Archive for the ‘Energy’ Category

The Green River Formation, a largely vacant area of mostly federal land that covers the territory where Colorado, Utah and Wyoming come together, contains about as much recoverable oil as all the rest the world’s proven reserves combined, an auditor from the Government Accountability Office told Congress on Thursday.

The GAO testimony stressed that the federal government was in “a unique position to influence the development of oil shale” because the Green River deposits were mostly beneath federal land.

The Green River Formation–an assemblage of over 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah, and Wyoming–contains the world’s largest deposits of oil shale,”Anu K. Mittal, the GAO’s director of natural resources and environment said in written testimony submitted to the House Science Subcommittee on Energy and Environment.

“USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions,” Mittal testified.

“USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions,” Mittal testified.

“The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the oil shale in the Green River Formation can be recovered,” Mittal told the subcommittee. “At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world’s proven oil reserves.”

In her oral statement before the subcommittee, Mittal said that developing the shale oil would create wealth and jobs for the country, but also challenges for government.

“Being able to tap this vast amount of oil locked within this formation will go a long way to help to meet our future demands for oil. The U.S. Geological Survey, as you noted, estimates that the formation contains about 3 trillion barrels of oil of which half may be recoverable,” she said.

“As you can imagine having the technology to develop this vast energy resource will lead to a number of important socioeconomic benefits including the creation of jobs, increases in wealth and increases in tax and royalty payments for federal and state governments,” she said.

“While large-scale oil-shale development offers socioeconomic opportunities it also poses certain socioeconomic challenges that also should not be overlooked,” she testified. “Oil shale development like other extractive industries can bring a sizable influx of workers who along with their families put additional stressed on local infrastructure. Development from expansion of extractive industries has historically followed a boom-and-bust cycle making planning for growth difficult for local governments.”

In her written testimony, Mittal noted that three-fourths of the Green River shale oil is under federal land.

“The federal government is in a unique position to influence the development of oil shale because nearly three-quarters of the oil shale within the Green River Formation lies beneath federal lands managed by the Department of the Interior’s (Interior) Bureau of Land Management (BLM),” she testified.

The GAO also cited potential environmental impacts from producing oil from the Green River shale that included the need to draw large amounts of water, possible harm to water quality, and temporary degradation of air quality and the clearing of large amounts of vegetation.

“Developing oil shale and providing power for oil shale operations and other activities will require large amounts of water and could have significant impacts on the quality and quantity of surface and groundwater resources,” Mittal said in her written testimony. “In addition, construction and mining activities during development can temporarily degrade air quality in local areas. There can also be long-term regional increases in air pollutants from oil shale processing and the generation of additional electricity to power oil shale development operations. Oil shale operations will also require the clearing of large surface areas of topsoil and vegetation which can affect wildlife habitat, and the withdrawal of large quantities of surface water which could also negatively impact aquatic life.”

OBAMA’S RESCUE OF CHRYSLER AND GENERAL MOTORS UNPOPULAR WITH VOTERS, CREDITORS, AND GM MANAGEMENT

BY: Bill McMorris – April 30, 2012 5:00 am

President Barack Obama has made the auto bailout a centerpiece of his reelection campaign, using it to bash Republican nominee Mitt Romney. But the tactic may backfire as the general election heats up, public opinion surveys suggest.

Recent polling from Rasmussen indicates that 59 percent view the bailouts as a “failure” and only 44 percent think the bailouts were “good for America.”

The administration has already written off $7 billion in taxpayer losses in the American takeover of Chrysler and General Motors; those losses are expected to climb as high as $23 billion—27 percent of the $85 billion spent on the bailout.

While the bailout is widely credited with saving the two companies, increasing taxpayer losses have made it nearly as unpopular in 2012 as it was when Obama was elected. More than half of Americans still disapprove of the auto bailout compared with 61 percent in 2008.

That has not stopped Obama from using the bailout as a bludgeon against Romney, who backed bankruptcy measures, in a number of campaign speeches.

“We could have just kicked the problem down the road. The other option was to do absolutely nothing and let these companies fail,” Obama told the United Automobile Workers union in February. “And you will recall there were some politicians who said we should do that. Some even said we should ‘let Detroit go bankrupt.’”

The line drew a chorus of boos from the crowd and Obama has used the talking point often in his recent campaign addresses. He has deployed the line in a number of speeches in front of friendly crowds, despite the surprising lack of enthusiasm among Democrats for the bailout.

Obama’s job approval ratings among Democrats remain at nearly 85 percent, according to RealClearPolitics.

That is 20 points higher than the 63 percent of Democrats who support the auto bailout.

Obama is using the talking point as a targeted message to interest groups, rather than a broad appeal to his overall base, bailout experts say.

“The reason Obama likes it is because labor likes it,” one bankruptcy expert said. “The administration went in and took UAW and pulled them up.”

The administration handed $85 billion to GM and Chrysler and guided them through reorganization. Obama took on the role of bankruptcy court and bumped the unions to the front of the line, handing them control of Chrysler, while preserving pay and benefits at General Motors.

“They came in and forced these companies into pre-packaged bankruptcy where unions were made whole and creditors were squeezed out,” the expert said. “In normal bankruptcy they don’t rearrange stakeholders rights willy-nilly…there’s no way those union contracts would have been untouched.”

Labor is not the only constituency to which Obama has tried to appeal by championing the bailout. “After three decades of inaction, we’re gradually putting in place the toughest fuel economy standards in history for our cars and pickups,” Obama said in the same February speech. “That means the cars you build will average nearly 55 miles per gallon by the middle of the next decade—almost double what they get today.”

Obama tied the bailouts to strict environmental standards that have led to increasingly efficient cars, an achievement he has used to woo green advocates. The move has affected more than just the environment, establishing “dangerous” legal precedents, according to some legal experts.

The fuel-mileage regulations are expected to drive up vehicle prices by $3,200 and keep consumers out of car lots, according to the National Auto Dealers Association, which sued to block the regulations. A Washington D.C. Appeals Court tossed the suit, ruling that only manufacturers could sue for damages associated with the expensive rules.

“This is a great incentive for cronyism,” an attorney familiar with the regulations said. “The manufacturers colluded with the feds and they pushed these costs onto car dealers and consumers; the government had its first taste of cronyism and learned that if they can bully enough stakeholders and companies, they can get away with it.”

Auto executives hailed the bailout as a lifesaver in 2008, but are increasingly uneasy about the government’s ownership in the two companies. While the government liquidated a number of its shares in GM during its record-setting stock offering in 2010, it has retained partial control of the company.

