If oil rigs are pulled from the moratorium; they MUST be in compliance with safety regulations and big oil subsidies MUST stop.

I agree that we need to kick start our own oil drilling and that we should extend the drilling permits of the oil companies restricted by the oil moratorium but we also need to do other things such as end big oil subsidies and seriously look into wind, solar and geothermal energy simultaneously.

However- it is essential that all oil rigs placed in the moratorium are in compliance with the new BP oil safety regulations as well as confirmed by a 3rd party contractor in order to resume drilling.

I DO NOT agree with addtl drilling in the Gulf of Mexico as we have seen the catastrophic events resulting from an oil spill. Not too mention that the oil has the potential to impact NW Florida and our military mission at large as well as has the potential to get into the loop current and travel up the East coast of Florida and the US.

I support get our oil rigs back up and running in the Gulf (that is; if they are truly 100% compliant with new safety regulations) as we depend on that oil the rigs produce but I do not agree with putting in any new oil rigs in the Gulf.

There are other areas to drill and if the local residents want it and the drilling does not pose a safety risk or a military mission risk- then by all means should we consider it.

In the meantime; it is imperative that we look into alternative energy and become energy independent. Drilling is not the full answer as it is a known fact that drilling is not renewable; therefore, we will eventually run out of that resource.

Let’s look at long term solutions while we are lowering our gas costs so that gas does not get above $4/ gallon ever again.

Read more about the reasoning behind eliminating big oil subsidies and how the consumer will reap the benefits.


Read more about the independent 3rd agency that CG Adm Thad Allen and Bureau of OEM supports.



Libya: Rebels flee Ras Lanuf, signaling a shift in momentum

Loyalists of Libyan leader Muammar Qaddafi forced rebel fighters to flee the strategic oil town of Ras Lanuf Thursday after being assaulted by land, sea and air.

The city mosque was hit by an air strike, and the hospital was evacuated in the afternoon after several attacks nearby.

Commercial and military ships hit the town with artillery and rockets, adding a third dimension to the usual mix of ground and air attacks that have become a part of the daily menu of fighting along the east-west highway between Bin Jawwad and Ras Lanuf.

At least one air strike was aimed at a rebel checkpoint on the edge of Brega, about a hundred miles east of Ras Lanuf, suggesting that the pro-Qaddafi forces may be ranging further east.

At the Red Crescent Hospital outside of Brega, which was receiving the dead and wounded from today’s battle following the closure of the Ras Lanuf hospital, four were reported dead and approximately 20 wounded.

The battle for control over Libya has pitted a well-armed, organized and often ruthless military against a group of protesters.

“I’m not a soldier, I’m a student,” said a protester in Ras Lanuf, brandishing his gun, his eyes intense and his voice quivering.

He had just retreated from the east-west highway after a heavy assault by government troops. “I’ve never held a gun before and Qaddafi is killing us from the sea, from the air.”

When the protesters captured Ras Lanuf a week ago, it was seen as a major victory for the opposition. Now, it appears the tide may be turning.

Qaddafi’s son, Seif al-Islam vowed Thursday to retake the eastern half of the country, which has been held by rebel forces for the past few weeks

He told a crowd of supporters in Tripoli: “I have two words to our brothers and sisters in the east: We’re coming” acting as if the Eastern population is held prisoner by the opposition.

Qaddafi troops earlier claimed victory over Zawiya, a town about 30 miles from Tripoli that had been held by rebels.

The town was the scene of intense fighting on Wednesday, with the town’s central square reportedly changing hands several times as rebels tried to hold off an onslaught by Qaddafi tanks and snipers. By the end of the day, government forces claimed to have gained the upper hand.

“Qaddafi is in this for the long haul,” James Clapper said, as reported in the BBC. “I don’t think he has any intention, despite some of the press speculation to the contrary, of leaving. From all evidence that we have… he appears to be hunkering down for the duration.”

American and other intelligence officials claim that Qaddafi has tens of billions of dollars in cash hidden away in Tripoli that will enable him to continue his fight against the rebels.

The money, which is controlled by Qaddafi, enables the leader to pay his troops, mercenaries and political supporters as the uprising continues for a third week.

The EU showed signs of confusion and disunity Thursday over how to handle the Libya crisis, the Independent reports.

As the EU tried to present a unified front, France chose to break out on its own and become the first nation to recognize the rebels’ national council as the country’s “legitimate representative.” Way to go, France.

