November Issue

The year 2007 will go down in history as the year Congressional leaders in the U.S. House and Senate attacked the domestic oil and gas industry on a multitude of fronts in an effort to punish for who knows what.

The Democrats took control of the House and Senate for the first time since 1994 in January and one of the first items of business was to "repeal Big Oil subsidies," Speaker Pelosi announced. And, she delivered. On January 18 the House passed HR 6 that repealed many of the tax changes that were enacted in the Energy Policy Act of 2005.

Global warming, international terrorism, cap-and-trade programs, tax issues, environmental debate and even the award of an Oscar and the Nobel Peace Prize to Al Gore all became weapons in the arsenal of oil industry’s opponents.

Most recently, U.S. Rep. Henry Waxman (D-Ca), Chairman of the Oversight and Government Reform Committee, conducted a with-hunt against the oil and gas industry in his committee and ironically it occurred on Halloween.

Waxman and his friends at the Natural Resources Defense Council (NRDC) paraded people before the committee who claimed they became ill because of the oil operations, trout fishermen who claimed the oil industry polluted pristine streams, and a physician who wants more testing of the industry.

Actually what Waxman and the NRDC were after were the federal exemptions the industry received in the Energy Policy Act of 2005, regarding storm water runoff and hydraulic fracturing regulations. Even though the industry must comply with state regulations, Waxman wants the feds involved, too.

While rumors persist of a willingness on the part of the White House and Congressional leaders to reach a compromise on an energy bill, time is running out. With vetoes pending on most spending bills, the Farm Bill taking most of the next two weeks in the Senate, and two weeks off for Thanksgiving, that leaves only three weeks before Christmas to complete the first session of the 110th Congress.

Miracles can happen, but that’s what it will take to get an energy bill this year.

Why do we need an energy bill? Ponder these facts:

• The United States has 2% of the world’s oil reserves, 8% of the world production, and 5% of the world population.
• The United States consume 25% of the world supplies.
• The United States import 2/3 of our supply.

Doesn’t that present some REAL national security concerns?

Compromise is not a four-letter word. There would never have been a United States of America were it not for the willingness of our leaders at the time to compromise. Conservation, environmental, and production concerns are of equal importance.

Are today’s leaders up to the challenge? What about we followers? Doing nothing is not a good option.

The Governor of Connecticut has asked Congress to investigate Chesapeake Energy for allegedly manipulating natural gas prices because Chesapeake announced that it would cut back on drilling while prices were soft.

Chesapeake CEO Aubrey McClendon fired back a letter stating that Governor Jodi Rell’s letter "Contains incorrect and reckless statements."

To Promote Industry In Texas The Alliance PAC has been formed, and we are much honored to have Bob Eagle of Abilene as Chairman.

It is my hope that we, as members, appreciate the importance of this organization in our efforts to influence legislation in our state. I request the opportunity to be the first contributor.

The nature of the oil and gas business makes it a lightning rod for hostile legislation and regulation.

The real challenge is to measure our success influencing legislation that is beneficial to the industry and the citizens of our State and Country.

One of the ways the Alliance does this is by sponsoring events around the State 15 events in 2007 that bring together members of the industry. These occasions highlight subjects both enjoyable and informative thus providing an opportunity for members to discuss important topics of the day.

The cumulative affect is very positive. Alliance’s success can be partially measured by the enthusiastic attendance of each meeting.

They promote messengers for a strong oil and gas industry in our country.

We cannot have too many messages or messengers from our industry.

Crude Oil Not Very Popular; Wind, Solar, Ethanol Seem To Be ‘Darlings Of The Future’

As of this writing (November 2), there are still two months – 60 days – before the first Presidential beauty pageant (the Iowa caucuses) and anything can happen.

Senator Hillary Clinton of New York leads the Democratic candidates, and Mitt Romney, former Governor of Massachusetts, is the front-runner among the Republicans.

We ran our first survey of the candidates on energy and environmental issues in July and there wasn't much information available. We have been able to find more about the candidates' positions and that is presented below.

Next month we will start our energy and environment scorecard.

The Alliance encourages you to get behind a candidate and support him/her with you time, effort and money.