“GM’s executives have wanted the government out for a while now … it’s a huge PR liability for them—they hate the ‘Government Motors’ stigma,” said Edward Niedermeyer, editor-at-large of TheTruthAboutCars.com. “The government can’t get out now, they don’t want to take an even bigger loss on the bailout.”

GM’s stock price has dropped about $10 per share since its IPO, meaning any sale would increase the taxpayer’s multi-billion dollar losses in the bailout.

Niedermeyer said the administration might wind up its involvement in GM even if it means higher losses. Timing, he added, will play a key role in that decision.

“They’ll wait until after the election before they act,” he said.

Michele Bachmann- Obama “Waiving a Tar Baby in the Air”

by Javier Manjarres

During our sit-down interview with Congresswoman Michele Bachmann, Bachmann skewered President Obama’s energy policy and his farcical view of energy “independence.”

Bachmann said that Obama doesn’t know “zilch about the economy and what to do in the business world,” and added that he didn’t have “any background when he came in and has proved it over and over in spades.”

Bachmann also said the Obama’s recent Keystone XL pipeline proposal was a joke and that it was hypocritical of him to blame oil speculators. Bachmann explained that the President has every tool at his disposal to deal with speculators and “if there is a problem (with oil speculators) then President Obama is the problem for failing to utilize these tools that he has.”

This is just about waiving a tar baby in the air and saying that something else is a problem. I have never seen a more irresponsible President who is infantile in the way that he continually blames everyone else for his failure to first diagnose the problem and second to address the problem. – Congresswoman Michelle Bachmann

America’s largest solar panel manufacturer is laying off 2,000 workers and closing factories in response to “waning demand” and increased competition from China, the Associated Press reports.

First Solar Inc. says the layoffs amount to 30 percent of its global workforce. Some cuts come from shutting down production lines in Malaysia and closing a factory in Germany. The company will also cut additional jobs in both Europe and the U.S.

First Solar says its manufacturing costs should drop by $30-$60 million this year and another $100-$120 million a year afterward. It will book a restructuring charge of $245 to $370 million.

The Tempe, Ariz., company says the cuts are necessary to cope with deteriorating demand in Europe, which has been the biggest market for solar panels.

However, what’s odd about the Associated Press report is the fact that there’s no mention of the $3.1 billion
 
In federal loan guarantees First Solar was awarded back in 2011. We assume the billions were given with the understanding that First Solar, “America’s largest solar panel manufacturer,” would boost the economy and create jobs.
Not so much.

And there’s no mention of that time First Solar (via the infamous Export-Import Bank) was awarded $455.7 million in additional funds to sell solar panels to itself
 
And there’s no mention of that time former CEO Rob Gillete’s unexpected resignation sent the company’s stock into a downward spiral
 
What we’re trying to say is that maybe — just maybe — First Solar was a poorly run company from the start and the mass layoffs have nothing to do with Chinese competition and “waning demand” but everything to do with lousy management and structuring

80% OF DEPARTMENT OF ENERGY GREEN LOANS
WENT TO “OBAMA-RELATED COMPANIES”

Under the guise of “investing” in so-called green energy, the Obama Administration is perpetrating yet another massive scam on the American people. It has now been documented that Obama is using your hard-earned tax dollars to line the pockets of his biggest campaign donors.

But don’t take our word for it…

According to research done by Hoover Institution Fellow Peter Schweitzer, the hundreds of millions of dollars in taxpayer-backed loans handed to Solyndra – the now bankrupt company that was run by Obama campaign bundler George Kaiser – is just the “tip of the iceberg.”

In fact, a staggering 80% of the federal grants and loan guarantees made to green-tech firms by Obama’s DOE since 2009 were made to companies whose chief executive or chief investors were major contributors and big money men to Obama’s 2008 presidential campaign.

Schweitzer’s research reveals a devastating picture of corruption in Washington, D.C. Democrats, Republicans, Congressmen, Senators, administration officials and bureaucrats – the corruption is widespread.

Billions upon billions of dollars literally have poured into the coffers of Obama’s biggest campaign donors whose quasi-green products, like bankrupt Solyndra’s solar panels or the exploding Finnish eco-car, were not only questionable, but very clearly doomed to failure from the beginning.

Given the number of reports warning the Obama Administration against many of the “green” loans and government handouts, it is now obvious that the money transfers were never meant to rescue the American economy or create jobs… Rather, the program from the very beginning was about nothing more than lining the pockets of loyal Obama supporters.

Even the non-partisan Government Accountability Office (GAO) has chastised the Obama Administration for the manner in which DOE loans and handouts were granted. According to GAO:

Many of the loans lacked adequate documentation and performance measures.

Obama’s DOE granted many loans based on favoritism while denying or disadvantaging other equally and often more qualified potential borrowers.
And DOE’s own inspector general, Gregory Friedman, has testified that many of the contracts have been steered to “friends and family.”

Yet despite all this, Barack Obama wants to double down on the program. In fact, Obama’s Department of Energy has announced its intention to issue even more “green energy” loans. How many major Obama 2012 donors do you think will be on the receiving end of those new loans and grants?

by RON DEVITO on SATURDAY, APRIL 14, 2012 20:40 EDT

Former Alaska Governor Sarah Palin last night demonstrated how the price of fuel affects the price of food, clothing, and service and called for responsible energy development in a Fox News special, Paying at the Pump, which she co-hosted with Eric Bolling. Gov. Palin showed how much prices of different food products have increased. She spoke about her all-of-the-above approach to energy development, developing ANWR, and using natural gas. The show also featured a panel of drillers, refiners, and other subject matter experts. Bolling advocated for raising margin requirements on oil trades.

The show is repeating at 2100 / 9 PM tonight. Fox has not yet released the video of the Special. Following is a five-minute HD video clip by SarahNET, and Fox News’ complete photo spread.


Gov. Palin sitting with Eric Bolling at the beginning of Paying at the Pump.

By Kathy Kristof

Forget the modest 3.1 percent rise in the Consumer Price Index, the government’s widely used measure of inflation. Everyday prices are up some 8 percent over the past year, according to the American Institute for Economic Research.

The not-for-profit research group measures inflation without looking at the big, one-time purchases that can skew the numbers. That means they don’t look at the price of houses, furniture, appliances, cars, or computers. Instead, AIER focuses on Americans’ typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products.

The institute contends that to get a good read on inflation’s “sticker shock” effect, you must look at the cost of goods that the average household buys at least once a month and factor in only the kinds of expenses that are subject to change. That, too, eliminates the cost of housing because when you finance your home with a fixed-rate mortgage, that expense remains constant until you refinance or move.

The group maintains that this index better measures the real-world impact of price changes, particularly for people on a budget. And, largely as the result of the recent run-up in gas prices, this “everyday price index” (EPI) suggests that Americans are being pinched far more tightly than the official inflation measure would have you believe.

