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Big Oil’s Big Windfall

Editorial, NY Times
A public already groaning under huge deficits does not need more red ink. An oil industry already rolling in record profits does not need more tax breaks. But both are sure to happen unless some way can be found to claw back from a decade’s worth of Congressional and administrative blunders, aggressive lobbying and industry greed.

According to a detailed account in Monday’s Times by Edmund L. Andrews, oil companies stand to gain a minimum of $7 billion and as much as $28 billion over the next five years under an obscure provision in last year’s giant energy bill that allows companies to avoid paying royalties on oil and gas produced in the Gulf of Mexico.

The provision received almost no Congressional debate, in part because Congress was lazy and in part because the provision was misleadingly advertised as cost-free. The giveaway also seemed a natural sequel to a measure passed in 1995 to provide royalty relief. But that measure came at a time when oil prices, and new investment in oil and gas exploration, had declined. It also included an important safety valve: in any year when oil prices exceeded a threshold, about $34 a barrel, companies would have to resume paying royalties.

However, in what appears to have been a bureaucratic blunder, the Clinton administration omitted that crucial escape clause in all offshore leases signed between the government and the oil companies in 1998 and 1999. It seemed a harmless mistake at a time when oil prices were still below $20 a barrel. But times changed. Prices have been above the cutoff point since 2002, and an estimated one-sixth of the production in the Gulf of Mexico is still exempt from royalties for no good reason whatsoever.

That blunder was compounded, again and again. First, a court decision in 2003 effectively doubled the amount of oil and gas exempted from royalties. Then the Bush administration offered special exemptions for “deep gas” producers, drilling more than 15,000 feet below the sea bottom. Then came the 2005 energy bill, which essentially locked in the old incentives for five more years.

At least one oil company has the grace to be embarrassed by all this. “Under the current environment,” one Shell official told Mr. Andrews, “we don’t need royalty relief.”

But some companies seem to want more. A lawsuit filed by Kerr-McGee Exploration and Production would greatly expand the royalty relief. If the suit succeeds, the lost revenue may rise to as much as $28 billion.

Edward Markey, a Democratic member of the House from Massachusetts, has proposed a bill that would keep any new contracts from granting relief when oil and gas prices were high, and would instruct the interior secretary to try to renegotiate existing contracts. That is a fair and overdue remedy.
(28 March 2006)

Pentagon seminars seek solutions to U.S. oil ‘addiction’

Gopal Ratnam,
Several hundred people gathered in an Arlington, Va., hotel just a block from the Pentagon on March 27 to listen to Jim Woolsey, the former CIA director, talk about energy conservation.

It was the first in a series of seminars organized by the Pentagon’s Office of Force Transformation and acquisition office, headed by Ken Krieg, to address the problem of the nation’s “addiction” to oil, as President George W. Bush put it in his State of the Union address in January.

The Pentagon, as the single largest U.S. buyer of oil, accounting for 1.7 percent of national consumption, wants to do its part to cure the addiction. Defense Secretary Donald Rumsfeld has asked the Pentagon to examine ways the department can address its own oil use. Gordon England, the deputy defense secretary, is expected soon to announce a new office under Krieg’s supervision to coordinate the department’s oil use.

The diverse audience – including executives from the defense and oil industries, energy conservation and environmental groups, think tanks, officials from the Pentagon and State Department, foreign diplomats and a few reporters – were given “Be energy smart. Are you doing your part?” badges, featuring a finger-pointing Uncle Sam drawn from the Army’s recruitment poster.

If the participants had expected to hear Woolsey lay out a grand plan, a Manhattan Project-like scheme to cure the American oil addiction, they would have been disappointed.

“We must focus on short, quick moves that will give us alternatives, but they are not silver bullets,” Woolsey said.

…For those who say these adjustments are difficult, “we have done hard things before,” Woolsey said. “In the past, we have dismantled kaiser’s and Hitler’s Germany, Mussolini’s Italy, the Japanese imperial forces and the Soviet Union. All of them decided to take us on – they are all gone and we’re still here.”
(28 March 2006)
Behind a paywall.

Biotech crops will hurt US family farmers and deepen the energy crisis

John E. Peck, InfoshopNews
As concerns about peak oil mount, the latest group to jump on the renewable energy bandwagon has been the biotech industry. In a March 13th 2006 press release building towards their national convention in early April in Chicago, Jim Greenwood, president of the Biotechnology Industry Organization (BIO), proclaimed that a new wave of genetically engineered technologies “will end our national addiction to oil.” Nothing could be further from the truth.