Democratic Candidates

Barac Obama: "I actually think that we should explore nuclear power as part of the energy mix…We have to develop solar…I have proposed drastically increasing fuel efficiency standards on cars, an aggressive cap on the amount of greenhouse gases that can be emitted." Democratic debate, July 23, 2007.

"It's time to turn the page on energy…to tell the oil and auto industries that they must act, not only because their future's at stake, but because the future of our country and our planet is at stake. As president, I will place a cap on carbon emissions and require companies who can't meet the cap to buy credits from those who can, which will generate billions of dollars to invest in renewable sources of energy and create new jobs and even a new industry in the process."   Take Back America 2007 Conference, June 19, 2007.

"We cannot drill our way out of the problem (imported oil). Instead of subsidizing the oil industry, we should end every single tax break the industry currently receives and demand that 1% of the revenues from oil companies with over $1 billion in quarterly profits go toward financing alternative energy research and infrastructure." The Audacity of Hope, by Barack Obama, p. 167-169, Oct. 1, 2006.

Supports requiring 20% of power supply come from wind, solar, biomass and geothermal; supports mandates and tax incentives for ethanol; opposed drilling in ANWR; supports programs to reduce carbon dioxide emissions to reduce global warming.

Bill Richardson: "The first day (if I were elected president) I would get us out of Iraq with diplomacy. The 2nd day, I would plan a huge initiative on making American energy independent with an Apollo-like program to become more reliant on renewable fuels. It's asking the American people to sacrifice in so doing. Third, I would have a major initiative on climate change. 90% reduced emissions by 2050."   Democratic debate, April 26, 2007.

Supports mandates and subsidies for exotics (30% by 2020); improve energy efficiency by 20%; reduce greenhouse gas emissions by 20% by 2020 by implementing a cap-and-trade program; supports nuclear; can't find any mention of policies toward crude oil, natural gas and other petroleum products.

Hillary Clinton: "Hillary recognizes that global climate change is one of the most pressing moral issues of our time. She supports policies to reduce carbon emissions and other pollution that contribute to global warming.

"Hillary introduces a plan to Congress to create a Strategic Energy Fund that would inject $50 billion into research, development, and deployment of renewable energy, energy efficiency, clean coal technology, ethanol and other homegrown biofuels, and more.

"We can create the fund without raising taxes by giving oil companies a choice: invest in renewable energy themselves or pay into the fund. She would also eliminate oil companies' tax breaks and make sure they pay their fair share of drilling on public lands."   Taken from HillaryClinton.com, Nov. 2, 2007.

The Strategic Energy Fund places a tax on major oil company profits that exceed a 2000-2004 profit baseline. The fee would be in place for two years, and companies could offset their fee by investing in refinery capacity, ethanol production, or electricity generation from wind or other exotic sources. Oil company tax and royalty provisions would be changed to raise $50 billion to fund research, development and deployment of energy technologies.

Joseph Biden: The energy crisis is the "single most consequential problem we can solve." Spring 2007. Biden voted against new drilling in Gulf of Mexico (2006), he has authored legislation mandating increased fuel efficiency standards for vehicles, and opposed clean coal technology. September 2007.

Christopher Dodd: Supports fuel cell technology as an alternative energy source; supports tax incentive for gas stations that provide biofuels; opposed bill allowing new drilling in Gulf of Mexico; opposes tax support for coal-to-liquid technology research; favors 50 mile per gallon standard for automobiles by 2017. August 2007.

John Edwards: He would create at "New Energy Economic Fund", a $13-billion-per-year fund that comes from the sale of emissions permits and by "ending taxpayer giveaways for big oil companies."   The fund would finance new energy technologies and "provide transition assistance to workers in carbon-intensive industries."    His plan mandates that U.S. power companies use renewable sources for 25% of their energy output by 2025, and allocates $1 billion for U.S. automakers to "apply the latest technology," including biofuels, hybrid and electric cars, and hydrogen fuel cells. Favors fuel economy standard of 40 mpg by 2016. Supports increased use of ethanol.

Republican Candidates

Rudy Giuliani: "I don't know if we can ever be (energy) independent. I think you can be independent by being diversified."   He said the U.S. needs diversity in U.S. energy sources. Supports building more nuclear power plants encourage use of hybrid cars, increase use of ethanol, increase LNG ports, and increase refining capacity. June 14, 2006.