Over the past year, the EPI is up just over 8 percent, according to the economics group. The biggest factor: Motor fuel and transportation costs are up 21.06 percent from year-ago levels. The cost of food, prescription drugs, and tobacco also have increased faster than the government’s inflation measure, rising 3.56 percent, 4.21 percent, and 3.4 percent, respectively.

On the bright side, prices of household fuel (natural gas and electricity) and supplies have increased only 2.74 percent; recreation and personal care products are up less than 1 percent; and telephone or Internet services are down 0.66 percent.

Admittedly, the purchases that the EPI tracks make up slightly less than 40 percent of the average household budget. But Steven Cunningham, research and education director at AIER, says these items are what contribute to the “sticker shock at the gasoline pump and the supermarket check-out line.”

“If at first you don’t succeed, double down…”
It’s no secret that by funding various “green” energy initiatives with taxpayer money, the Department of Energy (DOE) has engulfed itself in a cloud of scandal. What with the magnificent and expensive failures of Ener1, Energy Conversion Devices, Solyndra, Solar Trust, Mountain Plaza Inc., Fisker Auto, etc., etc., the DOE, under the guidance of Energy Secretary Steven Chu, has been making quite a name for itself — and not a very good one.
So rather than dial back some of its activities, cut losses, and perform a post mortem on failed taxpayer-backed projects, the DOE is rushing forward and investing $5 million into “the construction of a ‘biogas anaerobic digester’ that will use cow manure to heat an ethanol plant and create 15 permanent jobs,” the Washington Examiner’s Joel Gerhke reports.
Western Plains Energy, LLC, a Kansas company, will use the money to “utilize waste energy resources from a local cattle feedlot to replace almost 90 percent of the fossil fuels currently used” at the plant, he adds.
And although the above sentence dresses it up a little, it’s what it sounds like: the Obama administration is investing $5 million so that cow manure can be converted into energy.
“Projects such as this are a key part of the Obama Administration’s all-of-the-above approach to American energy that is supporting the development and usage of renewable energy, revitalizing rural economies and creating an America built to last,” USDA Secretary Tom Vilsack said in a statement.
“Animal waste from a local feedlot will be the primary feedstock that Western Plains will use for the digester,” USDA added. “Support for renewable energy projects such as these is an example of the many ways USDA is helping revitalize rural economies.”
But here’s the kicker: the USDA expects the project will only create 15 permanent jobs and 100 temporary construction jobs.
Fifteen permanent jobs? You realize what that means, right? That’s about $330,000 per job. Great investment?
“We only wish this was a joke,” Zero Hedge writes, summing up the sentiments of pretty much everyone who read the Examiner article.

As we approach record high gas prices, the media seems oddly silent. This video from around this time last year is a good reminder of when high gas prices used to be a bad thing. IN HIS OWN WORDS.

Projected – 1.8 million to lose their Jobs
by John Ransom

Enviro-Whack jobs are celebrating the demise of America‘s most abundant energy resource, coal. Because coal has just been given the death sentence by Obama and the EPA.
“If old King Coal isn’t dead already, he’s certainly teetering toward life support,” said Frank O’Donnell, president Clean Air Watch in Washington.
The EPA has issued new proposed rules on carbon emissions that will help Obama keep one campaign promise: Builders of new coal fired power plants won’t be prevented from building coal-fired power plants, they’ll just go bankrupt if they try.
“Proposed emission rules for new power plants unveiled by the U.S. Environmental Protection Agency (EPA) on March 27 spell the gradual demise of coal-fired power generation and entrench the current cost advantage for natural gas,” reports Reuters’ John Kemp.
If Obama can’t get the tax portion of the Cap and Tax, I guess he figures he might just as well get the cap portion done.
“The agency’s proposed rule, signed yesterday, would set a standard well within the capability of modern gas-fired plants but impossible for coal-fired units to meet unless they employ (unproven) carbon capture and storage (CCS) technology.”
Even before this proposed new rule, regulators have been using a variety of stratagems to stop the construction of new coal-fired plants.
“Power developers have scrapped plans for more than 100 coal-fired electricity plants over the past decade,” says a Reuters newswire report, “due to difficulty obtaining construction and pollution permits or because they were simply too expensive.”
Last year the EPA tightened up particulate standards for every type of industry including concrete. Additionally, the agency last year used obscure visibility standards to try to put the throttle on coal-fired power plant, eliciting an eruption of protest from the GOP-controlled House of Representatives.
“So much for that ‘all of the above’ energy plan the President touted last week,” says Congressman John Sullivan, Vice Chairman of the House Energy and Power Subcommittee in response to the new EPA mandate. “Today’s announcement from EPA is an unprecedented attack on American made energy.  EPA’s greenhouse gas rules are a backdoor attempt to enact a national energy tax that will have a crushing impact on consumers, jobs, and our economy- while doing little to protect the environment.”
OK, so maybe Obama will get the tax portion too. I stand corrected.   
The move by the EPA continues to try to help Obama shore up his environmental base in front of the 2012 presidential elections.
At this point, it’s all Obama can do, considering that: 1) He has no energy policy; and 2) The American people know that he has no energy policy.
According to a recent Gallup poll, a stunning 58 percent of Americans don’t think that Obama is doing a good job managing energy policy.  The poll also revealed that 57 percent of Americans don’t think Obama is doing a good job making the country prosperous. The numbers’ proximity to each other are likely not coincidental.
For 100 years the country has followed policies that tried to ensure that we have stable prices and a reliable sources of energy.
Obama’s policy of providing neither reliability nor price stability would be akin to the US announcing the unilateral departure from NATO.   
Obama and company are hoping that the nudge the economy has seen from the loose money policies followed by the Federal Reserve will be just enough to convince Americans that the president should get another term.
But the numbers say otherwise, mostly because policies- like this newest EPA mandate promoted by Obama- have killed job creation in the US, while sparking pockets of inflation. At a time when prices are going up, the job market remains dismal, and incomes aren’t able to keep pace. 
Conversely, the National Mining Association (NMA) is saying that the coal business won’t die- thanks to exports to emerging economies.
“Seaborne exports of coal are hitting record levels,” says Hal Quinn, the president and CEO of the NMA. “Last year U.S. mines exported more than 100 million tons of coal, up 40 percent from 2009 — and the highest level in 20 years.”
In other words, the cheap coal that we won’t use is being used by other economies.
According to figures provided by the NMA:
? Coal for electricity generation in China in 2010 stood at 1.6 billion tons—by 2030 it will almost double to 3.1 billion tons.
? China’s industrial sector (steel, cement, petrochemicals) accounts for almost 40
percent of the coal demand at 1.2 billion tons—that is expected to almost double as well
to 2.1 billion tons by 2030.
? China has already invested $15 billion in coal conversion infrastructure to transform
coal into oil; by 2020 that investment will reach anywhere from $65-80 billion with a
requirement of over 100 million tons of coal.
India is investing in a new electrification program and 80 percent of new capacity will come from coal, with an expected increase in coal demand of over 200 percent in just five years.
Still despite exports to other countries, slackening coal orders domestically are going to hurt workers and cause rates to rise for electricty.
“The uncertainty caused by these regulations could result in the loss of thousands of Ohio jobs and will increase electricity rates for families during tough economic times, in return for less reliable power,” Ohio Republican Senator Rob Portman said in an e-mailed statement to BusinessWeek.com.   
There is a reason why emerging economies have picked coal: It’s cheaper than natural gas over time and more reliable.
Already we have seen the enviro-whack jobs turn on natural gas, shutting down fracking operations around the country.   
 “This EPA is fully engaging in a war on coal,” West Virginia Democratic Senator Joe Manchin said in a statement according to BusinessWeek.com. “This approach relies totally on cheap natural gas and we’ve seen that bubble burst before.”
“It might sound good now, but what happens if those prices go up?” Manchin added.
Oh, it’s not if, it’s when.
Note: I knew that liberalism was a disease, but I didn’t know that it was accompanied by a reading disability. But alas that’s the case.
The Wonkette says that I demanded an apology from Obama for murders that have happened around the world in my column Where’s Obama’s Outrage Over Murder of “My” Son? I did no such thing as a plain reading of the column she questions will show.
So in homage to the Wonkette’s reading disability, here’s a SparkNotes version of the column she doesn’t comprehend:
In the column Where’s Obama’s Outrage Over Murder of “My” Son? I simply showed how ludicrous it was when Obama claimed that his election was going usher in the Age of Aquarius. I also hit Obama on the hypocrisy of his outrage regarding the Trayvon Martin shooting in contrast to his silence on the murder of David Koschman.
Before you wasted several hours puzzling over it, Wonkette, perhaps you should have just emailed me.
Because when you wrote: 
Townhall Columnist Wants Obamapology for 8-Year-Old Murder of White Man by Other White Man
once again you got it wrong. 
Apparently, white-on-white crime committed by the politically connected is OK with liberals.   
I’m simply stunned by the double standard that allows Obama to promote the suspected killer’s uncle to chief of staff, while not insisting that the Justice Department investigate the murder as violation of civil rights. Getting away with murder is wrong whether the assailant is white, black or Hispanic.  
But, you know, keep on on representing the 99%, Wonkette.  
Wonk on.    
John Ransom
John Ransom is the Finance Editor for Townhall Finance. You can follow him on twitter @bamransom and on Facebook: bamransom.

