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March 16, 2011

Palin: Obama's Not Drilling Here And Ain't Drilling Now

Really good FaceBook argument on one of the top three issues of the day. (Part of the top issue, if you consider energy to be part of the economy, which it is.)

I knock Palin a lot but when she's on, she's on.

The evidence of the President’s anti-drilling mentality and his culpability in the high gas prices hurting Americans is there for all to see. The following is not even an exhaustive list:

Exhibit A: His drilling moratorium. Guided by politics and pure emotion following the Gulf spill instead of peer-reviewed science or defensible law, the President used the power of his executive order to impose a deepwater drilling moratorium. The Administration even ignored a court order halting his moratorium. And what is the net result of the President’s (in)actions? A large drilling company was forced to declare bankruptcy, the economy of the region has been hobbled, and at least 7 rigs moved out of the Gulf area to other parts of the world while many others remain idle. Is it any surprise that oil production in the Gulf of Mexico is expected to fall by 240,000 bbl/d in 2011 alone?

But that’s just the Gulf. There’s also the question of a moratorium on the development of Alaska’s Outer Continental Shelf. It seems the Obama Administration can’t agree with itself on whether it imposed a moratorium there or not. The White House claims that they didn’t, but their own Department of the Interior let slip that they did. To clear up this mess, Gov. Parnell decided to sue the DOI to get a solid answer because such a federal OCS drilling moratorium would violate federal law.

Exhibit B: His 2012 budget. The President used his 2012 budget to propose the elimination of several vital oil and natural gas production tax incentives. Eliminating these incentives will discourage energy companies from completing exploratory projects, resulting in higher energy costs for all Americans – and not just at the pump. According to one study mentioned in a recent Wall Street Journal op-ed, eliminating the deduction for drilling costs “could increase natural gas prices by 50 cents per thousand cubic feet,” which would translate to “an increased cost to consumers of $11.5 billion per year in the form of higher natural gas prices.”

I'd like to see more about this. If these are actually incentives -- tax breaks -- I don't see the need for them, as I'm usually in favor of "clean" tax codes, shorn of policy-pushing incentives and disincentives. If oil companies are getting some kind of a break here, not only do I think that's a political argument that can't be won, but I'm not sure it should be won.

However, I have looked into this stuff in the past and I've often found that what liberals term "special breaks for oil" is often normal accounting practices extended to oil companies. For example -- of course you have to be able to depreciate your oil source the same as you can depreciate any other degrading good. Oil runs out as you pump it. I have seen liberals claim that depreciation applied to oil is somehow a "special break" when in fact it's just the normal rule of subtracting cost of earning a dollar from the dollar earned.

Exhibit C: His anti-drilling regulatory policies. The U.S. Geological Survey found that the area north of the Arctic Circle has an estimated 90 billion barrels of technically recoverable oil and 1,670 trillion cubic feet of technically recoverable natural gas, one third of which is in Alaskan territory. That’s our next Prudhoe Bay right there. According to one industry study, allowing Royal Dutch Shell to tap these reserves in Alaska’s Chukchi and Beaufort seas would create an annual average of 54,700 jobs nationwide with a $145 billion total payroll and generate an additional $193 billion a year in total revenues to local, state, and federal governments for 50 years. This would be great news if only the federal government would allow Shell to drill there. But it won’t. It’s been five years since Shell purchased the lease to develop these fields, but it’s been mired in a regulatory funk courtesy of the Obama Administration. After investing $3.5 billion in exploration programs (a significant portion of which went to ensuring responsible spill response and prevention), Shell announced last month that it has given up hope of obtaining the required permits to conduct exploratory drilling this year. That means no jobs and no billions in oil revenue from the Arctic anytime soon thanks to this Administration. Let’s stop and think about this for a moment. Right now Beltway politicos are quibbling over cutting $61 billion from our dangerously bloated $3.7 trillion budget. Allowing drilling in the Chukchi and Beaufort seas will enrich federal coffers by $167 billion a year without raising our taxes. If we let Harry Reid keep his “cowboy poetry,” would the White House consider letting us drill?

