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Incentives on Oil Barely Help U.S., Study Suggests
Edmund L. Andrews, NY Times
The United States offers some of the most lucrative incentives in the world to companies that drill for oil in publicly owned coastal waters, but a newly released study suggests that the government is getting very little for its money.
The study, which the Interior Department refused to release for more than a year, estimates that current inducements could allow drilling companies in the Gulf of Mexico to escape tens of billions of dollars in royalties that they would otherwise pay the government for oil and gas produced in areas that belong to American taxpayers.
But the study predicts that the inducements would cause only a tiny increase in production even if they were offered without some of the limitations now in place.
It also suggests that the cost of that additional oil could be as much as $80 a barrel, far more than the government would have to pay if it simply bought the oil on its own.
…The Interior Department study, commissioned to analyze the costs of royalty incentives and their effectiveness at increasing energy supplies, was completed in fall 2005. But the study was not released until last month because senior officials said they considered it incomplete.
After repeated requests, the department provided a copy to The New York Times with a “note to readers” that said the report did not show the “actual effects” of incentives. Indeed, Interior officials contended that the cost of the incentives would turn out to be far less than the study concluded.
They also said that the nation benefits from even small amounts of additional domestic fossil fuels.
But industry analysts who compare oil policies around the world said the United States was much more generous to oil companies than most other countries, demanding a smaller share of revenues than others that let private companies drill on public lands and in public waters. In addition, they said, the United States has sweetened some of its incentives in recent years, while dozens of other countries demanded a bigger share of revenue.
(21 Dec 2006)
The NY Times has been leading the way with its coverage of royalty reductions for oil companies. What’s surprising in this story is the Bush administration’s reluctance for the public to see a study that the public has paid for. (Or perhaps, as Kevin Drum suggests at Washington Monthly, it isn’t so surprising.) -BA
UPDATE: Jerome a Paris disagrees with the policy:
This is absolutely insane. Tens of billions of dollars of abandoned tax revenue, more of the same in giveaways on an absolutely useless and counterproductive policy, when that money could be used to fund alternative energies and R&D in energy saving technologies.
Mexico hopes tax on soda will refill lost oil revenue
Marla Dickerson and Carlos Martinez, LA Times
Mexico is trying to make up for a projected shortfall in oil revenue by raising taxes on other quick-fix liquids: colas and carbonated drinks.
A proposal by the nation’s new President Felipe Calderon would impose a 5% levy on soft drinks – and an additional 15% on cigarettes – to raise $1 billion next year. With Mexico’s oil production falling and its economy slowing, Calderon’s administration is scrambling to find additional sources of revenue. Calderon said last week that he would seek to impose the new taxes as part of his 2007 budget.
The proposal has raised the ire of Mexico’s $10-billion soft drink industry. The sector has taken out full-page ads in national newspapers blasting the proposal as a job killer and a potential blow to Mexican consumers, who trail only Americans in their consumption of carbonated drinks.
(12 Dec 2006)
Trading coal for oil may prove profitable
Dustin Bleizeffer, Jackson Hole Star-Tribune
What if you could make more money by throwing coal away than actually using it to heat and electrify our homes and businesses? How would you do it?
You might make a handsome profit by playing one commodity against another, particularly if you don’t have to go to a competitive bid to pay for one of the mineral resources.
Say oil goes back to $80 to $100 per barrel, and coal stays on its steady course of $12 to $15 per ton. Under this price scenario, you might be able to burn coal to generate the thousands of megawatts required to extract “oilshale” under a freeze-wall and heating regime, even if the energy value of the oil you extract doesn’t match the energy you put into the program.
Would it be possible, then, to have a total net loss of energy and still make a profit because you leveraged $90 oil against $12 coal?
(10 Dec 2006)
Good article. Going directly coal-to-liquids would surely be cheaper. And yet the project rolls on. If the link doesn’t work try over at EnergyResouces. -AF
Global energy hunger means boom for Norwegian outpost
DOUG MELLGREN, Houston Chronicle
HAMMERFEST, NORWAY – The polar night cloaking this wind-swept town in northernmost Norway is pierced by glaring floodlights from a nearby island.
Construction machines roar and hum as workers bundled against whipping winds scurry among enormous storage tanks, gleaming towers and rows of red housing barracks.
The massive natural gas plant outside Hammerfest, once an Arctic outpost known for fish, reindeer traffic jams and a dubious claim of being “The World’s Northernmost Town,” is now the base of oil-rich Norway’s latest energy drive.
It’s a pioneering venture to extract natural gas in the fragile Arctic waters of the Barents Sea, which the nation uneasily shares with powerful neighbor Russia, and may contain billions of barrels more of yet-to-be-discovered oil and gas.
“We are opening a new oil province,” said Sverre Kojedal of the state-controlled oil company Statoil, which is developing Norway’s first Barents natural gas field, Snoehvit, which lies about 90 miles off the coast and is expected to come online a year from now.
(19 Dec 2006)