Vedran Vuk here, filling in again for David Galland. I’m not sure if David will be back next Friday – but don’t worry, he’s not gone forever. I’m sure that he’ll come back to write one of his famously long issues which will more than make up for a few weeks away. Today, I want to talk about the small print in ETFs and whether it’s that much different from an outright scam. A Casey Research correspondent shares his take on Warren Buffett’s performance against gold in the last decade. We also have some other goodies plus the traditional Friday Funnies, so let’s get started.

The Difference Between Knowing and Pretending Not to Know
By Vedran Vuk, Senior Analyst

In the infamous case of the Goldman Sachs Abacus 2007 AC-1 fund, it doesn’t take a whole lot to figure out the wrongdoing. Paulson & Co., a multibillion-dollar hedge fund, helped select the mortgage-backed securities held by Abacus while at the same time, Paulson was planning on shorting it. This was all unbeknownst to Abacus buyers, since Goldman Sachs conveniently left out the details of the Abacus’ creators and their bet against the fund in the investment marketing materials. Ultimately, the case was settled for $550 million.

Goldman Sachs made a huge mistake here. By not telling its clients about the conflict of interest, the whole thing seemed like the coverup of a malicious act in order to defraud investors. What it really should have done is put the fund’s flaws in difficult-to-understand language on page 82 of the hundred-page prospectus. After all, that’s what everyone else in the industry does, and they’re certainly not settling for half a billion dollars with anyone.

The exchange-traded fund (ETF) industry has made millions – if not billions – of dollars on products sold with a similar approach. If the problems are laid out somewhere, it’s not the ETF company’s fault when the fund fails. Better yet for them, ETFs never promise results… they are marketed only as an investment tool. In the majority of cases, this works just fine. It’s wonderful that investors can purchase a whole index such as the S&P 500 with a single ETF.

Unfortunately, these incentives can create serious problem in the ETF industry, as popularity drives much of its profits, rather than results. When commodities became all the rage in the past decade, retail investors flooded billions into futures commodity ETFs promising to provide an easy way to invest in the asset class. It didn’t matter that the underlying investments were doomed for failure. The funds lay out the risks in the prospectus and then wash their hands clean should the ETF head for the worst. Sometimes the failure of those funds is hardly an accident or the result of bad luck.

In regard to ETFs, Wall Street needs to answer the following question: Is there a moral difference between constructing a package of worthless securities while hiding the creation process, and packaging the same sort of garbage while informing the investors about the problems on page 82 of a hundred-page prospectus? In both cases, you’re aggressively marketing a product which is known to be harmful, if not disastrous, to the investor.

Sure, one can pretend to not know what’s in the product. After all, ETFs aren’t promising returns… they are just an investment tool. It’s always “buyer beware,” but if the tool is broken, someone should be held responsible for the damage. In the securities industry, ETF companies are encouraged to play stupid. If one pretends not to know about the likely performance of the fund, then everything is fine, as long as the fund’s faults are somewhere in the prospectus. But if one packages a garbage fund and doesn’t write down the details, then one’s likely to face a billion-dollar lawsuit.

In reality, the two are close to the same thing. Of course, one man’s garbage could be another man’s treasure, but there are cases where one could objectively call the product pure trash. When a company shorts a product it created or an ETF fails to follow its intended index, then these are truly garbage investment products. It’s hard to say that anyone would want to invest in such financial instruments, if one properly understands them.

An ETF that resembles this description is the United States Oil Fund (USO). Let’s take a look at the summary on the front page of USO’s website:

The United States Oil Fund, LP (“USO”) is a domestic exchange traded security designed to track the movements of light, sweet crude oil (“West Texas Intermediate”). USO issues units that may be purchased and sold on the NYSE Arca.