As I understand it, with ANWR (though I don't think this is what she's discussing; not sure), we have a certain estimate of how much oil is in the ground, but no further exploration has been permitted to get a firmer reading on the oil.

I suspect the reason that liberals will not permit us to even do the science needed to get a more accurate read is that they are afraid there will be discovered an even greater bounty of oil, and that will make their no-drilling-in-the-barren-tundra-called-ANWR politically untenable.

Can we at least be permitted to discover precisely how much oil we are giving up on for no reason?

A bear. Obviously distressed and crazed by an oil pipeline.
You can almost hear him crying, "Please choose a policy of
wind-turbines and solar so that my cubs are spared this horror."

Taken altogether, it’s hard to deny that the Obama Administration is anti-drilling. The President may try to suggest that the rise in oil prices has nothing to do with him, but the American people won’t be fooled. Before we saw any protests in the Middle East, increased global demand led to a significant rise in oil prices; but the White House stood idly by watching the prices go up and allowing America to remain increasingly dependent on imports from foreign regimes in dangerously unstable parts of the world.

This was no accident. Through a process of what candidate Obama once called “gradual adjustment,” American consumers have seen prices at the pump rise 67 percent since he took office. Let’s not forget that in September 2008, candidate Obama’s Energy Secretary in-waiting said: “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” That’s one campaign promise they’re working hard to fulfill! Last week, the British Telegraph reported that the price of petrol in the UK hit £6 a gallon – which comes to about $9.70. If you think $4 a gallon is bad now, just wait till the next crisis causes oil prices to “necessarily” skyrocket. Meanwhile, the vast undeveloped reserves that could help to keep prices at the pump affordable remain locked up because of President Obama’s deliberate unwillingness to drill here and drill now.

Hitting the American people with higher gas prices like this is essentially a hidden tax and a transfer of wealth to foreign regimes who are providing us the energy we refuse to provide for ourselves. Like inflation, higher energy prices are a hidden tax on Americans who are struggling to make ends meet. And these high gas prices will be felt in the form of higher food prices due to higher transportation costs. Energy is connected to everything in our economy. Access to affordable and secure energy is key to economic growth, which in turn is key to job growth. Energy is the building block of our economy. The President is purposely weakening that building block and weakening our country.

You know, when I say that Palin needs to sound smarter, this is exactly the sort of thing I'd like to hear her saying on TV.

I don't think this last part can be emphasized enough: Higher energy costs equal higher costs for everything -- everything runs on energy -- and that additional expense isn't even remaining in the country. As a river of oil flows into this country, a river of money flows out.

What She's Talking About In Exhibit C: It's not ANWR. It's oil that's gettable for a limited time only since ice has retreated a bit:

Confirmation on one of your thoughts: Palin isn't talking about ANWR in Exhibit C. There's a big-ass pile of resources above the Arctic Circle (and not just oil) that no one could get to before. Because of arctic warming, the ice cap recedes enough that Shell could rush in and pump oil before the ice returns. That sort of thing didn't make sense before, but between the price of oil and the longer drilling season, there's enough money to be made.

Because of the stupid bureaucratic rules, Shell can't get approval before the ice returns, and the agency keeps making them re-apply every year.

Oh that's precious.

Thanks to Meiczyslaw.

Not Special Incentives: robrtr says the "incentives" she mentions are just normal deduct-your-costs-from-your-profits things:

The incentives she is talking about are research incentives. In other words if the oil company drills a dry well they can write that off as a cost of doing business.

It's the same as if Apple built a bunch of I phones they couldn't sell they can write off the cost of buidling those I phones.

Companies use money for research that they have already paid taxes on, if they lose it in a dry hole or an unsuccessfull product they write off that cost against future tax liabilities. If you take that away then they will increase the cost of oil they do find or products that are successful to cover the costs of their losers.

This results in a tax increase to the public with the corporations collecting the tax for the government.

Thanks, that's what I expected it would turn out to be. In that case I think leaders should make sure people know these aren't special incentives but just the normal rules of determining profit.

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posted by Ace at 01:46 PM

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