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Category — Energy Companies

‘Let’s Go’ … Game On for Shell in the Arctic (a milestone in the still maturing hydrocarbon energy era)

“I can’t downplay this. It’s obviously very exciting for us…. This is opening up a new chapter in Alaska’s oil and gas history that is literally starting today.”

- Pete Slaiby, Shell Alaska. Quoted in Jennifer A. Dlouhy,Shell Begins Drilling Well off Alaska,”  San Francisco Chronicle, September 9, 2012.

Profit-seeking, consumer-directed business is proper, necessary, and heroic. Free-market-based energy enterprises (oil, gas, and coal) are quite unlike government-dependent (crony) businesses (ethanol, windpower, and on-grid solar). Ken Lay’s Enron is (was) a leading example of the latter; Koch Industries’ Charles Koch, writing in the Wall Street Journal yesterday, epitomizes the former.

Shell has scaled back its (scarcely profitable) renewable energy investments and is back to its oil and gas roots. Its advertising is no longer about pie-in-the-sky energies and more about here, now energy. LET’S GO! The company found out the hard way that self-styled environmentalists are really anti-industrial and obstructionist when it comes to producing the energy needed by world consumers.

The expense and delay of Shell’s ambitious plans to drill offshore Alaska have been huge. But that chapter is largely over. It is GAME ON for Arctic drilling. LET’S GO!

[Weak] Opposition

The argument against drilling is hypothetical and borders on postmodernism. Stated Greenpeace: [Read more →]

September 11, 2012   4 Comments

Fraying Support for Windpower: Exelon Does the Math

The coalition in support of wind power’s Production Tax Credit (PTC) has always had a bit of a Bootleggers and Baptists flavor: environmentalists making a clean and green argument in favor of wind power and the multinational wind power development corporations funding the political muscle needed to get things done.

The coalition has proven durable even as wind power took a few environmental hits, but now the business side of the coalition is beginning to fray. The PTC will expire at the end of 2012 unless Congress acts to extend it, and some interesting positions are being advertised as the tax-cliff approaches.

For example, the Chicago Tribune reports that Exelon Corp., a large electric power company that owns a significant amount of wind power and is a member of the American Wind Energy Association, is opposing efforts to renew the tax credit (sub. req.).

“The (production tax credit) has been in place since 1992, I believe,” Exelon Chief Executive Christopher Crane said in a conference call with investors and analysts Wednesday. “And I think that’s enough time to jump-start an industry, 20 years.”

The economic logic behind Exelon’s position is clear: ”with nearly half of its profits coming from its nuclear fleet and low-cost wind power cutting into its margins, Exelon is in Washington leading a fight to kill a tax credit the wind industry says is crucial to its survival.”

Note that “low cost wind power” is referring to the low marginal cost of production, not the total cost per MWh of energy produced. Most of Exelon’s generating assets are in markets with energy prices driven toward the marginal cost of production, and additional wind power in these markets tends to push average prices down. [Read more →]

August 15, 2012   5 Comments

Energy Loserville: U.S. DOE Picks in an Artificial Industry

“When government undertakes tasks for which it is ill equipped it squanders the authority necessary for carrying out its core responsibilities. Pervasive rent-seeking, bad for our economy and worse for our republic, should be discouraged instead of rewarded. If government becomes integral to securing every advantage and assuaging every grievance, then governance becomes impossible.”

- Richard Voegeli, “Reclaiming Democratic Capitalism,” Claremont Review of Books, Spring 2012, p. 46.

Governments around the world are having buyers’ remorse with their bets that solar and wind could effectively diminish oil, gas, coal, and nuclear. So much cost, so little energy. So much cost, so little reliability, and so much need for backup power.

The story is the same for the U.S. Department of Energy. The Obama administration’s rocky road with green-energy boosterism is no secret. With big names like Solyndra and Solar Trust of America, it’s hard to lose sight of the administration’s funding failures.

But what may come as a surprise is the overall amount of money being thrown away on these green companies that the administration has championed. Of the $10.7 billion in green-energy commitments, detailed below, approximately $3.2 billion is to companies that are in bankruptcy, and another $7.1 billion is committed to teetering firms.

