Forty-two of its first 48 exploratory wells struck oil — an almost unheard of success rate. The Toronto-based firm, whose Colombian operations are run by exiled Venezuelan oilmen, now pumps nearly one-quarter of the country's present crude production of 953,000 barrels per day, and it's the main driver behind a boom that may well see the country reach 1 million barrels per day by the end of the year. (time.com)".

Good news for the world oil supply. It's especially important, because it reduces the economic power of the Middle East.

Fracking for Increased Natural Gas Supply Is a Great Development

EIN News says, "European Gas Giant Backs French Fear of Fracking Europe's largest natural gas firm, the Paris-based GDF Suez, agrees with the French government that hydraulic fracturing must be made safer for the environment before it is used to develop natural gas from shale resources in Europe. (forbes.com)".

GDF Suez

Let's first take a look at the relative size of GDF Suez, by using some production figures from its website http://www.gdfsuez.com/en/activities/our-businesses/natural-gas-exploration-and-production/natural-gas-exploration-and-production/. It reports its production in BOE. One BOE is equivalent to 164 cubic meters of gas. GDF suez produces 0.006 trillion cubic meters of natural gas per year. The supply comes from Germany, Netherlands, Norway, and the UK. It also has reserves of 0.1 trillion cubic meters.

For comparison, the total Euopean Union produces 0.2 trillion cubic meters (33 times more than GDF Suez). The EU also has conventional reserves of 2.3 trillion cubic meters (23 times that of GDF Suez).

Other country reserves of conventional gas are:
Russia 47.6 trillion cubic meters
Iran 29.6
Qatar 25.5
Turkmenistan 7.5
Saudi Arabia 7.5
US 6.9
Therefore, GDF Suez can be considered a minor supplier, with small reserves.

Fracking is estimated to increase the EU reserves by another 3.5 trillion, The likelihood that the fracking areas will fall in the areas where GDF Suez has existing conventional reserves is remote. Therefore, GDF Suez takes the position of opposing fracking, in order to preserve its existing business.

Environmental Considerations

One of the major objections to obtaining increased quantities of natural gas by fracking is a claim of environmental contamination put forth by environmental organizations.

I have said previously that environmental organizations have been taken over by leftists who really have little interest in the environment per se but are using it to reestablish world order and particularly place the United States in a position of what is presently considered a Third World country. Some of the political controversy is well documented in http://e360.yale.edu/feature/fracking_comes_to_europe_sparking_rising_controversy/2374/.

The best way to determine whether environmental contamination is a significant factor is to look at the detail.

Contamination

Let's first look at contamination in perspective. A volcano explodes and throws millions of tons of poisonous gases and particles into the air. Nature has its own way of handling that contamination. When we drive our automobiles, we generate poisonous carbon monoxide and nitrogen oxides. We handle that with catalytic converters. Each day we contaminate the environment with millions of tons of trash from food wrappings and waste food. We control that with landfill. Each day we personally contaminate the environment with urine and feces. We control that with sewage treatment.

On the input side, our food is contaminated with insects and microorganisms. We control that with cleanliness to reduce the concentration of contaminants and cooking to kill microorganisms. Our water in Lubbock is contaminated with calcium. We control that with water softeners. Water is used by the general public for flushing toilets, washing, lawn watering, cooking, and drinking. Only a very small portion is used for drinking, but cities and major towns have water treatment plants to treat water for all uses. Treatment plants treat the water to specifications. That means they take out most of the bad stuff. But treated water still has small concentrations of various minerals and, in some cases chemicals, such as pesticides and medicines, which leak into the supply from sewage treatment plants. Is this a source of concern? Yes, but the objective of water treatment plants is to keep the concentrations at low enough levels so that they are not health hazards.

Basic water supplies come from wells and reservoirs, such as lakes. Well water is generally contaminated with small concentrations of minerals through which the groundwater runs. Lake water comes from rain flowing across ground surfaces as rivers and streams, from which it takes up less mineral matter but more debris. As a side issue, New York City water comes from lakes in the Catskill Mountains. It is not subjected to contamination by fracking, which is an underground operation. It is silly to ban fracking in New York State, on the basis of protecting New York City water.