“France is playing the role of breaking the ice for the European Union. This is the first nail in the coffin of Qaddafi. I expect Europe and Italy to follow as they consume the majority of Libyan oil.” stated, Heart of America’s Executive Editor, Denise Haywald.

Divisions also emerged over a decision to implement a no fly zone over Libya. Some European countries and the United States have expressed hesitation over being drawn into what could become a civil war.

“We do not want to get sucked into a war in North Africa,” said German Foreign Minister Guido Westerwelle.

I cant say I blame the hesitation as placing sanctions and removing military and embassy operations is one but instituting a no fly zone which can only be done by controlling the Libyan air space, is quite another.

Copyright (c) March 10, 2011. All rights reserved.

EXCLUSIVE VIDEO: Saudi Arabia preparing for “Day of Rage” tomorrow.

Click into the video to see the calm before the storm.

A day before protesters planned to take to the streets for an anti-government “Day of Rage” rally in Riyadh, Saudi Arabia’s capital- Saudi Arabian security forces broke up a rally in the eastern city of al-Qatif, 12 miles north of the Capitol.

Al-Mugaiteeb, president of the al-Khobar, Saudi Arabia- based Human Rights First Society, said a doctor who attended to the wounded told him that 3 people were injured at the rally, in the Shiite Muslim-dominated city.

Crude oil futures pared losses after it was reported that police in Saudi Arabia, the world’s biggest oil exporter, opened fire to disperse protesters by using percussion bombs, followed by gunfire, which caused the crowds to flee.

U.S. officials said Saudi authorities used “less-than- lethal” means on protesters by firing rubber bullets.

Crude oil for April delivery declined to $102.93 a barrel.  Prices are up 25 percent from a year ago. Oil traded at about $101.50 before reports of the gunfire showing that the markets are incredibly sensitive to disruption in the Middle East.

Deputy National Security Advisor Ben Rhodes said on a conference call with reporters that the White House was aware of reports of firing in Saudi .

“What we have said to the Saudis and to all the people of the region is that we’re going to support a set of universal values in any country in the region,”  Rhodes said. “And that includes the right to peaceful assembly, to peaceful protest, to peaceful speech.”

Rhodes added, “And we’ll of course continue to closely monitor this particular situation, get as many facts as we can about exactly what transpired, since these reports are relatively recent.”

At a look at tomorrow, Protests are being formed in Saudi Arabia despite protests being outlawed in the kingdom.

In February, Saudi King Abdullah announced a number of reforms, such as pay raises and increased spending on social programs to appease protesters. Yet the protesters were not satisfied.

A ban on protests was enacted earlier by the government earlier this month.

On Thursday, human rights organization Amnesty International asked Saudi authorities to reverse the ban on peaceful protest in the kingdom.

“Instead of banning peaceful protests the Saudi Arabian authorities should address the need for major human rights reform in the country,” Philip Luther, deputy director of their Middle East and North Africa program, said.

To read the request to reverse the ban in full, please visit: http://www.amnestyusa.org/document.php?id=ENGUSA20110310002&lang=e

It is said that approximately 10,000 Saudi troops are ready to be deployed to crack down on any protests.

If today is any indicator of what tomorrow is going to bring, I suggest filling up your gas tanks NOW.

For if the Saudi uprising does occur Friday, and oil pipelines and distribution networks are disrupted, expert analysts are stating that oil prices will rise to $150 per barrel almost instantaneously, and $200 per barrel will shortly follow.

Copyright (c) March 10, 2011. All rights reserved.

JUST SAY NO to tapping the Strategic Oil Reserve (Solutions included!)

The International Energy Agency (IEA) has produced an  estimates stating that the social upheaval in Libya has halted between 850,000 and 1.0 million barrels per day of the country’s exporting oil.

In the United States, oil prices has risen to over $106/barrel causing CA to fill up at the price for an astonishing $5/gallon. On the East Coast, prices loomed around a whopping $3.5/gallon.

It has been said that society could survive on gas pumps as high as $4.5/gallon but current recessive times are causing people to doubt that figure and instead are looking for ways to lower our gas costs.

Including myself. In fact, I have outlined options available below in order of feasibility from 1-7, with #5  being used as a LAST resort and  the sub options within #6 and #7 sought to be implemented simultaneously while operating within the first 4 options.