Family farmers and others who have already suffered from the first wave of biotech crops can only shudder at what lurks within this latest Pandora’s Box. Thanks to Monsanto, farmers are now stuck producing vast quantities of low quality Bt corn that has hardly any market. This unwanted biotech corn must then be dumped – at taxpayer expense – into domestic ethanol production, factory livestock farms, or abroad in places like Mexico where it contaminates indigenous varieties, undercuts peasant farmers, and creates desperate people who have no choice but to cross the border. And in the wake of the Starlink disaster, one can only imagine the consumer safety threat posed by fields of high starch low fiber biotech corn, genetically engineered with an ethanol enzyme, growing adjacent to other corn across the Midwest.

The conventional ethanol industry is already under the thumb of Archers Daniel Midland (ADM), and many family farmers have lost their shirts investing in co-op ethanol projects that end up being gobbled up by ADM when times get tough, such as happened to MN Corn Processors. And, in tune with its slogan about being the supermarket to the world, ADM could care less about energy independence at a national level. They have already pledged to import sugarcane ethanol from Brazil under new “free trade” deals and leave U.S. corn producers high and dry if the price is right. Adding biotech ethanol crops into this corporate-driven quasi-monopoly will only tip the scales further against family farmers.

Another lucrative “solution” to the energy crisis being promoted by the biotech industry is to engineer microbes to produce enzymes that can then be added to switchgrass or crop wastes such as corn stover or wheat straw in largescale biorefineries – a process known as cellulosic ethanol production. Of course, the environmental impact of such unprecedented industrial facilities is unknown. And beyond all the hype, one is still left with the same Enron style scheme dependent upon potentially dangerous patented technologies, abusive one-sided supply contracts, and commodity markets manipulated by corporate cartels.

John E. Peck is executive director of Family Farm Defenders

(27 March 2006)

Ag, You’re It
Agriculture interests push ambitious renewable-energy goal

Amanda Griscom Little, Grist
A few more strange bedfellows have recently been coaxed into the sack with the enviros, hawks, and labor advocates pushing for a smarter U.S. energy strategy. The newbies include growers of corn, soy, wheat, trees, and even dairy cows, all of which could play a role in cultivating homegrown energy sources.

Earlier this month, some 70 agriculture and forestry groups and companies endorsed a campaign dubbed “25 x ’25,” which advocates that 25 percent of energy in the U.S. come from “America’s working lands” by 2025. That means biofuels like ethanol, bioenergy from processed animal manure and agricultural waste, and wind and solar power produced on agricultural lands. At the moment, these sources make up less than 4 percent of America’s energy mix. Backers of the campaign, many of them generally right-leaning, include the American Farm Bureau Federation, the National Corn Growers Association, the National Milk Producers Federation, the Association of Consulting Foresters of America, and the farm equipment giant Deere & Co.

“We don’t see this as big, we see it as enormous,” said Ernest Shea, a longtime agriculture and conservation lobbyist who is spearheading the 25 x ’25 coalition. “Land managers inherently understand how soil, water, air, and sunlight can be harnessed and harvested, be it for nourishment or fuel. We see this as something that will dramatically expand agriculture’s role — as a producer not just of food and fiber, but also energy for America.”
(24 March 2006)

Daylight Savings – A drop in the Oil Drum?

peakguy, The Oil Drum / NYC
[Editor’s Note: See Peakguy interviewed by local TV station NY1. I can’t believe that they edited out the part where I show them the Hubbert Curve T-Shirt! /joking]

The Energy Bill passed into law last year extended daylight Saving hours by three weeks starting with the spring of 2007 as a way to cheaply save some energy, without having to make much sacrifice.

Daylight Saving Time (DST) is not a new concept. In 1784, when Benjamin Franklin was Minister to France, an idea occurred to him: in that part of the year when the sun rises while most people are still asleep, clocks could be reset to allow an extra hour of daylight during waking hours. The rationale behind this is that you basically shift an hour of daylight from the morning when most people are still asleep (lights out), to the evening when people are in their homes and require light. He calculated that the French could save one million francs per day on candles. This same logic was applied in both world wars in Europe and the US and later during the oil embargos of the 1970s. More historical background here.

But how big is this impact? Is DST really as meaningful now as it was in the past?
(29 March 2006)

New fuel economy rules issued to auto industry
Large SUVs like Hummer H2, Chevrolet Suburban covered for the first time

Associated Press via MSNBC
The Bush administration issued new rules Wednesday ratcheting up gas mileage requirements for pickup trucks, sport utility vehicles and vans, for the first time covering the largest SUVs on the road like the Hummer H2 and Chevrolet Suburban.

The new fuel economy rules, covering 2008 through 2011, would save 10.7 billion gallons of fuel over the lifetime of the vehicles sold during the period and go further than an administration proposal issued last summer, officials said.
(29 March 2006)