Methane

Methane is a major component of natural gas. Natural gas also contains some ethane and carbon dioxide. Note that these substances are not poisonous, and have no odor or taste. Natural gas from franking is piped from a level deeper than that of groundwater. Therefore in most cases, groundwater is not exposed to natural gas. There are exceptions and burnable well water has been observed. This can occur when natural gas dissolves in water water at high pressures. Subsequent release of pressure at ground level also allows the natural gas to come out of solution and be lighted. If the gas also contains higher hydrocarbons, it likely will have a taste and odor. However as indicated above, this can only occur with well water, which for cities and towns goes to a water treatment plant, where the taste and odor can be removed. Persons with private wells have more of a problem, but control is available, the cost of which can be borne by the value of the recovered gas.

Drilling/Fracking Contaminants

In the drilling operations and subsequent underground pressure fracturing of rock to release the natural gas, some chemical additives are generally used at low concentrations. These may occasionally find their way into well water but can be removed by water treatment techniques that would normally present no more of a problem than removal of trace amounts of pesticides and other chemicals from surface water in a water treatment plant.

Other Contaminants

As one Googles fracking, the only contaminants associated with well water are the methane and related hydrocarbons plus casual mention of drilling/fracking chemicals. Other than that, nothing is mentioned. This is not to say that some additional specific contaminants will not be discovered, but if they are, it is likely they could be easily controlled by standard water treatment techniques.

Conclusion

The new technology of increasing availability of natural gas by fracking from porous rock is a great development to increase our practical energy resources. Like anything else, there is a cost to obtaining it in the drilling and recovery process, and there are also environmental considerations. However those environmental considerations can easily be handled as minor costs within the gains of the energy itself.

More Extreme Waste by the US Department Of Energy (DOE)

The July 11 issue of C&E News also has an article entitled, "Powering Innovation". It says that the Department of Energy (DOE) is accelerating innovative energy research and development in the US. It wants to give teams of scientists and engineers the resources to solve what it considers the US's pressing energy challenges quickly..

The DOE has developed a new term called Energy Frontier Research Centers (EFRCs). Twenty six of these have been funded by the DOE to "identify the gaps and challenges in the fundamental understanding of the science of energy". A second group is the Energy Innovation Hubs, which are focused on alternatives to petroleum based fuels, such as fuels from sunlight and nuclear reactor design/engineering. The third group is the Advanced Research Projects Agency-Energy (ARPA-E), which concentrates on high-risk projects, such as electric fuels using microorganisms to convert CO2 to liquid fuels.

There are 46 EFRC's costing $1.7 billion. There are three Hubs costing $75 million. There are 121 projects in ARPA-E's seven programs at a cost of about $120 million.

One of the Hubs is building new facilities which will employ 150-180 new government employees.

The above costs are on an annual basis and many of them are specified to continue for five years. It appears that total taxpayer-fund expenditures for this pie-in-the-sky operation will run almost $2 billion per year. I say pie-in-the-sky, because none of it is really necessary. We have in the US more than ample supplies of oil and natural gas. We also have private drilling companies in a position to develop these resources. The only inhibition is the US government, which has a twofold program. The first is to inhibit production of oil and gas and the second is to spend money on projects, such as the many above, which will have no practical significance in most of our lifetimes.

Pres. Obama Should Resign

EIN News says, "U.S. President Obama's Losing Charge on Energy President Barack Obama is racking up an impressive losing streak when it comes to energy. Under pressure from Republicans, he embraced offshore drilling just weeks before the BP oil spill. He offered support for nuclear power, only to watch a disaster unfold in Japan. Gas price hikes in the spring disrupted his economic message. Feeling the heat from Republicans again, he infuriated his green base by bailing out on a long-promised ozone standard. (politico.com)".

I don't accept everything said above, particularly the "embracing" of offshore drilling. President Obama has done everything possible to inhibit oil production in the US. However in general, this is the best news I've heard in a long time. I am impressed that Pres. Obama is losing charge on energy. In addition, everything he touches seems to turn to mud. He is a wonderful speaker, likable and apparently a great community organizer, but he has so far done this country terrible damage. We need him out, out, out, as soon as possible and remove from the White House the Fascist/Socialist team he has installed.