Before the outline of options,  A BIG thank you goes out from the Heart of America to Saudi Arabia, the IAE & Canada for offering to help us during this tumultuous time. I hope our “leaders” (and I use that term loosely) will come to their senses and take you up on your offer to help bring financial relief via the gas pump to the United States. Thank you, thank you, thank you. It’s comforting to see who our true friends are in a time of crisis.

Option #1- Seek assistance from the IEA

IEA, part of the Organization for Economic Cooperation and Development (OECD), holds emergency stockpiles equi va lent to at least 90 days of net oil imports, counting both government and industry stocks.

IEA executive director Nobuo Tanaka last week sought to calm markets by saying emergency oil stockpiles could be used if needed to counter the disruption from Libya.

“We can release 2.0 million barrels per day for two years. We don’t really have to worry too much about the supply side,” said Tanaka.

Option #2- Take up Saudi Arabia on their effort to help.

Top oil exporter Saudi Arabia has pledged to fill any supply void left by Libya.

Saudi Arabia was currently pumping around 9.0 million barrels daily and has spare capacity of 2.5 million to 5 million barrels per day; although that would cut global spare capacity to pump more oil.

Opponent of this idea are against it because we would be resting our demand in Saudi Arabia’s hands and their regional area is running amok with domestic civil wars and stability in Saudi Arabia is not guaranteed. A concern that is justifiable and definitely noted as Saudi Arabia’s “day of rage” will be initiated tomorrow.

Yet it is important to remember that OPEC [Organization of the Petroleum Exporting Countries] is capable of managing the situation, of exporting 2.5 to 4 million barrels a day are available from Saudi Arabia.

New production can be completed in a few days while price reductions become immediate.

Problem being? Is not so much the quantity but rather the quality that the US is searching for as Libyan oil is “sweeter” which makes it easier to be refined. Unfortunately, not too many countries can “measure up” to Libyan oil but at this point, “can beggars really stand to be choosers?”

Option #3- Seriously consider Canada’s offer to help while ensuring that the water of Ogallala is protected.

Canadian Prime Minister Stephen Harper on Friday urged U.S. officials to approve an oil pipeline from Canada to the U.S. Gulf Coast, calling his country a secure, stable and friendly neighbor that offers “ethical oil” as Canada respects human rights, workers’ rights and environmental responsibility.  Not too mention the location convenience of having the oil right next door and on all things considered, “calm” land.

Canada is offering to build a 1,900 mile pipeline that would carry crude oil extracted from tar sands in Alberta, Canada, to refineries in Texas, producing more than 500,000 barrels a day of crude oil derived from formations of sand, clay and water in western Canada.

The $7 billion Keystone XL pipeline could substantially reduce U.S. dependency on oil from the Middle East and Venezuela, according to a report commissioned by the Obama administration.

“Keystone XL will also create 20,000 high-paying jobs for American families and inject $20 billion into the U.S. economy“, states CEO of Calgary-based TransCanada, the project’s developer.

The study suggests that the pipeline, coupled with a reduction in overall U.S. oil demand, “could essentially eliminate Middle East crude imports longer term.”

Yet opponents are responding that  the project would bring “dirty oil” from a polluting source into the U.S.  Specifically, portions of Colorado,  Kansas, Montana, Nebraska, New Mexico, Oklahoma and South Dakota, Wyoming, before coming to it’s finally destination stop in Texas via the Ogallala Aquifer.

The Ogallala Aquifer holds the majority of the water in America’s high planes and uses 90% of the underground water to irrigate crops that provide 1/5 of the total annual U.S. agricultural harvest.

While I understand their concern of their deletable and non-renewable source of water; I have to think that Canada has run across similar concerns as this type of drilling is a relatively new concept.

Perhaps we could meet with them and find a way to allow access to their oil reserve while protecting the American plains irrigation water and make this a win-win for both parties involved.

Where there’s a will, there’s a way.

Option #4 – Opening up drilling in the US areas  where already pre approved.

Now newer fields are showing promise, including the Niobrara, which stretches under Wyoming, Colorado, Nebraska and Kansas; the Leonard, in New Mexico and Texas; and the Monterey, in California and North Dakota.

By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.

This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. Within 10 years, it could help reduce oil imports by more than half.

** Please note- this is NOT an argument for additional drilling in the Gulf  of Mexico after last year’s oil spill.

In fact, I would prefer for the existing drilling to be compliant with an independent drilling regulatory agency (as talked about:  https://theheartofamerica.wordpress.com/2011/02/16/cg-adm-thad-allen-and-bureau-of-oem-support-an-indepenent-drilling-regulatory-agency/) before they are allowed to start drilling again.