The good news is that private developers are postponing (and probably canceling) projects that even with government subsidies are uneconomic. General Electric Co. just last week halted construction of what would have been the largest solar-panel factory in the U.S. Some 335 workers can now find economic employment.

Here’s the breakdown of the “green” energy carnage to date: [Read more →]

July 9, 2012   9 Comments

Petroleum Development in the Ecuadorian Amazon: Setting the Record Straight (Part III: Did International Oil Firms Despoil Eastern Ecuador’s Environment?)

[Ed. Note: This concludes Douglas Southgate's review of Ecuador’s claims of “reckless environmental damage” against Chevron, and through them international oil companies (IOCs). Part I challenged the facade that Ecuador's passive view of its own resources led to exploitation by Big Oil; Part II examined the economic benefits of fossil-fuel development in the country.

This post refutes the charge that environmental damage is the responsibility of foreign firms alone. Indeed, it is the state company, Petroecuador, that was chiefly responsible for environmental despoliation in the Amazon region. These postings are timely in light of a recent article in The New Yorker, [1] a new book about the construction of a trans-Andean pipeline, [2] and other literature in which IOCs’ actions in Ecuador are criticized.

Billions for Government, Nada Environment

Opponents of petroleum development in the Amazonian lowlands (Oriente) of eastern Ecuador maintain that damage to the region’s natural resources has been the result of IOCs’ dominance of the country. But in the first of three postings about the anti-oil campaign, I show that the Ecuadorian government actually exercised considerable power in its dealings with foreign companies. Soon after petroleum was discovered in the Oriente, Ecuadorian authorities obliged IOCs to spend tens of millions of dollars on transportation infrastructure in order to facilitate colonization, in which the firms had no real interest. [Read more →]

February 17, 2012   3 Comments

Petroleum Development in the Ecuadorian Amazon: Setting the Record Straight (Part II: Oil wealth & socioeconomic progress in Ecuador)

[Ed. Note: This series addresses key issues at the heart of Ecuador’s claims of “reckless environmental damage” against Chevron, and, through them, international oil companies (IOCs). Part I challenged the facade that Ecuador's passive view of its own resources led to exploitation by Big Oil. Part III tomorrow addresses the misperception that environmental damage in this small, South American nations is the responsibility of foreign firms alone.]

 Oil and gas has been a 40-year economic driver in Ecuador. With the national treasury benefiting from oil and gas revenue, any lack of socioeconomic progress during the last decades cannot be blamed on international oil company (IOC) profit-making there.

Indeed, no serious observer claims that Ecuador has failed to experience development. Criticism has focused instead on waste and misallocation of the large cash bounty that multinational investment created for Ecuador.

Who Got the Money?

Much of the blame for misallocation rests with the uniformed services, which have received a sizable portion of the country’s petrodollars. Military expenditures averaged 45 percent of the national budget from 1972 through 2000, which has enabled the armed forces to acquire a fleet of oil tankers, an airline, and other commercial enterprises.[1] However, oil wealth also has been spent on social services and subsidies for the public at large.

Despite waste, corruption, and misallocation, gross national income (GNI) per capita improved during this period. So did non-economic indicators of human well-being, including the infant mortality rate (IMR) and life expectancy at birth, thanks to better water supplies and public sanitation, wider access to pharmaceuticals, and, most importantly, improved nutrition.

Conditions in 1967

At the time when oil was discovered in the Oriente, mean GNI in Ecuador ($260) was barely half the Latin American and Caribbean average ($478); only in Haiti’s GNI per capita was appreciably lower. [2] The country’s standing in terms of non-economic measures was a little better. [Read more →]

February 16, 2012   No Comments

Petroleum Development in the Ecuadorian Amazon: Setting the Record Straight (Part I: Was Ecuador ever subservient to foreign oil firms?)