Release of Emergency Oil Supplies by the US Likely Had No Effect on Oil Price

Open e-mail to Rep. Neugebauer:

Randy,

EIN News says, "Oil Release by IEA Is a 'game-changer' Despite Price Bounce It might not sound like much of a victory. The US and other oil-consuming countries release emergency stocks of oil to put a lid on prices. The result: crude prices in London rise by $1 since the programme began three months ago. (gulf-times.com)".

The United States and more than two dozen other countries that make up the IEA put 60 million barrels of oil into the market this summer in an effort to drive down skyrocketing oil prices.

It is unclear to me how anyone could logically say that the putting of strategic oil supplies into the market had a significant effect on reducing oil prices. We have no way of knowing what the oil price would've been without the "putting". I also do not claim that the "putting" had no effect.

I do recognize that based on normal laws of supply and demand, if the price is increasing on a product, the product is desired and there is a shortage of supply or else the mode of payment has become poorer. I think we can reasonably speculate that while the dollar has been declining in value, there is still a substantial shortage of oil compared to the amount desired.

This leads me into my standard complaint that Obama and the Department of Interior have continually withheld drilling permits to limit the quantity of US oil production in favor of promoting "sustainable" energy.

I also revert to the suggestion of two major oil company CEOs, who claim we need more federal regulators, on the presumption that those additional regulators will speed up the issuance of drilling permits. This is obviously a silly supposition, because all of these people take orders from Obama and Salazar to limit oil production.

Randy, it is up to Congress to change the situation, I don't know how it can be done. Perhaps you have some imaginative technique which could work to increase drilling permits and get more oil flowing.

Curbing CO2 Emissions at Power Plants Will Increase Electricity Costs

EIN News says, "Obama EPA Delaying More Pollution Curbs The U.S. Environmental Protection Agency will delay yet again plans to curb greenhouse gas emissions, its second delay of a major anti-pollution initiative in as many weeks. The head of the EPA said the agency needs more time beyond the Sept. 30 deadline to forge a plan to limit emissions of carbon dioxide from power plants. (msnbc.msn.com)".

It appears that Pres. Obama may be getting the message.

Notice that the September 30 deadline was to submit a plan for limiting carbon dioxide emissions. That deadline has now been extended to some non-determined date. However, Pres. Obama previously pledged that the US will cut its greenhouse gas emissions by about 17 percent by 2020, under 2005 levels, and the EPA is presumably still working under that directive.

What we do not know is what the actual plan will be. There is little doubt that it will be a combination of installation of carbon dioxide capture equipment in coal burning power plants, which supply most of the US electricity, or an alternative tax on those power plants, if they do not conform. This will lead to a significant increase in electricity utility rates.

Pres. Obama does not easily give up on his ideology of converting the US economy to sustainable energy use, which would include wind, solar, and fuels from agricultural products. However, it is likely that he is starting to see that a significant increase in electricity rates before the 2012 elections would seriously turn the electorate against him. For that reason, he wants to delay the EPA operation of instituting emission controls.

Watson is the head of EPA. She works for Obama, and Obama makes the rules and directives.

EPA emission controls would lead to an increase in electricity cost to the American public and would be counterproductive to Pres. Obama's bid for reelection. The flipside is that if Pres. Obama is reelected, you may be certain that all of these regulations will be put into effect, with the net result of further destroying our economy.

Congress Must Illuminate the Subsidy for Ethanol Use in Automotive Fuel

C&E News has an article entitled "E15 Controversy" in its August 13 issue. E15 is code for the concentration of ethanol in automotive fuel. Ethanol is presently added to gasoline for a 10% concentration and 90% of the US gasoline market uses this modified gasoline..

A group of ethanol supporters and 54 ethanol manufacturers are organized as Growth Energy. They want to increase the concentration of ethanol in automotive fuel from 10% to 15%. The obvious reason is to increase their business of making and selling ethanol. The group has apparently gained the support of the EPA in that the EPA has approved the increase for certain types of vehicles.

Several objections to this rule change had been registered, including damage to engines, but the most significant aspect has been completely ignored.

