Reply to DGH

DGH says: February 14, 2013 at 1:36 pm President Obama made it abundantly clear that we all better be watching our wallets; the tax and spend crowd has a friend in the White House. If you don’t like gun control, immigration reform higher taxes, carbon taxes, more regulations, and windmills this is going to be a tough couple of years, no doubt about that. However, the only accurate thing about this post is the title as it describes the content. I’ve read through the statistics and claims in the post pretty carefully. Between the cherry picking, rants and insults there really isn’t much substance. Yes the President stretched the truth in the first point. There’s a shocker – a politician exaggerated. 1. “Wrong!!! We buy more “foreign oil” now than we did 20 years ago.” No doubt that President Obama did a politician’s stretch on this one. It’s been about 14-16 years since crude imports were this low. But the fact is that imports have been falling dramatically since 2006 and they are approaching mid-90s levels.

The President gets the 20 years figure by combining crude oil and refined petroleum products. This is like combining iron ore and steel in order to boast about a decline in iron ore imports.

2. “We produce more oil at home than we have in 15 years.” Your own data shows that the President’s statement was true. Furthermore, you know that oil production in the federal lands in the Gulf slowed because there was a moratorium on exploration following the big spill. He made no claim regarding public vs. private vs. state. And that’s a split hair given what is happening in the Gulf. For example, BP now a total of 14 rigs in the gulf – that’s more than ever according to their reports. Additionally, the rights to many millions of hectares in the GOM will be auctioned off in the near future.

BP currently has ten (10) deepwater rigs under contract. Three (3) of these are new builds, not yet operational. The other seven (7) are engaged in development operations, primarily in the Atlantis and Thunderhorse areas. This is work that would have been done two years ago, if not for the unlawful moratorium and ongoing permitorium. When faced with criticism of his maladministration, he resorts to variations of, “Under my administration, America is producing more oil than… ” The fact is that his administration has been nothing but an obstacle to US domestic oil production.

3. “The only red tape you have cut, is red tape that your maladministration created.” This Administration didn’t create the spill. And most Americans won’t be surprised or disappointed that production was slowed following that accident. There were videos on the nightly news of a gaping hole on the ocean floor spilling millions of barrels of oil. I’m not arguing that the delay was necessary, useful or effective. But the delay was inevitable no matter who controlled the White House. Returning to the facts for a moment, Federal Gulf Crude production has increased by approximately 5% since this President took office in January of 2009. Your own graph confirms that point. And with the new fields that are coming online forecasts have us at 1.5 million bbl/day in 2014, a 13% increase during the Obama Administration.

In 2008, the forecast was for ~1.8 MMbbl/d by 2013, with most the ~500,000 additional bbl/d coming from the ultra-deepwater Lower Tertiary play. Those fields were expected to start coming on production in 2010. Petrobras’ Cascade/Chinook field came on production in 2012. Most of the ~16 drillships working in the Gulf right now are performing operations that should have been done 2 years ago.

4. What do you mean by “our oil and gas revenues”? You know exactly what he meant by “our” revenues. Show us where you held Mitt Romney (or any other politician) to the same standard when he (they) discussed “our” coal, oil, nuclear, renewables, education system, trips to the moon, agriculture, obesity problem, anything. He wasn’t taking personal credit for drilling a well. This comment is childish and it is a pejorative jab despite your explanations.

Show me where Mitt Romney ever referred to a private sector’s revenue as “our revenue.”

5. “Federal mineral revenues for FY 2012 were HALF of what they were in FY 2008!” Great cherry pick. This one is a doozy. Since 2008 natural gas has a seen a decrease in price. Due to global economic conditions demand has also fallen. Accordingly revenue decreased. Maybe you’d like to blame that on the President. Fair enough. But that’s a small piece of the decrease. In 2008 the mineral revenues were extremely high due to the fact that Bonuses were about 10x greater than normal. Here’s the data from 2003 to 2012 which shows that 2008 was an outlier to the tune of $9 Billion: 2003 $1,263,517,244.50 2004 $ 602,801,496.25 2005 $ 798,679,399.50 2006 $1,163,225,776.25 2007 $ 550,571,499.49 2008 $9,682,957,464.55 2009 $1,555,182,756.70 2010 $1,181,441,803.16 2011 $ 270,218,666.17 2012 $ 946,766,723.25

2008 was an outlier due to the fact that the MMS raked in $7 billion lease bonus and rental payments from the Gulf of Mexico. However, even if you take 2008 out, GOM ONRR revenue is $3 billion below where it should be. GOM ONRR revenue was tightly coupled with oil prices up until 2009. The decline in production and leasing activity are the reasons for the $3 billion shortfall.


 




6. “What’s even more ironic? We’re importing 50% more from the Persian Gulf than just three years ago!” Persian Gulf imports down since 2008, way down since 2002, and we are at 1994 levels. Of course you trimmed that out of the graph. You must own a cherry orchard.

The only relevant period is since the unlawful moratorium. The Obama administration’s malfeasance has resulted in ~300,000 bbl/d of lost domestic oil production. This production had to be made up from other sources and the only nation on Earth with significant excess production capacity is Saudi Arabia, a Persian Gulf nation.