In addition, I  also would like existing Gulf drilling to be in full compliance of the new safety legislation, Implementing the Recommendations of the BP Oil Spill Commission Act (read more: https://theheartofamerica.wordpress.com/2011/01/28/safety-measures-for-oil-may-be-tedious-but-dont-throw-them-to-the-wayside-for-a-quick-dollar/)**

For the record, while I support existing and pre approved new drilling- I do not support any new drilling in the Gulf of Mexico as it provides a potential threat to our Country’s military mission off the West Coast and runs the risk of getting into the Loop Current near South Florida and be carried into the Gulf Stream which runs up the East Coast of Fla and of the United States.

Option #5 Tapping our strategic oil reserve (THIS SHOULD BE AVOIDED AT ALL COSTS)

Democratic lawmakers are pushing the public into lessening our personal supply of oil for a (possible) relief at the gas pump by tapping into our strategic oil reserve which holds only 727 million barrels of crude.

The U.S. reserve’s stockpile is equal to 485 days of Libyan oil exports and about 60 days of total U.S. oil imports.

However, tapping this reserve has only been done on a few occasions in the past and is frowned upon by many as it reduces our energy self dependence (something that the Democrats, ironically enough, keep talking about).

If the Democratic Party is looking for “all the help we can get”- perhaps they should look to the solutions below instead of depleting one of our only stable sources of security.

Option #6: “All the help we can get” which includes other means of financing

One way that we can work towards investing in our alternative energy sources is by eliminating big oil subsidies and reduce royalties. You can read more about it by visiting: https://theheartofamerica.wordpress.com/2011/02/05/case-in-point-eliminate-big-oils-subsidies-and-royalties-reduction-of-national-debt-encourage-alternative-energy-and-give-back-money-to-the-american-taxpayers/

Another way of tackling the rising gas costs is to copy British finance minister George Osborne line of logic as he signaled he would cut the country’s fuel tax to counter soaring oil prices. A one penny-per-liter rise in the fuel duty planned by the previous Labour government is due to take effect in April. Perhaps we can do something similar here in America.

Option #7: “All the help we can get” which includes alternative energy

Natural gas remains an important fuel for electricity generation worldwide as it is less expensive with natural gas than with oil as the primary energy source, and natural-gas-fired generating plants are less capital-intensive than plants that use coal, nuclear, or most renewable energy sources.

High world oil prices encourage consumers to turn to natural gas in the near term but this will only be a short term gain as natural gas supply is expected to start dwindling by 2020 – 2035.

Solar Energy;  Connects a solar thermal array with an existing combined-cycle natural gas power plant, reducing the use of natural gas when heat from the sun is available to help produce the steam needed to generate electricity.

The technology uses solar collectors with mirrored surfaces that reflect and concentrate the sunlight onto receiver tubes filled with a heat transfer fluid. After being heated, this fluid travels to a heat exchanger where it converts water into steam, which is used in the steam turbine generator  to produce electricity. Look at FPL Martin Next Generation Solar Energy Center in Martin County, FL as an example.

** Side note: There is another option involving closed land fills.  To find out more about the benefits of transforming closed landfills into solar facilities, please visit:  https://theheartofamerica.wordpress.com/2011/01/31/saving-the-planet-one-landfill-at-a-time/

—  Hydroelectricity which uses the Earth’s water cycle to generate electricity. Water evaporates from the Earth’s surface, forms clouds, precipitates back to earth, and flows toward the ocean.

This movement of water as it flows downstream creates kinetic energy that can be converted into electricity. A hydroelectric power plant converts this energy into electricity by forcing water, often held at a dam, through a hydraulic turbine that is connected to a generator. The water exits the turbine and is returned to a stream or riverbed below the dam.

The Department of Energy has completed a resource assessment for 49 states (no report was generated for Delaware because of scarce resources). The completed work has identified 5,677 sites in the United States with undeveloped capacity of about 30,000 MW. By comparison, today there is approximately 80,000 MW of hydroelectric generating plants in the United States.