Ethanol in automotive fuel got its start through the Clean Air Act passed by Congress more than 30 years ago. When the Clean Air Act was passed, it was thought that there was only a short-term tangible supply of petroleum, and that the United States did not have significant reserves. The Act intended to extend the supply of automotive fuel by addition to gasoline and also to reduce dependence on foreign oil. However, that situation has completely changed. We now know that we have very significant oil reserves in the United States and the only reason we are not developing them is because of inhibition by the present Obama administration.

Ethanol is a more costly fuel than is gasoline, and the only reason for its continued use is that taxpayers subsidies artificially reduce its cost to an acceptable level for fuel. Not only should its use in automotive fuel not be increased, it should actually be eliminated through normal market forces. In other words, the only reason for the continued use of ethanol in automotive fuel is its subsidization by taxpayer dollars. That is equivalent to the old practice of digging holes and filling them in order to make work. It is inefficient and completely unnecessary.

Congress should get on with a modification of the Clean Air Act to eliminate the need for ethanol to be used in 2022 to the extent of 36 billion gallons. It must also completely eliminate subsidies for ethanol used in automotive fuel.

Top oil executives need to reevaluate their position on Federal drilling permits

EIN News says, "Shell's President Odum Calls to Ramp Up Oil Federal Regulators    Shell Oil President Marvin Odum says the federal government's oil and gas regulators are understaffed, singing a similar tune to another Big Oil executive last week. (nationaljournal.com)".   
More regulators? This borders on insanity! But, can two big oil executives be insane simultaneously? Unlikely. Let's take a look at their reasoning.
   
The reference article gives a more complete picture. Shell's Odum and Chevron's John Watson are trying to address the problem that new drilling permits are very slow in coming. They are presumably judging that increasing the federal staff will also increase the speed at which the permits will be issued. This is a reasonable supposition. While it is not insane, it certainly is naïve.
   
CEOs of major corporations have one thing in common. They are unusually adept in outmaneuvering their competitors within organizations for the top jobs. This means they have talent and experience in out-negotiating other highly intelligent contenders. It also means that they have little knowledge of how their organizations really work, in spite of the fact that they lead the organizations.
   
In industry and in government, the top boss has a philosophy of how his business should operate. Underlings quickly understand and conform to that philosophy for the purpose of improving their own careers. In the case of the Interior Department, Pres. Obama through Ken Salazar is the top boss. They have the philosophy that the US should reduce its dependence on foreign oil, not by developing local oil resources, but rather switching to renewable energy, such as wind and solar. To promote renewable energy, they take every opportunity to limit production of US oil, a portion of which program involves minimizing issuance of new drilling permits. The most effective way to do that is to micromanage all aspects of a drilling permit, which then requires additional time and ultimate delay in its issuance.
   
Because Odum and Watson do not understand that process, they assume that throwing more federal people at the drilling permit issuing problem will lead to increased speed at which drilling permits are issued. Wrong, wrong, wrong!
   
A simple fact of life is that if you want to speed up issuance of a permit, one must take a more cursory look at the permit and eliminate investigation of many of the minor details. This is not to say that we ignore major aspects, such as environmental considerations, but it would not be necessary to include the pay scale and qualifications of a person required for spill cleanup. That could all be covered by a general liability clause, which says that if you have a spill, you are required to clean it up within a certain period of time to the satisfaction of existing federal regulators and bearing all costs. Arguments among drillers, federal regulators, the general public and organizations thereof can be resolved in federal court. It is not necessary to foresee all eventualities on how to avoid going to court.
   
Odom and Watson need to look at the big picture. Increasing the staff of the federal federal regulators will only establish an opportunity for government to investigate more miniscule details on permit applications, which in the long run will further delay permit issuance. What is needed is a change in policy at the top levels of government (Obama/Salazar), and that is what Odum and Watson should be fighting for.

Kudos to Congress on Stalling Oil Spill Response

Open e-mail to Rep. Neugebauer:

Randy,

As you know, much of my political writing is derogatory and generally negative with respect to government action. In this particular case, I congratulate Congress on its inaction.