6 Responses to “Reply to DGH”

  1. DGH Says:

    David –

    Thanks for following up.

    1. No matter what the President was referring to as far I can tell it was an exaggeration. The combination of U.S. crude and other petro products is not below 1992 levels according to the EIA.

    http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTTIMUS2&f=W

    2. The moratorium was not illegal. For you to continue asserting otherwise goes beyond misinforming people.

    Production is up in the GOM during this Administration despite the catastrophe that occurred in 2010. Given what we watched on TV I find that remarkable.

    Argue away about what might have been, but the fact is the President was correct, “We produce more oil at home than we have in 15 years.”

    3. Here’s a couple of Romney quotes,

    “We have produced more oil and gas on federal lands.”

    He wasn’t even President and he’s tried to take credit for what “we” produced. The gall.

    “I’m going to take advantage of our energy resources: Oil, coal, gas, nuclear, renewables, wind, solar.”

    Following your logic, MItt is an oil man, a gas man, a coal man, a nuke man, and a wind man. He’s a wealthy fellow but I am pretty sure he hasn’t bought the sun.

    You wrote, “Perhaps you can point out the pejorative barbs and I’ll ask to have them redacted.”

    Will you?

    4. “The decline in production and leasing activity are the reasons for the $3 billion shortfall.”

    So the $12 billion decline is down to $3 billion and instead of all Federal Mineral Revenues we’re down to the GOM. Your post on this point was a cherry pick of the highest order an IMO should be amended.

    We can agree to disagree about the other $3 billion.

    5. “The only relevant period is since the…moratorium.”

    I get the fact that you’re angry about the moratorium. It was a policy decision and you disagree with a Democratic administration’s policy on an environmental matter. Welcome to the club.

    • David Middleton Says:

      [1] Combining domestic crude oil and refined product production in order to boast about a reduction in crude oil imports is fundamentally dishonest. It is a bald faced lie. You can’t combine a raw material with a manufactured product in order to make a claim about the raw material.

      [2]The moratorium was unlawful.

      The U.S. “unlawfully and improperly delayed” permits for deep-water drilling after the BP Plc (BP/) Gulf of Mexico oil spill last year, a federal judge ruled.

      U.S. District Judge Martin Feldman in New Orleans today ordered offshore energy regulators to act within 30 days on six pending permit applications filed by companies that have contracts with Ensco Offshore Co., the Louisiana drilling company leading the legal challenge to the government’s offshore drilling bans.

      Federal law “establishes a non-discretionary duty on the Department of Interior to act, favorably or unfavorably, on drilling permit applications within a reasonable time,” Feldman said in a written order. Ensco was harmed by “the government’s failure to act on pending permit applications contemplating the use of Ensco’s rigs,” he said.

      DOI appealed the enforcement order and the contempt citation. Fifth Circuit stayed the enforcement order, but did not rule on the lawfulness of Feldman’s ruling.

      Interior two days later filed an appeal with the 5th Circuit in which it warned that Feldman’s deadline could ultimately jeopardize the companies’ chances of obtaining their permits.

      “The orders only work to disrupt BOEMRE’s more efficient, iterative practice of communicating application inadequacies to the applicant so that they can be corrected,” said a 12-page filing from federal attorneys. “BOEMRE instead now may be required to deny the applications outright, which in turn would frustrate Congress’ stated preference that the Outer Continental Shelf be made available for ‘expeditious and orderly development subject to environmental safeguards.’”

      The appeals court’s ruling yesterday drew immediate rebuke from Louisiana lawmakers who have criticized the government’s pace of permitting in the Gulf of Mexico.

      DOI asserted that if Feldman’s order was enforced, BOEMRE would simply deny all permit applications.

      [3A] This doesn’t answer my request. Show me where Mitt Romney ever referred to a private sector’s revenue as “our revenue.”

      Without a doubt, the use of “we” when discussing domestic oil production would not have bothered me had it not been for the “you didn’t build that,” and “under my administration America is producing” quotes.

      [3B] If you can point out the pejorative barbs and convince me that they are pejorative, I will ask to have them edited out. However, I can’t edit my guest posts after I submit them.

      [4] No. It’s still $12 billion. I was just pointing out that at least $3 billion can be tied directly to the moratorium. Another $7 billion is likely due to the permitorium. $2 billion might be due to declining gas production in the Gulf. This was declining prior to the moratorium.

      The permitorium included the cancellation of lease sales 215 and 216, the near tripling of the minimum bid on deepwater leases and the shortening of many deepwater lease terms from 10 to 7 years. Leasing activity was just starting to recover from Ike and the crash of 2008-2009 when the unlawful moratorium and subsequent permitorium killed that recovery.

      With leasing activity subdued and permit approvals dragged out from 30-60 to more than 365 days, the ONRR revenue from the Gulf is at least $3 billion and more likely $10 billion lower that it should be.

      [5] It’s simply the only period regarding domestic oil production and imports that is relevant to this administration, its claims and its policies.