Geothermal energy is achieved by digging deep wells and pumping the heated underground water or steam to the surface. We can also use the stable temperatures near the surface of the earth to heat and cool buildings. Read more about geothermal energy, by visiting: https://theheartofamerica.wordpress.com/2011/01/10/geothermal-debate-heats-up/

Wind farms It is estimated that wind energy has the potential to provide 10 to 15 percent of future world energy requirements. Yet, if we can make use of ocean areas with high winds for wind energy, they could potentially generate 500 to 800 watts of energy per square meter. Though it is slightly less than solar energy (which generates about one kilowatt of energy per square meter), wind power can be converted to electricity more efficiently than solar energy and at a lower cost per watt of electricity produced. Read more about offshore wind farms, by visiting: https://theheartofamerica.wordpress.com/2011/01/10/offshore-wind-farms-a-dream-turned-reality/

In Conclusion;

If we use Saudi Arabia and IAE’s oil while working with Canada in figuring a way to turn their “dirty” oil into “clean” oil, working on our pre approve drilling projects, researching  and implementing alternative energy options all the while cutting big oil’s subsidies/royalties and lessening the gas tax  – we would be able to pull ourselves from this slippery slope of mass confusion and panic and possibly come out better than where we were before the Middle East upheaval.

Truth be told, it is going to take a lot of work and creativity to get this done but I have full faith in the American People to rise above, join together and do what is best for our Country in an effort to give our children and grandchildren a better life than what we were given.

Simply tapping our oil reserve because we are too lazy to research into the options will only hurt our future generation’s self reliance. We cannot allow this to happen- not when other countries are offering to help and when we have the solutions right outside our grasp.

Copyright (c) March 8, 2011. All rights reserved.

Gas Trend Index

BREAKING NEWS & NOTICE- 2 Iranian Warships on Route to Suez Canal.

Case in point: Eliminate big oil’s subsidies and royalties and reap the rewards.

CG Adm Thad Allen and Bureau of OEM support an independent drilling regulatory agency.

Egypt deploys troops along Gaza border

New oil fields found despite possible risks to the environment.

Published in: on February 17, 2011 at 4:24 am  Leave a Comment  

CG Adm Thad Allen and Bureau of OEM support an independent drilling regulatory agency.

The hearing of the U.S. House Coast Guard and maritime transportation subcommittee came as news surfaced that the Obama administration may oppose a commission recommendation to create an independent regulatory agency because it could clash with reforms already being undertaken by the Interior Department.

If reports from an independent regulatory agency clashes with the government agencies, that is a GOOD thing. Do we not remember how MMS (Minerals and Management Services) were partially to blame for the lack of safety measures and protocol for the Deepwater Horizon Oil Spill?

It is imperative that we have an independent agency doublechecking the work of our government. It has been proven that the government oversight needs independent oversight. Too shun this idea is a slap in the face to the Gulf States and families of the oil rig victims.

After the April 20 accident, the Interior Department separated its regulatory arm from the royalty collection division reasoning that there could be a conflict of interest between the two operations. That came to no surprise to anyone closely following the MMS or the Interior Department and was actually a much needed relief.

The Bureau of Ocean Energy Management, Regulation and Enforcement replaced the Minerals Management Service in the department as the industry regulator. The commission recommended that a new independent agency be formed to monitor regulation.

The seven-member panel wants an agency similar to how the FBI operates independently of the Justice Department, including having a director who is appointed for a time period in order to avoid any political interference.

Commission member Donald Boesch told the subcommittee the independent agency recommendation should be implemented.

Boesch also testified that the oil industry should pay for any step-up of industry enforcement. In response to subcommittee questions, Boesch said the commission recommendations would cost the oil industry from seven to 12 cents per barrel.

The tax would amount to a quarter of a cent increase on a gallon of gas and boost the regulation needed to police the industry.

A price that I, personally, would be willing to pay in order to avoid another explosion and catastrophe in the Gulf of Mexico.

I urge an Independent Commission to commence and oversee the operations of oil drilling and environment affairs. There is simply too much to stake to leave it in the hands of the Federal Government.

Copyright (c) February 16, 2011. All rights reserved.

New oil fields found despite possible risks to the environment.

A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.

Now newer fields are showing promise, including the Niobrara, which stretches under Wyoming, Colorado, Nebraska and Kansas; the Leonard, in New Mexico and Texas; and the Monterey, in California and North Dakota.

By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.

This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.

“That’s a significant contribution to energy security,” says Ed Morse, head of commodities research at Credit Suisse.