The August 22 issue of C&E News has an article complaining that more than a year has passed since BP's Deepwater Horizon rig exploded in the Gulf of Mexico killing 11 workers and causing the largest marine oil spill in the history of the petroleum industry. The Interior Department immediately revised rules governing offshore oil drilling to include a lengthier and more extensive permitting process. C&E News is lamenting that Congress has made little headway toward addressing the safety issues raised by the disaster.

We have said before that the deaths of workers and the subsequent environmental problems caused by the oil spill are deeply regretted. While fault has been found with BP's operation prior to the spill, there is no doubt that the so-called disaster was also a result of unpredictable natural causes. No one realized that the upward pressure of the oil reserve exceeded the pressure at the bottom level of more than a mile of water. A favorable aspect is also that a completely new large body oil reserve had been discovered.

While fault can definitely be found with BP and its subcontractors, their drilling program was not unduly risky and the accident cost the company a tremendous loss, such that it almost resulted in bankruptcy. On the positive side, significant new information was obtained, which has resulted in improved technology not only for BP but also other deepwater drillers. Let's keep in mind that the business of deepwater drilling is to obtain usable oil and anything that works against that is a detriment to the program. More simply, deepwater drillers avoid unnecessary risks wherever possible, but risks are inherent in any development.

While the oil spill caused considerable damage per se, the action of the Interior Department has probably done more damage to our economy. Our society runs on oil, and the limitations imposed by the Interior Department have significantly reduced our domestic oil production and contributed to our poor balance of international payments, by forcing oil importation. I and others have been fighting that ever since, with our watchwords, "Drill, Drill, Drill".

Reverting to the good news, Congress has been inactive in applying safety rules. These are not needed. The oil industry knows what it has to do, and the Interior Department has already placed more restrictions than we should have. My heart is warmed by the comments of Rep. Doc Hastings, Chairman of the National Resources Committee. I now quote from the Chemical and Engineering News article on what Rep. Hastings had to say, "The regulatory cobweb of red tape and constantly moving goalposts created by the Obama Administration after the Gulf of Mexico oil spill have resulted in a de facto moratorium on deepwater and shallow-water drilling permits. From day one I've said that we need all the facts surrounding the course of this tragic event before jumping to conclusions and passing reforms with long-term consequences."

Let's hope that in the final analysis Rep. Hastings finds it more necessary to limit the the detrimental actions of the Interior Department. rather than develop another set of rules, which would contribute to the destruction of our economy.

Obama Must Approve a Five-Year Oil Drilling Plan in the Atlantic before July 1

EIN News says, "U.S. Scrambling to Meet Offshore Drilling Date. The Obama administration has less than 10 months to finish assembling its plan for selling offshore drilling leases over the next five years, and some oil industry leaders are worried the government is barely on track to meet a July 1 deadline for issuing the document. (chron.com)".

This issue has been made unnecessarily complicated. There is so much written about it that it takes a tremendous amount of time to sort out the relevant facts.

However, the Outer Continental Shelf Lands Act was created by Congress in 1953. Congress designated the Secretary of the Interior as the administrator of the act. The Minerals Management Service (MMS) was the bureau within the Department of the Interior that is

responsible for implementing the requirements of the Act. A 1996 study by the US Minerals Management Service (MMS) estimated undiscovered conventionally recoverable resources in Atlantic federal waters to be 7,200,000,000 barrels (1.14×109 m3) of oil and 27.5 trillion cubic feet (TCF) gas. This means we are really talking about a large potential increase in US oil production. Previous drilling under the old five-year plan was not productive, but there has been significant improvement in drilling technology.

Section 18 of the Act calls for the preparation of an oil and gas leasing program indicating a 5-year schedule of lease sales

designed to best meet the nation’s energy needs.

The MMS is in the process of preparing a possible new 5-year program for 2010-2015, to replace the current program for 2007-2012. The last five-year plan will end on June 30, 2012. It must be either reinstated or replaced by a new plan. In either case, Congress and the President must approve the plan before it can become effective, which means leases can be offered. Required by law, the document lays out every planned government auction of drilling leases in federal waters for a five-year period. If a sale doesn't make it into the plan, it can't happen. "In the offshore, nothing happens without the five-year program," noted Dan Naatz, executive vice president of the Independent Petroleum Association of America. "It is the bible" of how offshore development moves forward.

My concern is the integrity of the approval system.