The investment objective of USO is for the changes in percentage terms of its units’ net asset value (“NAV”) to reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract for light, sweet crude oil traded on the New York Mercantile Exchange (the “NYMEX”), less USO’s expenses.

If I were a retail investor sans the education of a master’s in finance, I would immediately think that this sounds like a great way to invest in oil prices. Unfortunately, the devil is in the details. Essentially, because it’s impossible to hold so much oil, ETFs must purchase oil futures contracts. And by investing in the futures market, the fund must worry about contango. When a futures contract comes close to maturity, the fund must sell the contract and buy one further out in the future, since the company can’t take delivery of the oil.

If the futures curve is in contango, that means future oil prices are more expensive than the current maturing contract. So, when the fund sells the maturing contract, it must buy a more expensive future contract. The fund breaks the cardinal rule of investing – it buys high and then sells low! Over time, the fund continues to lose money until its path fails to follow WTI crude oil prices:
In 2009, as oil prices began their drive from around the $30 range to over $100 today, USO stayed flat. Since mid-January 2009, oil prices have increased a stunning 142% while USO only rose by 33%. A lot of prescient investors who saw the rise coming made practically nothing with their prediction, thanks to this ETF.

This isn’t an accident. Any financial professional with some basic knowledge of contango could have seen this coming. The fund simply doesn’t track spot oil prices. USO is only useful in a situation of backwardation; it’s the opposite of contango, where further-away maturities are cheaper than the nearest maturing contract.

All of these problems are spelled out by the company on its website – though the details are deep in the prospectus. One can’t say that the fund is intentionally hiding anything. However, does the fund’s existence depend on investors failing to read the prospectus or to comprehend the futures market? Those who understand the fund stay away from it.

With $1.51 billion under management, USO still finds plenty of unsuspecting buyers who think it’s a good way to invest in oil. With all of this said, is the fund doing anything illegal? Absolutely not. Is the fund acting in an unethical manner, much like the Abacus scandal? I’ll let the reader decide.

Savings come slowly for hybrid, electric car owners
BY NEVIN BATIWALL
Buyers of hybrid or electric-vehicles, such as Nissan’s Leaf, hoping to save money have to wait years —or even decades in some cases— for the payoff.

If you’re thinking about buying a fuel-efficient hybrid, electric or otherwise eco-friendly vehicle as a way to save money over time, do your homework — or be prepared to wait.
Buyers who choose Nissan’s all-electric Leaf ($28,421) over its approximate gas-powered equivalent, Nissan’s Versa ($18,640), will likely wait nearly 9 years until they break even, according to a new report by The New York Times that examines the cost of fuel efficiency.

For drivers of the Chevrolet Volt ($31,767), the wait is even longer— 26.6 years.

A few vehicles begin paying off relatively soon after leaving the dealership. Two hybrids— Toyota’s Prius ($23,537) and Lincoln’s MKZ ($33,887)— as well as Volkswagen’s diesel-powered Jetta TDI ($25,242) all take less than two years before they start saving their owners money.

Check out this chart by the Times that breaks down the savings delay for many popular fuel-efficient models.

The high price tag of many fuel-efficient vehicles — including the Nissan Leaf, which will soon be made in Smyrna, Tenn. — is one reason consumers have yet to embrace them with open arms.
Nevin Batiwalla covers commercial real estate, construction, residential real estate, manufacturing and retail.

The Obama administration is blaming Israel for the recent rise in global crude oil prices, according to a Sunday report in The World Tribune. The rise in fuel prices is deemed as harming the U.S. economy and has also hurt Obama in the polls as he seeks re-election in November.

The report cited a leading U.S. analyst, Robert Satloff, who returned from talks with Israeli officials.

Satloff, executive director of the Washington Institute for Near East Policy, said, according to The World Tribune, that the Israeli leadership saw Washington as attributing the higher gas prices to “Israel’s posturing” on Iran.

“They think the Iranians should be held responsible for the higher gasoline prices,” Satloff was quoted as having said.

He added that the officials told him the Obama administration was staging a campaign to undermine Israel.

“I cannot underscore how deep and visceral the [Israeli] comments of the leaking that came out of Washington were,” Satloff said, noting Israel is alarmed by what officials determined were leaks by the administration of U.S. President Barack Obama of purported Israeli preparations to attack Iran.

The Israeli concerns come in the wake of a report in Foreign Policy magazine last week, according to which Israel has purchased an airfield in Azerbaijan on Iran’s northern border, prompting the United States to watch very closely.

Journalist Mark Perry wrote that the Obama administration is monitoring Israel’s relations with Azerbaijan, particularly its military ties.

The Americans believe Israel may use the site as a springboard for an attack on Iran’s nuclear plants, or as a landing and refueling spot following one. The site could also be used for aircraft needed for search, rescue and recovery in the wake of an attack.

“We’re watching what Israel is doing in Azerbaijan. And we’re not happy about it,” an official told the Foreign Policy writer.

Azeri president Ilham Aliyev later dismissed the speculation and said, “Azerbaijan’s territory will never be used to launch an attack against its neighbor, Iran.”

Newt’s American Energy Plan:

1. Remove bureaucratic and legal obstacles to responsible oil and natural gas development in the United States, offshore and on land.

2. End the ban on oil shale development in the American West, where we have three times the amount of oil as Saudi Arabia.

3. Give coastal states federal royalty revenue sharing to give them an incentive to allow offshore development.

4. Reduce frivolous lawsuits that hold up energy production by enacting loser pays laws to force the losers in an environmental lawsuit to pay all legal costs for the other side.

5. Finance cleaner energy research and projects with new oil and gas royalties.

6. Replace the Environmental Protection Agency, which has become a job-killing regulatory engine of higher energy prices, with an Environmental Solutions Agency that would use incentives and work cooperatively with local government and industry to achieve better environmental outcomes while considering the impact of federal environmental policies on job creation and the cost of energy.

RESULTS WILL BE $2.50 A GALLON

Posted by: Barry Secrest

Now, how much has the President thrown away again in his bankrupt “clean energy” loans?

Remember Solyndra and several others, now nearly forgotten to the tune of billions in bankruptcies?

At least the oil companies have something beyond bankruptcy court proceedings to show for their investments, not to mention Americans gaining valuable use from the oil companies’ products, as opposed to the Federal Government’s main product which is unimaginable debt.

The other thing to remember is that these oil companies’ profits are taxed at the highest rate of any country in existence. Therefore, if the oil companies are making billions in profit, this means the US government is making hundreds of millions in tax revenue. Well, unless your one of those crony capitalist companies ala’ GE who got money back from the Government after a $ 4 billion dollar profit.

