Why Won't We Drill?

I've already written too much about President Obama's policies that are trying to push us toward windmills, solar panels, and plug-in cars.  He is trying to do this in spite of the fact that those sources of energy and those cars are not reliable or efficient.  That is why under his policy, electricity costs "will necessarily skyrocket."  He is using federal tax incentives and regulations to discourage drilling in the U.S.  As I've mentioned previously, tighter regulations (by the state in this case ) in western Colorado severely limited exploration for natural gas.  The low price of natural gas combined with the regulations led Halliburton to close operations in the Grand Junction area, an area that went from unemployment rates under 4% in 2008 to today's rate of over 11%.  Another example of Change You Can Believe In.  Where did those jobs go?  Take a look at the state that Yahoo named the Best State to live in - North Dakota.  High paying drilling jobs have taken the state's unemployment rate to 3.8%!  5% below the national average.  Why are companies drilling there?  The state is not regulating "fracking" like Colorado began a couple of years ago.

Fracking is not a cleaned up version of an obscenity.  It is a slang word for fracturing.  In order to release oil and natural gas from the rock formations, companies fracture the formation.  Even though the procedure has been used for decades in Texas, Oklahoma, and other oil-producing states, the state of Colorado decided the process needed more study to determine its impact on the environment, especially water supplies.  As is usually the case, the media jumped in immediately with sensational stories to influence the debate.  A family went to a Denver television station with a story about their flammable tap water.  Sure enough, video shows their tap water being lit with a cigarette lighter as it comes from their kitchen faucet.  The connection to drilling?  A new well was recently drilled 7 miles away.  The drilling company did frack the well.  The state's energy department said that flammable water from wells is actually pretty common, and was reported in several areas of the state whether gas production was present or not.  Drilling for water sometimes passes through layers of the earth with pockets of natural gas.  As a rule, the release of gas is limited to a very short time.  But of course none of that made into the news reports. So, Colorado's Department of Natural Resources used the worry about fracking as an excuse to tighten regulations on the practice.  And effectively drive Halliburton along with its jobs out of the state.


Now, with gas prices inching towards $4 a gallon, Obama is starting to feel some heat on his energy policies, starting with the offshore drilling moratorium put into effect, in spite of a federal court ruling against it, immediately following the BP disaster a year ago.  This is an issue that he should worry about.  Unemployment in the 8% to 10% range has become the "new normal."  So that probably won't get as much attention as it should in the 2012 election campaign, especially with the media spinning the "improvement" that has the rate just below 9% now.  I think the average voter will have a very difficult time accepting $4 a gallon gasoline as normal, especially when they receive a $100 reminder each time they fill up their Government Motors Tahoe!

Reading the newspaper will tell you that oil and gas production is expected to be a big issue in the next election.  As one site I read said, you can tell what worries the Demoncrats by what they attack.  And they are attacking oil and gas exploration now.  Last week's Denver Post had a front section story, page 2 if my memory serves, about the environmental impact of fracking.   On Monday, the city of Grand Junction announced the opening of the western slope's first station selling natural gas for cars and city vehicles, touting natural gas's affordability and the fact that it clean burning.  So the Demoncrats, through the Denver Post launched their attacks.  The page 2 story reported that the environmental friendliness of natural gas was overstated, when the impact of fracking was considered.  They described giant trucks lumbering over the fragile western slope, pounding the earth to release the natural gas, just like black smoke spewing dinosaurs.  When you consider the impact of the equipment's emissions, the lack of emission of natural gas burning cars is more than offset, according to the Post.  Now this is my question, not the question of the so-called journalist writing the article -  why should the environmental cost (assuming there is actually one) of fracking should be considered when choosing a natural gas powered car, but not the source of electricity for the Volt ( too bad Fiero was already taken, because this story shows Fiero would be a more appropriate name).  Clean burning coal is the source of over half the electricity needed to power the Volt.  Luckily no one is buying - either the car or the fear of environmental catastrophe.

Next came a front page of the business section article.  This article seemed to be in response to the reports of the high paying jobs that left Colorado for more friendly states like Texas, Oklahoma, the Dakotas, and New Mexico.  The Post reported that the production from the exploration of western Colorado was greatly overstated.  The Post reported that of 16 wells they studied for the report, almost "half produced 800 barrels a day, or less."  Now, I was no math major, but just assume that those 16 wells averaged 800 barrels a day.  Probably a low estimate, considering the spin the author seemed to be giving the article.  Oil is $105 a barrel as I am writing this.  Again, I was not a math major, so lets round down to $100 to make the math easier.  Mr. Haight, my 4th grade math in Gruver, TX would be proud to know that I remember that to multiply by 100, just add two zeroes to the number you are multiplying.  So using these low estimates, these wells would make $80,000 a day!  Oh yeah, times 16 wells.  That's only $1,280,000 a day.  Again, let's make the math easier by assuming that these wells belong to a good union and only work 300 days a year.  What local economy wouldn't appreciate the production of $384,000,000 in a year?  Now, my bank statement rarely shows a comma, and never has two!  But if my memory of Mr. Haight's class is correct, those six zeroes and two commas denote millions.  $384 million, by conservative estimates, in a year.  Using data from only 16 wells studied for the article.  Imagine what the real numbers for the area would be!  That might put a couple of folks in the "rich" bracket that the Demoncrats are so fond of exploiting through tax increases.