Elizabeth Birnbaum was head of the Minerals Management Service at the time of the BP oil spill in the Gulf. She was forced to resign. Her replacement is Michael R. Bromwich and the MMS name has been changed to Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). The key point is that Bromwich works for Interior Secretary Ken Salazar, who in turn works for Pres. Obama. The Obama/Salazar program has been to strongly support sustainable energy sources, such as solar and wind and to inhibit further petroleum production.

I caution Congress to not let the five-year lease plan default or be replaced by something which is contrary to further development of US oil production through its leasing program. More succinctly, Congress should pay close attention to what Obama and Salazar are doing in this area.

More Oil and Gas Drilling

EIN News says, "U.S. Supercommittee Should Boost Oil Drilling, Chevron CEO Says The CEO of oil giant Chevron Corp. said Wednesday that the bipartisan deficit supercommittee should expand U.S. oil-and-gas leasing, joining a senior House Republican in urging the panel to wade into energy policy when it meets this fall. (thehill.com)".

Well! Not only do we have a CEO with the right answer but one who also has the guts to say so.

Expanding US oil and gas leasing will lead to more drilling. This makes drilling jobs.

More drilling makes more oil and requires more employees to refine and transport it.

The increased oil supply reduces the price per gallon of gasoline and diesel fuel. This allows manufacturing companies to use more energy in their production operations, which will then require more employees.

This is a win-win situation, except for the Communist inclined US federal government, which wants pie-in-the-sky wind energy, solar energy, tidal energy and maybe even harvesting the energy of cows chewing their cud.

Drill, Drill, Drill

EIN News says, "Big Oil: To Create Jobs, Let Us Drill More Widely With job creation taking center stage in American politics, the oil industry made a pitch for drilling more widely. With looser restrictions, the industry says it could deliver 1.4 million new jobs, boost tax rolls by $800 billion, and increase domestic energy production almost 50%. (cnn.com)".

Does this make sense to you? It's kind of obvious to me. I have been saying for some time that the federal government has been inhibiting job creation by limiting drilling operations.

I'm not sure how the oil industry calculates comes up with 1.4 million new jobs, but I can tell you that with increased drilling operations, more oil will be available and gasoline prices will fall. This will then spur the economy by people not worrying as much about fuel costs and getting on with the major aspects of getting work done.

Evergreen Solar Energy Is Defunct

EIN News says, "60% of Gulf of Mexico Oil Output Shut by Storm More than half of U.S. crude oil output in the Gulf of Mexico was shut in on Sunday as Tropical Storm Lee hindered efforts to restaff and restart oil and gas platforms in the basin. (reuters.com)".

This is a regrettable incident, but must be taken as part of operational costs. In spite of what junk scientists say, we cannot control the weather. Fortunately, these storms last a short time and have an effect of only a few weeks at most.

Conversely consider man-made fiascoes. The Obama Administration held up the granting of drilling permits to limit production of US oil. It wanted and probably still wants to have what it calls a "sustainable" energy source. The problem is that while this may be a good idea in some centuries to come, it is not applicable at the present time with availability of significant quantities of cheap petroleum, if we are not inhibited from getting it.

Evergreen, a solar energy company, has just gone bust with their filing for bankruptcy. The state of Massachusetts put $58 million into subsidies and tax benefits for the operation. Mitt Romney was fortunately not the governor at the time. If he had been, he would be taking it on the chin now, on top of the Massachusetts health plan, which is a dead ringer for that of Obama's federal program and an economy killer.

It all boils down to pie-in-the-sky versus reality. Petroleum is reality. We use plenty of it and could use more. Solar energy and wind are pie-in-the-sky. Without subsidies, they cannot compete with petroleum in spite of the hurdles that the Obama administration has been placing on the petroleum industry.

US Money Grants to Libyan Rebels Will Control EU Boycott of Syrian Oil

EIN News says, "EU Readies Ban on Syrian Oil Imports European Union members are expected to approve an oil embargo against Syria by the end of the week, diplomats said, serving a financial blow to the Assad regime, which continues to crack down on its citizens despite sweeping criticism. (france24.com)".

Notice that this is not yet a ban.