Oil engineers are applying what critics say is an environmentally questionable method developed in recent years to tap natural gas trapped in underground shale. They drill down and horizontally into the rock, then pump water, sand and chemicals into the hole to crack the shale and allow gas to flow up.

Because oil molecules are sticky and larger than gas molecules, engineers thought the process wouldn’t work to squeeze oil out fast enough to make it economical. However, drillers learned how to increase the number of cracks in the rock and use different chemicals to free up oil at low cost.

“We’ve completely transformed the natural gas industry, and I wouldn’t be surprised if we transform the oil business in the next few years too,” says Aubrey McClendon, chief executive of Chesapeake Energy, which is using the technique.

Petroleum engineers first used the method in 2007 to unlock oil from a 25,000-square-mile formation under North Dakota and Montana known as the Bakken.

Production there rose 50 percent in just the past year, to 458,000 barrels a day, according to Bentek Energy, an energy analysis firm.

“It’s only been fleshed out over the last 12 months just how consequential this can be,” says Mark Papa, chief executive of EOG Resources, the company that first used horizontal drilling to tap shale oil. “And there will be several additional plays that will come about in the next 12 to 18 months. We’re not done yet.”

Environmentalists fear that fluids or wastewater from the process, called hydraulic fracturing, could pollute drinking water supplies. The Environmental Protection Agency is now studying its safety in shale drilling. The agency studied use of the process in shallower drilling operations in 2004 and found that it was safe.

In the Bakken formation, production is rising so fast there is no space in pipelines to bring the oil to market. Instead, it is being transported to refineries by rail and truck. Drilling companies have had to erect camps to house workers.

The Bakken and the Eagle Ford are each expected to ultimately produce 4 billion barrels of oil. That would make them the fifth- and sixth-biggest oil fields ever discovered in the United States. The top four are Prudhoe Bay in Alaska, Spraberry Trend in West Texas, the East Texas Oilfield and the Kuparuk Field in Alaska.

Last month China’s state-owned oil company CNOOC agreed to pay Chesapeake $570 million for a one-third stake in a drilling project in the Niobrara. This followed a $1 billion deal in October between the two companies on a project in the Eagle Ford.

With oil prices high and natural-gas prices low, profit margins from producing oil from shale are much higher than for gas. Also, drilling for shale oil is not dependent on high oil prices. It is said this oil is cheaper to tap than the oil in the deep waters of the Gulf of Mexico or in Canada’s oil sands.

The country’s shale oil resources aren’t nearly as big as the country’s shale gas resources. Drillers have unlocked decades’ worth of natural gas, an abundance of supply that may keep prices low for years. U.S. shale oil on the other hand will only supply one to two percent of world consumption by 2015, not nearly enough to affect prices.

Still, a surge in production last year from the Bakken helped U.S. oil production grow for the second year in a row, after 23 years of decline. This during a year when drilling in the Gulf of Mexico, the nation’s biggest oil-producing region, was halted after the BP oil spill.

Within five years, analysts and executives predict, the newly unlocked fields are expected to produce 1 million to 2 million barrels of oil per day, enough to boost U.S. production 20 percent to 40 percent. The U.S. Energy Information Administration estimates production will grow a more modest 500,000 barrels per day.

At today’s oil prices of roughly $90 per barrel, slashing imports that much would save the U.S. $175 billion a year. Last year, when oil averaged $78 per barrel, the U.S. sent $260 billion overseas for crude, accounting for nearly half the country’s $500 billion trade deficit.

“We have redefined how to look for oil and gas,” says Rehan Rashid, an analyst at FBR Capital Markets. “The implications are major for the nation.”

While I am hesitant about the environmental concerns, this comes to a great relief when there is turmoil in the Middle East, which hosts the majority of  US’s oil/gas imports.

Some people may question my supporting of this measure as I am against deep water drilling and drilling in the Gulf of Mexico. My response to that criticism is that I speak on behalf of my state which resides off the Gulf of Mexico and could cause direct negative impact to the Gulf’s coast (as displayed after the Deepwater Horizon explosion in April 2010)and if spilled oil got into the Gulf Stream, it could affect the Eastern side of my state as well as the Eastern seaboard.

If the Western states support this measure, then to each state their own. I do acknowledge how not only would this increase our oil supply here in the United States but also how this would create thousands, if not millions, of jobs at a time where job creation is of the utmost importance. I pray that drilling is done in a responsible and safe manner so that we do not see a replay of the Gulf of Mexico oil spill.