The point,however being, that Obama should be just giddy with excitement when he notes any company making billions in profits simply because these profits help Govco by increasing tax revenue. Or maybe Obama doesn’t necessarily want more tax revenue?Posted by: Barry Secrest
Published on March 29th, 2012 @ 04:43:58 pm , using 567 words
Posted in Events and Issues: Credible Resources
BLS note:

Now, how much has the President thrown away again in his bankrupt “clean energy” loans?

Remember Solyndra and several others, now nearly forgotten to the tune of billions in bankruptcies?

At least the oil companies have something beyond bankruptcy court proceedings to show for their investments, not to mention Americans gaining valuable use from the oil companies’ products, as opposed to the Federal Government’s main product which is unimaginable debt.

The other thing to remember is that these oil companies’ profits are taxed at the highest rate of any country in existence. Therefore, if the oil companies are making billions in profit, this means the US government is making hundreds of millions in tax revenue. Well, unless your one of those crony capitalist companies ala’ GE who got money back from the Government after a $ 4 billion dollar profit.

The point,however being, that Obama should be just giddy with excitement when he notes any company making billions in profits simply because these profits help Govco by increasing tax revenue. Or maybe Obama doesn’t necessarily want more tax revenue?

NY Times

The Caucus Blog

By HELENE COOPER and JENNIFER STEINHAUER
Obama called on Congress to end $4 billion in tax subsidies for oil and natural gas companies on Thursday, casting the issue as a choice between plumbing scarce resources versus investing in clean energy research.

“That’s the choice facing Congress today,” Mr. Obama said, before the Senate voted on repealing the tax breaks. “They can either vote to spend billions of dollars on oil subsidies that keep us trapped in the past. Or they can vote to end these taxpayer subsidies so that we can invest in the future. It’s that simple.”

The president made his remarks in the Rose Garden as gas prices across the country have soared, becoming an issue that could hamper his re-election bid. Administration officials said in an e-mail to reporters that the three largest oil companies in the United States have made a combined profit of more than $80 billion last year, or $200 million a day.

“Exxon pocketed nearly $4.7 million every hour,” Mr. Obama said.

“The biggest oil companies are raking in record profits — profits that go up every time folks like these pull into a gas station,” Mr. Obama said, flanked by a cast of ordinary Americans who administration officials said have been hurt by rising gas prices.

“But on top of these record profits,” Mr. Obama said, “oil companies are also getting billions a year in taxpayer subsidies — a subsidy they’ve enjoyed year after year for the last century.”

“It’s like hitting the American people twice,” Mr. Obama said.

He said the money saved should be used on clean energy projects, including wind power, solar power, biofuels and fuel-efficient cars, trucks, homes and buildings.

“I don’t want folks like these back here and the folks in front of me to have to pay more at the pump every time there’s unrest in the Middle East,” Mr. Obama said. “I don’t want our kids to be held hostage to events on the other side of the world. I want us to control our own destiny.”

Soon after the president finished his remarks, the Senate voted 51 to 47 to end the subsidies, several votes short from the majority needed to pass the measure.

Rich Pottorff, Doane chief economist & Washington analyst | Updated: March 19, 2012

The U.S. Senate defeated two amendments aimed at supporting the biofuels industries. The $1 per gallon biodiesel tax credit expired at the end of December and an effort to attach an amendment to reinstate it to the transportation bill failed. The Senate also defeated an effort to extend the $1.01 cellulosic producer tax credit and the accelerated depreciation allowances for biofuels production facilities.

There may be few opportunities to pass these bills to encourage production of biofuels this year and the lack of support could stymie increases in production and use. The Senate did approve amendments to the transportation bill that would exempt agricultural truck drivers from maximum driving limits during planting and harvesting seasons. In addition, the bill would exempt drivers of farm vehicles from obtaining commercial driver’s licenses. Similar legislation has been introduced in the House but not yet voted on.

You may now be required to obtain a permit if you are going to apply pesticides over or in the vicinity of flowing water. This is in response to a federal appeals court ruling that pesticides are regulated under the Clean Water Act as well as the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). The permit process takes between 14 and 30 days. A permit may be required for anyone applying pesticides near or over streams, ponds or lakes.

Goals for a new farm bill were summarized this week by House Agriculture Committee Chairman Frank Lucas, R-Okla.
He says “First and foremost I want to give producers the tools to do what you do best; and that is to produce the safest, most abundant, most affordable food supply in the history of the world. To do this we must develop a farm bill that works for all regions and all commodities”.
He is saying that a one-size-fits-all program will not work. Lucas said a strong crop insurance program is the cornerstone of the safety net. He says he supports conservation programs but wants to simplify them so they are easier for farmers and ranchers to use.

Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., says she plans to stay within the structure of the $23 billion in cuts in farm program spending agreed to be House and Senate Agriculture Committee leaders last November. However the House Budget Committee may require bigger cuts when it develops the budget plan for fiscal 2013. House Budget Committee Chairman Paul Ryan, R-Wis., is expected to unveil the budget plan next week.
Last year Ryan proposed cuts totaling $30 billion for commodity programs and $20 billion for conservation programs over 10 years. The Senate does not plan to pass a new budget but will use the $1.047 trillion cap on all spending put in place in last summer’s budget deal.

The Congressional Budget Office forecasts a federal budget deficit of $1.2 trillion for this fiscal year, $93 billion larger than the last estimate. The increase in the size of the deficit is the result of the recently passed payroll tax cut. The CBO budget shows $770 million less spending for price support programs in fiscal 2012, but slightly higher spending on conservation programs. The CBO analysis and forecasts for farm program spending can be found at: http://www.cbo.gov/sites/default/files/ cbofiles/attachments/43053_USDAMandatoryFarmPrograms.pdf.

The Obama Administration is urging Congress to grant Russia permanent normal trade relations status. Russia is expected to join the World Trade Organization in the next few months and the U.S. will not see benefits from this development unless PNTR is approved.
Passing PNTR would double U.S. exports to Russia in five years, according to Senator Max Baucus, Chairman of the Senate Finance Committee. Senator Orrin Hatch, R-Utah, opposes the effort pointing to Russia’s corruption and human rights record. Congress probably won’t approve PNTR before Russia joins the WTO this summer.

By Marin Katusa, Chief Energy Investment Strategist

The energy market is a complex beast, its many parts interconnected through a multitude of linkages. When one part fails, the entire system reacts: certain linkages are burdened with extra stress, while other components sit idle. Only by studying the entire machine can one understand the rippling effects that stem from one change.

With the energy market, the system is made up of various sectors – oil, natural gas, uranium, coal, and alternative energies – and the countries that have each of those energy resources. The components are then linked through a long line of forces, including the geographic distributions of supply and demand, international allegiances and trade deals, global markets and commodity prices, and the ever-evolving field of international relations. A change in any country, sector, or linkage resonates through the entire system.