Thanks to US support of more than $1 billion, the EU may have access to Libyan oil if the rebels cooperate. With Libyan oil, they can cooperate with the US in trying to change the face of the Middle East.

The ban will only come into effect if it can be assured that the rebels will supply oil to Europe. That will take a US money grant to Libyan rebels, and the Obama administration has already promised this.

No More Government Regulations on Natural Gas Pipelines

EIN News says, "Regulators Weigh More Rules for Natural Gas Pipelines U.S. regulators sought public input on Wednesday about the need for increased oversight of the country's natural gas pipelines, as part of a push to strengthen safety after several deadly accidents. (reuters.com)".

Seeking public opinion on the matter of natural gas pipeline accidents is a ridiculous program. In the first place, the public doesn't know anything about pipeline safety. In the second place, US regulators will not be considering public opinion, and should in fact not be considering the matter at all.

Pipeline owners are well aware of their liability for accident. They full well know that they will get their pants sued off on accidents and make every effort to avoid same. They do not need government help, which we can normally interpret as interference.

We Just Spent $1 Billion in Libya to Supply Europe with Cheaper Gasoline

EIN News says, "Firms Are Eager to Tap Into Libya's Oil Wealth The fighting is not over in Tripoli, but the scramble to secure access to Libya's oil wealth has begun. Before the rebellion broke out in February, Libya exported 1.3 million barrels of oil a day. While that is less than 2 percent of world supplies, only a few other countries can supply equivalent grades of the sweet crude oil that many refineries around the world depend on. The resumption of Libyan production would help drive down oil prices in Europe, and indirectly, gasoline prices on the US East Coast. (boston.com)".

Is this what it's all about? According to an Administration spokesman, we sent money to the rebels and will continue to do so because of "humanitarian" reasons. I suppose the economics of oil can be considered humanitarian, but it's a long stretch. The related aspect is that the US will not see any any advantage in Libyan oil. Ever since the Marshall plan, we have had a program of destroying and then spending more money to rebuild without ever gaining any access to the spoils of war. The spoils of the present Libyan case will be collected by the Europeans, not us, in spite of the fact that EIN News makes a guess that it will indirectly help gasoline prices on the East Coast.

We don't need Libyan oil. We have plenty of it right here. We just can't get to it because Obama won't let us. Fortunately worldwide drilling companies are doing a masterful job and through their activities the price of crude oil has significantly dropped and will continue to do so as more production comes on stream. This is what will reduce the price of gasoline. Gasoline prices have not yet started to fall significantly, because old higher-priced inventories of crude oil still need to be worked off. Logically, refineries and gasoline retailers sell their wares at prices based upon their sunk cost of raw materials, not what they expect raw material costs to be. If they did, they would've been out of business a long time ago and we would be pedaling bicycles.

Is New York State Harassing Energy Companies in Order to Inhibit US Energy Production?

EIN News says,"New York Subpoenas Energy Firms    New York State's attorney general has sent subpoenas to three large energy companies as part of a broad investigation into whether they have accurately described to investors the prospects for their natural gas wells, according to several sources familiar with the inquiry. (nytimes.com)"

   

Let's hope that this is not another government harassment attempt to inhibit production of energy in the US.

We Need Exxon Activating Oil Leases in the Gulf of Mexico Now

Open e-mail to Rep. Neugebauer:

EIN News says. "Exxon Sues U.S. Interior Department Over Canceled Gulf of Mexico Leases    Exxon Mobil Corp., the world's largest publicly traded oil company, sued the U.S. Department of the Interior, asking a judge to set aside the agency's decision canceling offshore leases that could yield "billions of barrels of oil." (bloomberg.com)"

   

Excellent! Let's hope Exxon wins. We need cheap oil to get this economy moving again. However, one problem would be the slowness of the court action. We need Exxon activating these leases now.

   

Randy, "Any way you can speed up this action?"

Reduce Killings by Increasing Production of Oil and Gas

EIN News says, "Cost Hike on Shell Iraq Deal    Iraq's gas deal with supermajor Shell, to capture and exploit associated gas from its giant southern oilfields, is expected to produce 2 billion cubic feet per day and cost $17.2 billion, according to an official agreement summary. (upstreamonline.com)".