[Ed. Note: In this three-part series, Douglas Southgate, an economist and professor at Ohio State University, addresses key issues at the heart of Ecuador’s claims of “reckless environmental damage” against Chevron, and, through them, international oil companies (IOCs). Part II and Part III will address two other charges: that the small, South American nation has benefited little from energy-resource development, and that environmental damage is the responsibility of foreign firms alone.  These postings are timely in light of a recent article in The New Yorker,[2] a new book about the construction of a trans-Andean pipeline,[3] and other literature in which IOCs’ actions in Ecuador are criticized.]

Part I in this series challenges the charge from the Ecuadorian régime’s (and its U.S. backers) that:

(1) Ecuador was an innocent seduced by the siren song of Big Oil, and became a vassal to their interests;

(2) Ecuador’s relationship to its oil potential was merely passive; and

(3) Oil development monies did not benefit Ecuador.

In fact, the country moved aggressively to capture the lion’s share of the benefits created by private investment. Nationalization and taxation left the government with 97.3 percent, or $22.7 billion, of the monetary returns created by the concession originally developed by Texaco and Gulf between 1972 (when production and exports began) and 1992 (when the state oil company gained complete ownership of the concession).[1]

The Legal Setting

Continuing appeals of a February 2011 ruling by a district court in the Amazonian lowlands of eastern Ecuador and charges of fraud leveled against plaintiffs’ counsel [4] are recent and noteworthy developments in a legal campaign launched nearly two decades ago against Texaco, which along with Gulf Corporation began drilling for petroleum in the region during the 1960s and which has been affiliated since 2001 with Chevron. [Read more →]

February 15, 2012   3 Comments

Enron Romm: History Should Not Forget

It is a common refrain in headlines at Joe Romm’s Climate Progress:

Smearing and innuendo is hardly fair play. But in this case, Joe Romm has something embarrassing to hide. Just as Koch Industries might be his least favorite company, Enron was his darling company.

Specifically, Romm was not only a cheerleader of Enron (Enron is “a company I greatly respect,” Romm would say). He was also an unpaid consultant and collaborator with the infamously fraudulent division, Enron Energy Services (EES), purveyor of energy efficiency service in (gamed) long-term contracts.

It is timely to reestablish the linkage between Joe Romm and once-mighty Enron Corporation, a company which went bankrupt ten years ago this month. Perhaps this history will help the combustible Romm to deal with the arguments more and funding links less. (Besides, would he like for his critics to bring in the funding link between George Soros and Center for American Progress?)

Some Romm Enron Quotations

“I hope there is something in [my book] Cool Companies Mr. Lay can refer to. I’m sorry Enron isn’t in it, but if you have any good case studies, I would love to use them as I talk to the media and Fortune 500 companies. Feel free to use my personal email.”

- Email communication from Romm to Enron, June 6, 1999. [Read more →]

December 19, 2011   11 Comments

Chevron CEO: “The Imperative of Affordable Energy” (Moral substance trumps ‘green’ form)

“It’s time to move the debate past the dogmatic view that carbon dioxide is evil and toward a world view that accepts the need for energy that is cheap, abundant and reliable.”

- Robert Bryce, “Five Truths About Climate Change,” Wall Street Journal, October 6, 2011.

“Every [energy] policy objective should be viewed through the lens of affordability.”

- John S. Watson, Chairman and CEO, Chevron Corporation
Remarks at the Peterson Institute for International Economics, Washington, D.C., October 19, 2011.

Chevron CEO John Watson delivered a major address last month in Washington, D.C. that reorients energy sustainability from controversial neo-Malthusian notions toward consumer affordability and reliability. As such, it marks an end to the ‘apologetic’ era launched by BP’s John Browne in his 1997 Stanford University speech, which proclaimed that fossil fuels were problematic in relation to anthropogenic climate change. The moral high ground of consumerism also points to market capitalism in place of political capitalism.

Watson’s speech follows verbatim with subtitles added.

This is one of those places in our nation’s capital where serious minds turn to serious matters. The spirit of the Institute is to take the long view, to look past election cycles to the fundamentals of good policy, in this country and beyond. That’s an attitude that serves us well in any place and time, and certainly right now, in this fourth year of low economic growth, high unemployment and many other challenges.

This room is filled with people who spend a lot of time analyzing these problems, and advocating policy prescriptions to deal with them. And few policy issues are more contentious than energy.