Copyright (c) February 10, 2011. All rights reserved.

Case in point: Eliminate big oil’s subsidies and royalties and reap the rewards.

With unleaded gas prices rising into the $4/gallon range; it is no wonder that Exxon and other oil companies are unleashing record 1st Quarter profits.

A Natural Resources staff review of recent earnings announcements by the five largest oil companies operating in the United States shows that this industry has generated outsized profits that undermine the necessity for continued tax subsidies and royalty-free drilling access.

Hugely profitable multi-national oil and gas companies are set to enjoy $53 billion in royalty-free drilling over the next 25 years and $36.5 billion in taxpayer subsidies over the next decade.

In his State of the Union speech, President Obama called for an end to these tax subsidies:

“I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don’t know if you’ve noticed, but they’re doing just fine on their own. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.”

Tax Breaks and Royalty Relief Ridiculousness

The President’s remarks have focused renewed attention on the impact that outdated legacies of the tax code and failed royalty-relief policies have on our current energy system.

Most oil and gas subsidies have been on the books in the United States for many decades. They represent an era when oil and gas exploration was in its infancy, and when resources were plentiful but remained largely unexplored.

Intangible costs of exploration generally include wages, costs of using machinery for drilling, and the costs of materials like drilling muds, chemicals, and fuel that get used up during the process of building wells.

Since 1968, this program has cost the U.S. Treasury $78 billion. Ending this tax subsidy would raise nearly $8 billion over the next decade.

Tax breaks that allow oil and gas companies to use the “percentage depletion allowance” were first put in place in 1926. Rather than writing off the actual costs of the property over its useful life, like most businesses must do, some oil companies get to simply deduct a flat percentage of gross revenues.

Under this method of accounting, total deductions regularly exceed the actual capital invested to acquire and develop the reserve.

When this program was started, stimulating massive exploration around the geologically unknown United States was so important that oil and gas companies were allowed—through this preferable tax treatment—to recover amounts in excess of their investment.

Since 1968, this program has cost the U.S. Treasury $111 billion. Ending this tax subsidy would raise more than $10 billion over the next decade.

Subsidies to Oil Companies Do Not Benefit the Public

The oil and gas industry argues that the tax breaks they enjoy encourage them to develop more oil and gas deposits, which lead to increased oil and gas supplies and lower energy prices.

The Natural Resources Committee Staff’s analysis suggests otherwise for two primary reasons:

1. Depending on the reservoir and the physical characteristics of the hydrocarbon, the cost of producing oil can range from as little as $2 per barrel in the Middle East to more than $15 per barrel in some fields in the United States, according to the Energy Information Administration.

The profit incentive to explore and produce new supplies for this lucrative market dwarfs any marginal benefit that existing federal tax breaks for oil exploration or production could provide.

As President George W. Bush said in 2005, “With oil at more than $50 a barrel, by the way, energy companies do not need taxpayers’-funded incentives to explore for oil and gas.”  Now that oil prices have risen to $100 barrel, the same logic still applies.

2. In recent years, higher oil company profits have increasingly been redirected into dividends and stock purchases, not exploration. Among the Big 5 oil companies, less than 10 percent of profits are reinvested into exploration of new oil deposits.

Net profits directed towards dividends and stock repurchases for the Big 5 oil companies were 58 percent in 2005, 73 percent in 2006, and 72 percent in 2007, 71 percent in 2008, and 89 percent in 2009.

Dumping profits into stock buybacks drives up share prices for remaining shareholders by concentrating ownership, and, in the process, acts to increase the values of stock options for executives.

It also reduces the amount of capital available for new exploration and improvements in drilling safety. The current tax treatment does not incentivize oil and gas companies to diversify into clean energy alternatives.

While some oil companies tout their commitment to research into alternative energy resources, a review of actual corporate investments in research and development (R&D) reveal a business model which appears wildly averse to innovation.

While companies in high-tech sectors like pharmaceuticals and semiconductors regularly invest 15-18 percent of their revenues in R&D, U.S. energy companies invest less than one quarter of one percent of revenues in R&D.

Repealing the oil industry’s tax subsidies will not impact gas prices for American consumers. Oil, the main input and primary cost driver of gasoline, is traded in a global market and oil companies get paid the going market price for the oil they produce.