   

Controlling the revenues from oil & gas is one of the major reasons Iraqis kill each other.

   

If your compassion is to reduce the killing, you must make oil and gas cheaper. Here are some analogies: Many people die in the drug wars, because drugs are expensive. Few people die from food controversies, because food is cheap.

   

You can make oil and gas cheap by petitioning your government to remove inhibitions from oil and gas drilling companies, which will allow greater production and automatically reduce prices. In addition to saving lives, you will have the benefit of lower gasoline prices and reduced home heating costs.

Nothing Dangerous Known yet about Fracking

EIN News says, "Natural Gas Fracking Needs to Be Monitored, Panel Says Hydraulic fracturing, or "fracking," in shale formations should be monitored closely for its environmental effects, a federally appointed panel recommended Thursday. (latimes.com)".

Nothing strange or dangerous here.

Every time you have something new or a change, you are stupid if you don't give it special attention to see what unintended consequences it may have had. We buy a new car, and we pay special attention to how it sounds, whether the brakes are working properly, etc.. We also do that with cars we have been driving for a while.

Pres. Reagan said, "Trust but verify". He was basically referring to international agreements, but it applies equally to products and processes. Check out the operation, but don't condemn it on the basis of suspicion and fear.

Will the US Continue a Failing Policy on Energy?

EIN News says, "Shell Gambles U.S. Rules on Arctic Drilling Long winter nights and ice that clogs Arctic seas from November through June haunt Royal Dutch Shell Plc's ambitions to explore for oil off Alaska. Shell, Europe's largest oil company, says it must decide by October whether to assume that U.S. regulators will issue all 35 permits it would need to explore under the Beaufort and Chukchi seas next year during the four mildest months, from July to October. (bloomberg.com)".

The question is simple. Will Pres. Obama and his underlings at the Department of Interior and Department of Energy continue to inhibit production of oil in the United States, in favor of a failing program on wind and solar energy? Those leaders have nothing to lose. The American public will be the great losers, if the Administration continues its ridiculous policy.

Will the US Continue a Failing Policy on Energy

EIN News says, "Shell Gambles U.S. Rules on Arctic Drilling    Long winter nights and ice that clogs Arctic seas from November through June haunt Royal Dutch Shell Plc's ambitions to explore for oil off Alaska. Shell, Europe's largest oil company, says it must decide by October whether to assume that U.S. regulators will issue all 35 permits it would need to explore under the Beaufort and Chukchi seas next year during the four mildest months, from July to October. (bloomberg.com)".
   

The question is simple. Will Pres. Obama and his underlings at the Department of Interior and Department of Energy continue to inhibit production of oil in the United States, in favor of a failing program on wind and solar energy? Those leaders have nothing to lose. The American public will be the great losers, if the Administration continues its ridiculous policy.

Eliminate All US Government Energy Subsidies

EIN News says, "Energy Subsidy Battle Reignites As Debt Deal Preserves Tax Breaks As U.S. Democrats' battle to cut oil-industry tax breaks as part of a debt deal ends in defeat today, environmentalists are charging GOP lawmakers with skewing a closely watched energy-subsidy study in order to inflate federal renewable supports relative to those for fossil fuels. (nytimes.com)".

Tracking the article to its source, it appears that government is subsidizing $18 billion per year to various energy sources. The Democrats/Communists/Socialists want it discontinued.

Every now and then even a Communist makes a good point.

My understanding is that many years ago energy sources were considered essential to the development of a high standard of living. It also appeared that energy supply was limited. This resulted in the idea that subsidies would be necessary to keep the energy companies going and not give up because of the ultimate exhaustion of supplies.

That situation is completely changed. The energy companies involved in petroleum, coal, and natural gas have developed techniques, which have resulted in availability of large quantities of these materials. The only inhibition for making these products more available to the public appears to be government restriction.

Consistent with previous experience that market forces are the best technique for development, the US government should get out of the business of subsidization. It is not necessary. Government should also get out of the restriction business and let these companies do their jobs. Let's also not forget that there should be no government subsidization for wind energy, solar, tides or anything else that might be considered "sustainable". Existing energy companies have demonstrated their capability to supply the public, and they will move to so-called "sustainable", if and when that requirement develops.