There’s a reason for that. When it comes to energy policy today, we’re talking past one another. We all want a secure source that
minimizes adverse environmental impacts. But we’re failing to be clear about what our central priority ought to be among our energy objectives.

Affordable Energy

Today, I’d like to share what I believe that priority should be. I submit to you that affordable energy is the priority that should underpin all of our actions. Every policy objective should be viewed through the lens of affordability.

To make the case, think back over the last 150 years. We’ve seen the greatest advancements in living standards in recorded history because we have developed abundant, affordable energy. Light, heat and mobility have been made available to billions of people.

Agriculture has been mechanized, freeing populations to spend time developing other industries and toiling less for the very basics of life.

The evolution of energy supply over that time period has been just as stunning. As late as 1910, about a quarter of all U.S. farmland was still devoted to feeding horses used for transportation. Today, we use half as much land for all of our roads and highways, oil pipelines, refineries and wells combined.

Since Edison switched on his first generators in 1882, the average price of a kilowatt hour of electricity has fallen almost without interruption. Markets have driven a diverse portfolio of affordable energy sources that is anchored by oil, natural gas and coal, but also includes nuclear, hydropower and other renewables.

And we’re using our energy more efficiently. It takes 60 percent less energy today to produce a dollar of GDP than it did in 1949.

Affordable energy supports the very foundation of American life. Americans love their mobility, whether for business or pleasure. The population has roughly doubled since 1950, but gasoline consumption has quadrupled, even as gas mileage has improved. And we’re flying more. U.S. airlines use about 80 percent more fuel today than when I was in college, even as they have became more fuel efficient. [Read more →]

November 25, 2011   2 Comments

What’s a Business to Do? (In search of heroic capitalism)

[Editor note: This article first appeared in the October 2010 issue of Discovery, the quarterly newsletter of Koch Companies, Inc. This company's values include an adherence to free-market capitalism, in opposition to political capitalism or rent-seeking, currently the fashion at a number of major U.S. corporations. (Also see "The Future of  Economic Freedom"). ]

We live in an era when many people–including policymakers and media celebrities–view businesses and corporations with disdain or intense suspicion. Their way of thinking begs a simple question: What is the primary role of business?

Is it to create jobs and provide benefits?  Help advance a social agenda?  Or just to make as much money as possible, by exploiting customers and employees?

As a matter of principle, Koch companies believe there is only one reason for any business to exist: creating value.

“Value creation,” says Charles Koch, “involves making people’s lives better.

“It means contributing to prosperity in society.  If a company’s not doing that – enhancing the well-being of society – then it needs to go out of business.

“We all tend to pursue our own interests, but in a true market economy we can only prosper long-term by providing others with what they value.”

History and sound theory have both shown that the only way to consistently create value for society is to faithfully follow a set of reality-based principles.

For Koch companies, those are the 10 MBM® Guiding Principles, which include integrity, compliance, value creation, humility and respect. [Read more →]

January 17, 2011   8 Comments

A Republican Enigma on Renewables (Sen. LeMieux, please check your premises)

In line with conservative values, and with the passion of a local Tea Party leader, U.S. Senator LeMieux (R–FL) is behind his state’s lawsuit against the federal government’s healthcare reform law.  He also has a national debt clock on his WEB SITE, and his headline platforms include reducing government waste and improving transparency and accountability from soup to nuts.

So can we feel assured this senator upholds these values across the board?

No, unfortunately, when it comes to the failed government experiment with politically correct renewable energy.

Senator LeMieux has co-sponsored a bill–along with 25 of his closest friends across the aisle–to extend the ARRA 1603 tax credits, doling out 30% of project costs up front to so-called “renewables.”

So what goes? Florida is not a big renewables state. Florida voters are rebelling against Big Government, as recently shown at the polls. Florida is also a marginal solar state and has dismal wind resources.

So what is behind Sen. LeMieux’s deviation? Enter Florida Power & Light Company, and specifically its government-dependent, now-running-scared subsidiary, NextEra Energy.

Floridians should be furious. [Read more →]

December 7, 2010   5 Comments