From this perspective, North America’s shale gas revolution truly earns its accolade as a “game changer.” As many people now understand, the boom in natural gas reserves and production in the United States and Canada is changing the way North America will power itself in the future.

What a lot of people do not understand is how to profit from this shift.

Natural gas prices are depressed and expected to remain so for the short to medium term, so investing in natural gas options or a natural gas exchange-traded fund is not likely to bring home the big bucks anytime soon. Domestic natural gas equities are an even riskier idea – most producers are scaling back production and selling assets as they hunker down in preparation for a tough few years.

In this case, the way to profit is by understanding how natural gas’ changing role is impacting North America’s energy machine as a whole. Cheap natural gas is prompting utilities to switch from coal to gas where possible. The confluence of cheap natural gas and a risky global economy has droves of investors turning their backs on green energy, the sector that was such a market darling only a few years ago. Farther down the road, North Americans are debating – and in places implementing – a range of strategies to take advantage of the continent’s newfound abundance of natural gas, from natural-gas-powered transport trucks to exportation of liquefied natural gas (LNG).

Isaac Newton showed us that for every action there is an equal and opposite reaction. That is why every downside force in the energy sector creates upside opportunities elsewhere. The challenge is finding them. It takes an understanding of the entire global energy machine to figure out what areas are benefitting from the changing landscape.

For Every Down, There’s an Up

Natural gas seems to know that it is heading for several years in the doldrums and, in fighting spirit, it is trying to take a couple of other energy sectors down with it.

With coal, it is succeeding, but there are still lots of coal opportunities outside of the United States. With uranium, the global supply-demand scenario and America’s position within it is in such flux right now that cheap natural gas is doing little to reduce America’s need for U3O8. Then there’s the well-field services sector, where the successes born from horizontal drilling and fracturing created the gas supply glut that is forcing production cuts. Far from slowing down, however, well-field service companies are busier than ever as the oil industry adopts fracking to access shale oil, and the deepwater Gulf of Mexico continues to test the limits of drilling technology.

Coal

The sector feeling the worst impacts from gas’ downturn is thermal coal. Demand for the coal burned to generate power in the US is plummeting as utilities take advantage of the cheapest natural gas in ten years. Consumption of coal to produce electricity is expected to fall 2% this year to its lowest level since 1992, while gas-fired consumption rises 5.6%. Making matters worse, winter heating demand is falling in the face of mild weather: through January, this has been the warmest winter since 2006 and the fourth-warmest on record. With natural gas and warm weather conspiring against it, coal demand is decidedly down – in the second week of February, coal consumption was 4.3% lower than it was a year ago.

Exports are not going to provide any help. Last year, Europe bought 50% of America’s thermal coal exports, but demand from the EU is shrinking as the region struggles to stave off a recession. The economies of the EU shrank 0.3% in the fourth quarter of 2011 compared to the previous quarter, the first contraction since mid-2009.

In response, US thermal coal prices are deteriorating. Appalachian coal, the US thermal-coal benchmark, fell 15% in January alone to sit near US$60 per tonne and has moved little since (by comparison, Australian thermal coal is currently fetching almost US$120 per tonne). Mining costs to dig thermal coal out of the ground range from $60 to $75 per tonne for Central Appalachian producers, which means margins are already razor thin or nonexistent. Several major US thermal coal producers are reducing output and in some cases closing mines, including Arch Coal (NYSE.ACI), Patriot Coal (NYSE.PCX), and Alpha Natural Resources (NYSE.ANR).

Now for some good news. Thermal coal prices in the United States may be faltering, but that doesn’t mean that coal is in the doldrums across the globe. In fact, quite the contrary: global thermal-coal demand is expected to increase by 50% from 2008 to 2035, with the vast majority of increased demand coming from the developing world. That equates to a demand increase of 1.5% each year, and production is not quite expected to keep up to that pace. Rising demand plus not-quite-enough supply equals investment opportunities – maybe not in the US, but elsewhere.

That’s just thermal coal. There’s another component to the coal world: metallurgical coal, the higher-carbon coal used to make steel. Supplies are even tighter with metallurgical coal, which is why our subscribers have exposure to “met coal” through either equities or a fund. More recommendations are on the horizon: the upcoming edition of the Casey Energy Report will be all about coal. We will provide the background, supply and demand projections, and the best ways to profit from the global coal sector.

Uranium

The abundance of cheap gas has utilities looking to build more gas-fired power plants. Some observers have suggested that this will be to the detriment of the nuclear sector in the US. But that perspective is pretty shortsighted.

It is true that some utilities have delayed plans for new nuclear plants by a few years, primarily in response to the Fukushima nuclear disaster in Japan and the ensuing public backlash against uranium. But that backlash is already fading; and those delays will have only a minimal impact on the nuclear sector in the US. Five new generators are on track for completion this decade, including two reactors approved just a few weeks ago (the first new reactor approvals in the US in over 30 years). Those will add to the 104 reactors that are already in operation around the country and already produce 20% of the nation’s power.

Those reactors will eat up 19,724 tonnes of U3O8 this year, which represents 29% of global uranium demand. If that seems like a large amount, it is! The US produces more nuclear power than any other country on earth, which means it consumes more uranium that any other nation. However, decades of declining domestic production have left the US producing only 4% of the world’s uranium.

With so little homegrown uranium, the United States has to import more than 80% of the uranium it needs to fuel its reactors. Thankfully, for 18 years a deal with Russia has filled that gap. The “Megatons to Megawatts” agreement, whereby Russia downblends highly enriched uranium from nuclear warheads to create reactor fuel, has provided the US with a steady, inexpensive source of uranium since 1993. The problem is that the program is coming to an end next year.

At present the world is producing just enough uranium to meet global demand, but this precarious balance is already tipping. There are dozens of new reactors under construction in China, India, South Korea, and Russia that will need fuel. Production increases from new mines and mine expansions are not expected to keep pace. The race to secure uranium resources is on, and for the first time the US has to compete.

The answer is domestic production. The rocks underneath the United States hold lots of uranium, enough to make a significant contribution to the country’s uranium needs. The biggest impediment to mining this resource is public opposition to the nebulous dangers of uranium mining, but as the Megatons program ends Americans will start to see that the alternatives to domestic production are decidedly worse: competing against China, India, and the like for uranium is an expensive and unstable way to acquire a desperately needed energy resource. In fact, we have been vocal in predicting a demand-driven boom in US uranium production. We even expect to see “Made in America” uranium garnering a premium over imported yellowcake, in the same way that in-demand Brent crude oil earns a premium above oversupplied West Texas Intermediate crude.

