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This just in. On the tail of the national mortgage debacle, another example of federal government’s ineptitude has surfaced.
Apparently, a decision is pending regarding a royalty rate on production of “oil from shale” starting at 5 percent, then increasing up to 12.5 percent. Why in the world does government want to impose a “disincentive” on an industry which is still in the development stages?
Setting an arbitrary rate before the cost of production has been determined is definitely not an inducement for private enterprise to develop new technology, but it stands to reason. How many congressmen ever managed a business or, for that matter, have even been employed in the private sector?
According to reliable estimates, there’s a potential for 800 billion barrels of oil from shale deposits in Colorado, Wyoming and Utah. This incredible potential calls for a “marketing plan” not a government “impediment program!”
So, why not reduce the “startup” royalty to a ”buck a barrel” for the first 250 billion barrels produced. Not only would this provide an incentive for the developing companies, but would truly benefit the nation by providing a means to pay off the $750 billion bailout plan!
So much for wishful thinking. This sort of constructive planning is diametrically opposed to our government’s concept of financing programs by taxing citizens and penalizing private industry productivity.
The total irresponsibility and ignorance of our “leaders” in Washington is not merely embarrassing – it is downright frightening! Why are common sense and good judgment so lacking?
RICHARD DORAN
Parachute
3 Responses to “Why impose disincentives on oil shale?”
Posted November 18th, 2008 at 5:02 pm Login to Send PM Report this comment
Mr Doran said,
“The total irresponsibility and ignorance of our “leaders” in Washington is not merely embarrassing – it is downright frightening! Why are common sense and good judgment so lacking?”
Richard,
You are correct. Your observations are precisely why the Bush administration should not have issued a last minute executive order prematurely defining oil shale regulations. Fortunately, it will be up to the Obama administration to decide whether to proceed with leasing particularly with regards to environmental concerns.
Posted November 19th, 2008 at 11:31 am Login to Send PM Report this comment
GOOD judgment would be abandoning the very idea that organic marlstone (so-called “oil shale”) will somehow solve our hydrocarbon addiction and maintain our absurd happy-motoring fantasy. It’s the stuff of dreamers, and always will be.
This is all about the Welfare Mothers (Shell, Chevron, ExxMo, EGL, etc.) cueing up to receive their on-going government handouts of free land, free science, nearly free minerals (reduced or no royalty), exemption from environmental laws, etc. Keep in mind that the oil & gas industry is the largest welfare recipient in the USA, to the tune of $40-250 billion annually for incentives, tax breaks, and preferential treatment. Does that meet the “free-market” and “small government” definitions espoused by all the constitutional scholars around here?
Shall we just freely hand over the oil-shale lands and ask for nothing in return? Hop on GoogleEarth and take a look a couple miles north of Fort McMurray, Alberta for snapshot of your future. Or, view SkyTruths’s projection of what the Rifle area is destined to look like:
http://skytruth.mediatools.org/node/13483
How long will Americans put up with theft of our resources? This means breathable air, clean/abundant drinking water, and intact landscapes/habitats. Willing to sacrifice it all for a (supposed) cheap tank of gasoline?
Posted November 19th, 2008 at 3:59 pm Login to Send PM Report this comment
Even our conservative neighbors recognize the FOLLY (i.e., continued welfare handouts for the oil & gas industry) and ABSURDITY of pursuing oil shale:
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Published on Wednesday, November 19, 2008 by the Salt Lake Tribune
Oil Shale Frenzy - Bush rules a gift to oil companies
Salt Lake Tribune Editorial
“It’s still November, but Christmas is arriving early for fossil-fuel extraction companies that have had oil shale on their wish lists for years.
The Bush administration’s Interior Department wants to open millions of public acres in Utah, Colorado and Wyoming to oil companies to extract kerogen, a sludgy form of oil, from shale rock.
As Bush’s days in Washington wind down, his agents are working to give Big Oil a firm toehold on public lands by sidestepping the usual public-appeal process and adopting regulations that give companies a deal on royalties.
New rules would require payment of only a 5 percent royalty on oil shale for the first five years of production, while regular oil and gas wells pay 12.5 to 18.8 percent — a nice gift to energy companies that American taxpayers could end up paying for in environmental degradation?.
The traditional processes for producing oil from shale, which require huge amounts of water and produce millions of tons of CO2, are potentially dangerous for the fragile deserts and high plains of the West. There is too little data on the effects of such invasive extraction.
Experiments are on-going for a less-harmful method that is more resource-friendly. Until new technology is developed — and it is apt to take a decade, researchers say — the federal government should hold back on leases for what amounts to large-scale strip mining for oil.
The economic feasibility of oil-shale extraction waxes and wanes according to the price of oil on the world market. When oil prices are high, it’s worth the expense to mine oil from shale — about $37.75 to $65.21 a barrel, compared with $19.50 a barrel for conventional crude.
But when oil prices drop, companies abandon the projects, often devastating local economies. Utah saw such boom-bust cycles in the ’80s, to our regret.
The rule-setting process for oil shale mining was halted by a congressional moratorium two years ago. That moratorium was allowed to expire this year, largely in response to record-setting fuel prices and the Republican mantra, “Drill, baby, drill.” Utah’s Democratic Rep. Jim Matheson irresponsibly joined the GOP chorus.
America must wean itself off carbon-based energy. By continuing to provide lavish incentives for oil production, instead of encouraging conservation and alternative energy development, we merely quicken our pace toward catastrophic climate change caused by the burning of fossil fuels.”
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