This week's Post featured a front of the Perspective section article on the "real" west.  The article disputed the Republican's claim of representing the west in the battle to ease land use regulation by the Department of the Interior.  The article quoted a poll of western voters that supported the government's "protection" of our public lands.  The problem with the poll is the same as most westerners have come election time.  The polling is skewed by the heavily populated cities of Denver, Boulder, Las Vegas, San Francisco, and Los Angeles.  The constituents that wouldn't know a wilderness area not featured on a granola box, decide the policy for millions of acres of federally controlled/regulated land and the media spins it as the opinion of average westerners.  Whether that land should be federally controlled is another issue that I wrote about last year. 

Finally, today's news reported the final shot at the oil and gas exploration-friendly area of western Colorado.  Unfortunately in Colorado, the Demoncrats still control the state government.  Even worse, it's a re-distric
ting year.  So, the legislature has announced its recommendations for a new district that would include the traditionally Republican area of Grand Junction.  The area will be merged with the San Francisco/Los Angeles of the state, Boulder and Fort Collins.  This move will assure the conservative western slope will have virtually no representation in the state government.  So the folks that made the once proud state of Colorado the first to legalize abortion in the 70's and led the state's march to legalized marijuana will now decide representation for the conservative west.

I have had a very difficult time writing this post.  It's hard to keep my thoughts on track with all the B.S. being thrown right now.  My blood pressure is probably spiking now.  Sarah Palin may not be able to see the Kremlin from her front porch, but she is right on the correct energy policy for our country - "drill, baby, drill."  Or maybe her other creed is more appropriate - "don't retreat, reload."

Dumping Money On the Ground

When I worked for Avis, we were required to take a class on responding to fuel spills.  The district manager said that since I had worked in and been around the oilfield when I was younger, I probably didn't need to take the class.  I told him that unless the proper response to a spill was to throw some dirt on it, I'd better take the class.

When I visited my grandparents for the summer when I was about 7, I went to work with my Grandpa Tom in the oilfield.  When the tanks are full, he would have to hire a truck to come out and haul all the oil to his buyer.  Since the cost of having the truck come out is the same no matter how much oil they haul, you would of course want to have as much oil as possible be taken in a trip.  A tank could be full, but still have a lot of saltwater in with the oil.  Oil sits on top of the saltwater (think oil spill in the Gulf, the oil stays on top). So, there was a valve on the bottom of the tank.  Grandpa would open this valve and let the saltwater spray out onto the ground.  It was my job to sit beside this spraying valve and watch for the saltwater to turn into oil.  Grandpa would go do his maintenance on the pumpjack or whatever else he needed to do.  I didn't want to let any oil spray out, that would be just like throwing away money.  So I sat staring at the brownish saltwater spraying, waiting it for it to change from coffee with cream color to coffee with no cream color.  When oil started spraying out, I would yell for Grandpa and he would close the valve to let the well produce for a couple of more days to maximize the truck's load of oil.  It was a great practice economically, but probably not so great environmentally.  Oily saltwater leaves an ugly mess on the ground.  

I think even the most environmentally insensitive oilman sees this as a bad practice today.  So, to a degree regulations were needed.  But, as is usually the case with government involvement, they went too far the other direction.  And if the federal government is involved, they will go waaaaaaaaaaaay too far.  And then go further.  And take a minute's break and go a little further.  Eventually they go so far that the producers do not make enough money to stay in business.  The Democrat/Progressive side seems to forget that the reason oil companies exist is to make a profit.  And in most cases, they will do it the right way, both for their profit margin and for the environment.  

Eighteen governors, two of them Democrats, have asked Congress to clamp down on the EPA.  They say that the EPA doesn't take the economic impact of their rulings into consideration when they impose new restrictions.  They have reached the point in some cases, where it is no longer profitable to stay in business.  As I mentioned in yesterday's post about the Grand Junction area, trickle down works in both directions.  When business is booming for the oil company, it is booming for the construction industry, the fast food industry, grocery stores, retailers, and yes, the government through sales, income, and property taxes.  Ever notice all the new schools, libraries, and jails get built during the boom years?  Then the EPA steps in with new regulations, and end the boom.  For everyone.  Including the government.  

I don't know if the current Congress has the spine, or even the inclination to stand up to the President and his anti-business policies.  But it is nice to see that the states are starting to push back.  Over the past 100 plus years, the states have let the federal government take too many of the powers the Constitution relegated to the states.  It will be very hard to get those powers back.  But it sure is good to see the process start.  Not only in the case of the EPA, but Utah has filed suit to prevent the federal government from taking more land and to try to take back the area that President Clinton took by executive action in his last days in office (southern Utah, rich with uranium, imagine that).  Montana, Texas, and others have filed or threatened to file suit over federal gun control laws.  Texas, Virginia, and others have started the process of challenging federal takeover of healthcare.  And with the recent verbal jabs by Supreme Court Chief Justice John Roberts at the president, I think the Supreme Court is signaling that it is ready to reign in some of the federal power grabs.  

Maybe the Supreme Court is that seven year old watching money spray out onto the ground.  It's time to shut off the valve.