We have already recommended a range of investments to our subscribers to gain exposure to the coming uranium resurgence and, as with coal, there is more to come: the next edition of the Casey Energy Opportunities newsletter will focus on uranium, with recommendations to boot.

Well-Field Services

The techniques used to unlock natural gas from shale reservoirs – horizontal drilling and well fracturing – worked so well that they created a supply glut that is altering the global energy scene. That supply glut is now prompting natural gas producers to cut back on output, which you might think would be bad news for the well-field service companies that complete those tasks.

Not to worry: North America is also in the midst of a crude-oil production boom, and the common theme linking most of the continent’s new wells is highly technical drilling and production methods. The purveyors of those techniques are the continent’s well-field service companies, and their services are very much in demand.

Well-field service companies have been able to compensate for lost gas fracking business by shifting to oil, as the oil industry has adopted fracking to unlock its shale deposits. If you’ve read about the oil production boom that is keeping North Dakota’s economy hopping, you read about the Bakken shale formation. In the Bakken, wells are drilled horizontally to follow along the oil-bearing layer, and then high-pressure fluids are forced down the well to fracture the shale and release the oil.

Meanwhile, the challenges of producing oil in the deepwater Gulf of Mexico continue to test the limits of drilling technology. Pushing through kilometers of water before drilling through just as much rock and then extracting and transporting oil from a platform rocked by waves and threatened by hurricanes demands a wealth of specialized equipment and operators.

Most oil and gas companies do not own drill rigs, nor do they actually drill or fracture their own wells. They contract those jobs out to companies that drill and frac for a living, known as well-field service companies. And with wells in America’s booming oil and gas fields requiring more complicated and more technical services with each passing year, the services these companies provide are essential to North America’s oil and gas producers.

The Casey energy team is all over the well-field services sector. Subscribers to the Casey Energy Report newsletter and the Casey Energy Confidential alert service were alerted to our latest recommendation in the sector in mid-November. Three months later, our investment is already up roughly 50% and we suggested that subscribers take a “Casey Free Ride,” which means selling enough shares to recoup one’s initial investment and retaining the remaining “free” shares for continued, risk-free upside exposure.

The Take-Home

When a machine is as interconnected as the global energy trade, no part can change without impacting the rest. The dramatic debut of shale gas in North America has done far more than just depress domestic natural-gas prices – a shift of this magnitude has impacts that reach far beyond one commodity or one country. Some of those impacts are negative, but hidden in the doom and gloom lie opportunities to profit. The key is to open your horizons and embrace the complexity and interconnectedness of the global energy machine… either that, or find a good mechanic who can do the job for you.

Below the fold is my humble 10-point plan: Things President Obama could (but won’t) do to reduce domestic gasoline prices by November 2012.

1. Commit to a strategic goal of North American energy security. That includes reasonable and responsible domestic drilling. That includes taking the lead on the Keystone XL Pipeline; we could find a way to make it happen while addressing the legitimate environmental concerns of Nebraskans. It includes a commitment to maintaining the Trans-Alaska Pipeline System and opening ANWR.
2. Ditch the anti-industry, anti-capitalist rhetoric. It is not the President’s or the government’s place to decide when an industry’s profitability is “high enough”. High oil company profits fund more drilling; more drilling means more future supply and lower prices. Besides, American oil companies are not owned by a cabal of wealthy executives, but by America’s pension funds, mutual funds and private investment accounts. “They” are “us”.
3. Stop targeting the oil industry for punitive tax treatment. States such as Texas and Louisiana have production tax abatement programs that have successfully encouraged new drilling. If you don’t believe that the threat of increased taxes discourages drilling, just ask Governor Perry or Governor Jindal.
4. Realize that Uncle Sam is in the energy business and is a partner in industry’s success. Oil and gas royalties are the federal government’s #2 source of revenue, after the income tax. Offshore slowdowns hurt not only industry and jobs, but government revenue.
5. Recognize that industry does not need to be led by government; industry needs to be unleashed and encouraged to innovate. The resurgence of the domestic energy sector was rooted in the private sector, not matter how much President Obama and Dr. Chu would like to take credit for it. The growth in North Dakota, Pennsylvania and Texas happened in spite of the federal government, not because of it.
6. Trust that no oil operator wants to be the “next BP”. The BP spill cost that company something on the order of $40 billion. Industry safety and environmental commitment is motivated more out of self-interest and less out of fear of the government. When it comes to federal regulation, the nation would be better served by Sheriff Taylor, not Barney Fife.
7. Return offshore permitting to the pre-Macondo pace. Your overreaction to the BP Spill has cost on the order of 500,000 barrels per day of domestic oil production from the Gulf of Mexico. The ridiculous “Worst Case Discharge” calculation as a routine part of offshore permitting is engineering malpractice, in my humble opinion. The professional staff of the Bureau of Safety and Environmental Enforcement is capable of reasoned regulation, but they currently operate in fear of their political masters.
8. Declare hydraulic fracturing & well design to be the regulatory domain of the states, not the EPA. Geology and environment vary widely; Pennsylvania is not Louisiana is not North Dakota is not California. It is insanity to think that one broadly-applied set of rules can be applied to regulate industry without suffocating development.
9. Rescind the recently-enacted royalty rate increase for new onshore Federal oil and gas leases. Secretary Salazar’s stated rationale for increasing the government’s take by a whopping 50% – from 12.5% to 18.75% of gross production – was to equate onshore royalties with the offshore royalty rate. That makes no sense. Higher royalties mean less drilling, poorer economics of production and premature abandonment of wells. Besides, an IHS-CERA Study recently showed that the federal government’s total take of offshore cash flows makes the Gulf of Mexico the second-most punitive fiscal regime in the world, after Hugo Chavez’s Venezuela. [Update: In keeping with the First Rule of Holes, rolling back the royalty rate increase may be the first thing the government should do if it is serious about reducing energy prices. - Ed.]
10. Encourage development of a nationwide distribution system of natural gas as a transportation fuel. Natural gas is clean, abundant and nearly 100% domestic. Its potential as a transportation fuel has scarcely been tapped.

Bonus #11: Get real about the promise of alternative fuels. Recently you said: “You’ve got a bunch of algae out there; If we can figure out how to make energy out of that, we’ll be doing alright.” Maybe so, but I will stick my neck out and say it ain’t gonna happen, at least not in my lifetime, not on a scale that will impact pump prices.

Energy policy will be a President Obama’s key vulnerability in November. His goal has always been to encourage alternative fuels by raising conventional energy prices. Alternative energy may poll well, but the average voter who fills his tank with $4+ gas on the way to the ballot box will certainly “Hope for Change”