On the oil market, there is no difference between an unsubsidized barrel of oil that costs $10 to produce and a subsidized barrel that costs $9.50 to produce. Each barrel will sell for the same price, almost $100 on the oil market. Oil companies that receive tax subsidies pass on that benefit to their shareholders, not to consumers.

Reduce the Foreign Dependency

American consumers are price takers when it comes to buying oil. When oil markets react negatively to unfavorable political events or when OPEC decides to cut production, American consumers must simply pay more at the pump.

The world has little spare production capacity that can be tapped during supply crunches, and what does exist lies almost entirely in Saudi Arabia and other OPEC countries.

Expanded domestic drilling will not significantly change that dynamic, as the United States lacks sufficient oil reserves and production capacity to offset OPEC production decisions.

Put the Oil Profits Back into the Pockets of the Taxpayer

ExxonMobil, BP, Chevron, Shell, Conoco Phillips and many other companies are now drilling for free on public land offshore and will continue to do so for the life of these leases no matter how high oil prices climb.

The Government Accountability Office (GAO) has estimated that the federal government and American taxpayers stand to lose up to $53 billion in foregone royalties over the next 25 years.

Ranking Member Ed Markey has authored legislation that would recover these royalties rightfully owed to the American people.

The House has repeatedly passed Rep. Markey’s legislation, including as part of H.R. 3534 that passed the House on July 30, 2010, but the Senate has never taken action.

Oil Profits lay with the Shareholders, not Big Oil operations.

The oil companies and their representatives frequently suggest that their high publicly reported profit numbers are misunderstood because only 7 cents of every dollar in sales is profit, which is similar to other American industries.

However, intensely competitive industries like retail and food service are lucky to earn 1 or 2 cents of profit per sales dollar. The real measure of the oil industry’s financial health is how much profit they generate with the money shareholders have invested. Over the last two years, the Big 5’s average annual return on equity was 21 percent. The U.S. Treasury bond, in contrast, yielded about 3 percent during this same period.

The oil and gas industry’s very high profitability has provided a financial a bonanza for shareholders over the last decade. A $10,000 investment in the Big 5 in 1990 is worth $100,000 today. In contrast, the same investment in an S&P 500 index fund is now worth $60,000. Big difference.

The oil and gas industry is a mature and highly profitable sector that is no longer in need of generous tax breaks or royalty-free drilling access. The $36.5 billion in subsidies that the industry is set to receive over the next decade will not help consumers with rising energy prices.

These subsidies will not strengthen America’s energy independence or help to develop alternatives to oil. Allowing hundreds of billions of dollars to go to an industry who is clearly not in need of the subsidies is a fiscal misstep that must be corrected.

Redirecting a portion of the money saved from the subsidies and royalties into alternative energy while using the rest to pay down our monstrous national debt, would be the best way to start addressing the the US’s financial and environmental concerns.

Copyright (c) February 5, 2011. All rights reserved.

Egypt deploys troops along Gaza border

Egyptian security forces beefed up their presence along the border with the Gaza Strip on Sunday in a bid to stop Hamas operatives from crossing between the two countries amid concerns that terror groups will take advantage of the anarchy in Egypt to launch attacks against that country and Israel.

Israeli defense officials said the troop increase was undertaken in coordination with the Defense Ministry because, under the peace treaty between the countries, Egypt is not allowed to deploy large numbers of soldiers along its border with Israel.

The deployment came amid reports that Egypt had also ordered Hamas to cease all its tunnel activities along the Philadelphi Corridor.

On Sunday, a number of Hamas operatives, including the group’s commander for Khan Younis, escaped from a jail in Egypt and were believed to be making their way back to the Gaza Strip.

“The Egyptians are cracking down on Hamas,” a senior Israeli defense official said on Sunday.

Throughout the day, the IDF and Defense Ministry held consultations regarding the continued unrest in Egypt. Senior Israeli politicians and officials were in touch with Egyptian government officials, and contact was established directly between Israel and Egypt’s new vice president, Omar Suleiman.

Israel’s concern is that the Muslim Brotherhood will use the ongoing demonstrations to garner public support and eventually take over Egypt.

Israeli officials who were in touch with Egyptians on Sunday expressed confidence in Suleiman’s ability to take control of the military and prevent a regime change. I remain doubtful as he was seen as to close to President Mubarak and the Egyptian people want a total change of control.

If the Gaza border is infiltrated, be prepared for an increase in gas prices.

Copyright (c) January 30, 2011. All rights reserved.