Mike Huckabee: "The first thing I will do as President is send Congress my comprehensive plan for energy independence. We will achieve energy independence by the end of my second term…We have to explore, we have to conserve, and we have to pursue all avenues of alternative energy: nuclear, wind, solar, hydrogen, clean coal, biodiesel, and biomass. Some will come from our farms and some will come from our laboratories. Dwindling supplies and increasing demand from newly-industrialized countries of fossil fuels are driving up prices. These price increases will facilitate innovation and the opportunity for independence. We will remove red tape that slows innovation. We will set aside a federal research and development budget that will be matched by the private sector to seek the best new products in alternative fuels. Our free market will sort out what makes the most sense economically and will reward consumer preferences."   www.mikehuckabee.com. November 2007.

John McCain: Supports a cap-and-trade system aimed to limit emissions; supports increased use of nuclear power; supports ethanol if the market dictates it economic use; opposes UN Kyoto Conference treaty; opposes drilling in ANWR, OCS and other federal lands.

Question during Republican debate June 3, 2007: "Do you have a problem with Big Oil companies making these huge profits:

McCain's answer: "Sure, I think we all do. And they ought to be reinvesting it. And one of the areas that they ought to be involved in is nuclear power."

Mitt Romney: "We're spending too much money in Washington, using too much oil, our schools are falling behind."   Council Bluffs ( Iowa) Daily Nonpareil March 23, 2007.

"We must become independent from foreign sources of oil. This will mean a combination of efforts related to conservation and efficiency measures, developing alternative sources of energy like biodiesel, ethanol, nuclear, and coal gasification, and finding more domestic sources of oil such as in ANWR or the Outer Continental Shelf." www.mittromney.com . November 2007.

"As governor, I found that thoughtful environmentalism need not be anti-growth and anti-jobs. But Kyoto-style sweeping mandates, imposed unilaterally in the United States, would kill jobs, depress growth and shift manufacturing to the dirties developing countries."   Romney on the Environment news release. February 23, 2007.

He supports drilling in ANWR and the Outer Continental Shelf; supports increased use of nuclear power

Fred Thompson: Supports drilling in ANWR; support energy independence and investing in alternative energy sources;

"And while we don't know for certain how or why climate change is occurring, it makes sense to take reasonable steps to reduce CO2 emissions without harming our economy. Overall I am committed to:

• "A balanced approach to energy security that increases domestic supplies, reduces demand for oil and gas, and promotes alternative fuels and other diverse energy sources.
• "Investing in renewable and alternative fuels to promote greater energy independence and a cleaner environment.
• "An energy policy that invests in the advanced technologies of tomorrow and places more emphasis on conservation and energy efficiency.
• "Conducting research and development into technologies that improve the environment, especially the reduction of CO2 emissions." www.Fred08.com

Approaching $100 Per Barrel

Editor's Note: The following statement was presented by the Texas Alliance of Energy Producers to other state oil and gas associations at the meeting of the Independent Petroleum Association of America on November 7, 2007, and released to the news media.

Many news media sources reported today that the price of crude oil on the New York Mercantile Exchange approached $100 per barrel.

Demand for gasoline is at record highs even as prices continue to rise. If Congress increases taxes and enact punitive legislation against the oil and gas industry, supplies will be limited even further. Petroleum products do not grow on trees. Explorationists must have access to lands in order to drill and find oil and gas. Without drilling, production doesn't happen and supplies dwindle and prices rise.

The bills being pushed by the leadership of the House and Senate will reduce supplies of crude oil, natural gas and petroleum products – such as gasoline and home heating oil – to Americans.

The failed energy policies since the 1970s have been a major contributor to the decline in U.S. oil production from 9 million barrels per day to 5 million barrels per day, and the rise in imported oil from 5 million barrels per day to 12 million barrels per day. If the bills being pushed by the leadership pass, that trend will continue and prices to consumers will rise and become even more volatile.