    • David Middleton Says:

      Pres. Obama: So tonight, I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good.

      What do you mean by “our oil and gas revenues”? You don’t generate any oil and gas revenue. The Federal gov’t does generate some revenue from the private sector development of Federal mineral leases.

      I stand corrected… And shockingly so.

      Obama Clean-Energy Fund Would Gain If Oil Drilling Expanded
      By Jim Snyder – Feb 14, 2013
      President Barack Obama’s proposal to fund clean-energy research with fees paid by oil and gas producers is renewing a debate over whether the promise of innovation tomorrow is worth expanding drilling today.

      Obama’s “Energy Security Trust” — which he announced this week in the State of the Union address — would redirect about $200 million in royalties for drilling on federal lands to pay for the development of biofuels, electric batteries and cars and trucks powered by natural gas, the White House said yesterday. The trust would operate for 10 years and spend a total of $2 billion.

      While Obama’s plan doesn’t open new areas to producers, clean-energy advocates say the idea of an oil-backed fund could ensure further support for fossil fuel alternatives even in an era of austerity and federal budget cuts.
      […]
      Bloomberg

      I am shocked that Pres. Obama was actually referring to ONRR revenue and not alluding to a new tax.

      That said, his actions have suppressed ONRR revenue and he shows no signs of letting up on that suppression. It’s $12 billion less than it was when he took office. At least $3 billion can be tied directly to the moratorium. Another $7 billion is likely due to the permitorium. $2 billion might be due to declining gas production in the Gulf. This was declining prior to the moratorium.

      The permitorium included the cancellation of lease sales 215 and 216, the near tripling of the minimum bid on deepwater leases and the shortening of many deepwater lease terms from 10 to 7 years. Leasing activity was just starting to recover from Ike and the crash of 2008-2009 when the unlawful moratorium and subsequent permitorium killed that recovery.
      GOM Leasing Activity and ONRR Revenu

      With leasing activity subdued and permit approvals dragged out from 30-60 to more than 365 days, the ONRR revenue from the Gulf is at least $3 billion and more likely $10 billion lower that it should be.

  2. DGH Says:

    2. The Ensco rulings that you cite are specifically related to the delay in permitting. You are intentionally attempting to mislead people on this issue. Not only have you confused the permit delays with the moratorium, you’ve cherry picked the rulings related to the Ensco case like you culled data to support your other fantasies.

    One June 10 an “EXPARTE/CONSENT MOTION to Dismiss all of Plaintiff Ensco Offshore Company’s Claims” was filed. In August of 2011 Judge Feldman wrote,

    “The Court vacated the permanent injunction as moot, amended the final judgment on Count IV to remove its injunctive aspects, and dismissed Ensco’s remaining claims on June 16, 2011, all as jointly requested.”

    The permit delays were not unlawful.

  3. DGH Says:

    2. The moratorium(s) were not unlawful.

    A chronology of the Moratoriums and the Hornbeck case:
    - May 27, 2010 DOI issues a moratorium on deep water drilling.
    - June 22, 2010 Judge Feldman rules that the Moratorium is unlawful and orders that enforcement be suspended.
    - July 8, 2010 DOI appeals and loses.
    - July 12, 2010 The government reinstates the Moratorium with amended justification and requirements.
    - September 7, 2010 Hornbeck and other plaintiffs asked the judge to enforce the original injunction and file amendments to their original complaint.
    - September 29, 2010 Court of Appeals declines to consider the lawfulness of the original moratorium say, “Thus, “[a]ny opinion expressed by this court on the merits and legality of the issuance of the preliminary injunction would address an injunction that is legally and practically dead.”
    - January 13, 2011, Judge Feldman write that the second moratorium “was cancelled and lifted before the Court could rule on its validity.”
    - February 2, 2011 The Judge finds the DOI in contempt for violating his earlier order to suspend the Moratorium.
    - November 27, 2012 A three judge panel reverses (2-1) Feldman’s contempt ruling. For the majority Judge Southwick writes,

    “The district court was certainly correct that Interior immediately took steps to avoid the effect of the injunction, but we conclude none of those actions violated the court’s order. We REVERSE.”

    The judge continued, “The national importance of this case weakens, not strengthens, the propriety of the court’s contempt finding”

    In the first instance the issue of lawfulness was not completely adjudicated. In the second instance the issue was never considered.

    There is a complaint by ATP pending. They’ve asked the court to consider the lawfulness of the moratoriums. Except for ATP’s financial condition there appears to be no urgency in the case and it is moving quite slowly.

  4. DGH Says:

    David -

    I forgot to thank you for your most recent reply. It’s a most interesting discussion and I appreciate your indulgence. While we disagree (and I have been mostly right!) the discussion has been instructive. Thanks.

    Back to disagreeing…

    You wrote, “What do you mean by “we”? You don’t produce any oil.”

    Pejorative: …[a] grammatical form that connotes negativity and expresses contempt or distaste.

    Barb: a biting or pointedly critical remark or comment.

    Hmmmm….

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