Increasing taxes on the industry by $16 billion to pay for renewable fuels, tacking on an additional carbon tax, implementing bureaucratic and complicated cap-and-trade programs, restricting drilling on federal lands (onshore and offshore) and implementing new and unnecessary environmental restrictions doesn't produce one additional barrel of oil at home. As a matter of fact, these policies would be counterproductive and increase prices to consumers.

Consumers need additional supplies that are safe, reliable and affordable. The bills endorsed by Congressional leaders will increase imports, volatility in supply and price uncertainty.

North Central Texas College (NCTC) is planning to add a program that will prepare students for work in the oil and gas industry. The NCTC has a campus in Gainesville, Corinth and Bowie.

The NCTC Board of Regents voted to approve the creation of the Associate Degree of Applied Science in oil and Gas Production Technology recently during a regular meeting.

The program is designed to prepare students for entry-level jobs in the energy industry.

The oil and gas technology program will require students to complete 68 semester credit hours including 48 credit hours in technical courses from the Workforce Education Course Manual and 15 semester credit hours in academic courses.

Seventeen new technical courses would be implemented including a cooperative education course in petroleum technology.

"I don't know of any more exciting career than oil and gas exploration," said Emily Klement, Dean of the Bowie NCTC campus.

To enhance public education, enforcement, and regulation of industry activity in the Barnett Shale play, the Texas Railroad Commission (RRC) has selected Commissioner Victor Carrillo to spearhead dialogue with city and county leaders on regulatory oversight issues in the Barnett Shale, according to a RRC news release.

The FlexRig 4S, designed and built by Tulsa's Helmerich & Payne, may represent the next generation of drilling rigs designed for drilling in areas like the Barnett Shale where wide open spaces are at a premium and goal is "unconventional gas."

EnCana Corp. officials report using the rig to drill down around 7,000 feet. The rig has depth range of 6,000-14,000 feet.

Unconventional gas is more difficult and less economically sound to extract, usually because the technology to reach it has not been fully developed or is too expensive, according to energy industry officials.

Texas Governor Rick Perry has announced the appointment of Bryan W. Shaw of Bryan to the Texas Commission on Environmental Quality (TCEQ).

The commission establishes, oversees and implements clean air, clean water and other environmental policies for the State of Texas.

By Kurt Abraham
Director of Professional Development

In recent conversations with a few Alliance members, I've run into what I call the "Insulation Phenomenon." Basically, some folks believe that their operations are so remote in the far stretches of Texas, and small enough not to attract attention, that they are "insulated" from Washington D.C's control. They also see little relationship between their operations and international markets.

I wish that this were true—but it's not. More than ever, the majority leadership in Congress intends to meddle with our industry. We're not just talking about a little tax tweaking or alteration of incentives. These people want to fundamentally change the equation against our members. In their blissful ignorance, they see little difference between ExxonMobil and our small-producer members. The more radical, "super-green" legislators would like to force producers out of business, period.

This attitude is reflected in some of the "regular" oil and gas bills passed or proposed in recent months. One can also see such thinking in the tidal wave of Climate Change legislation (61 bills and resolutions at last count) introduced this year that could harm our members significantly.

Most Alliance members are aware of the key roles played by House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.). But I would submit that one of the nastiest, most dangerous characters is Sen. Barbara Boxer (D-Calif.). Since entering the Senate in 1993, Boxer has pursued a consistently hostile agenda toward upstream oil and gas. Now, with her party in the majority, Boxer holds plum assignments as chairman of the Committee on Environment and Public Works, and as a senior member of the Committee on Commerce, Science and Transportation.

From these committees, Boxer can toss the legislative equivalents of Molotov cocktails at our industry. Indeed,   Boxer has already submitted several energy-related bills this year, including S. 152, a bill to permanently ban oil and gas leasing off the California coast, and S. 323, a bill to require firms seeking approval for LNG facilities to actively persuade communities of the benefits of the approval. Sure, just leave these decisions to Malibu's selfish celebrity residents.

In addition, Boxer introduced S. 309, one of several significant cap-and-trade bills floating in Congress. Fortunately, all three of these Boxer bills are stuck in committees, but one day, she's going to get lucky and get something really nasty passed.

For someone holding a degree in economics, Boxer displays some awfully flawed logic. Speaking to a Sierra Club forum last spring, she declared.