Boone Pickens and Natural Gas

Every one knows that Boone Pickens is promoting the use of natural gas as one of his methods reducing American dependence on foreign oil.

Seemingly, as an afterthought, Mr. Pickens adds, “Sure, Drill, drill, drill … but that misses the point.”

Well, someone correct me if I’m wrong; but, unless your talking about coal gasefication or in some way extracting natural gas from shale oil deposits, I think you have to “drill, drill , drill” to get natural gas. In other words, it doesn’t grow on trees.

Now, I know that Mr. Pickens has the reputation of being sort of one of these western cowboy types … being from Texas, but I don’t think he was referring to placing rectal tubes in those cowboys from “Blazing Saddles” as his main source of “natural” gas, compressed or otherwise.

Natural gas is, in fact, a “renewable” source of energy. It can be produced from the fermentation of waste products as those cowboys around the camp fire amply exhibited. I seriously doubt that Mr. Pickens was referring to the “renewable” aspect of natural gas, though.

Currently, commercially significant natural gas comes from wells … which have to be drilled. So, unless gasefication of fossil fuel liquids and solids becomes a more prominent source of natural gas, drilling new wells and exploration for new deposits of natural gas which frequently occurs in the same wells as crude oil will be the main technique for expanding our natural gas supply.

As a side note, Mr. Pickens has referred to Iran converting to natural gas instead of gasoline for its transportation needs. I doubt that this is based on any environmental concerns. Iran lacks refining capacity and has to import refined gasoline just as we do because of our lack of sufficient refining capacity. Since natural gas doesn’t have to be refined, it is a natural solution to their critical shortage of refining capacity and could, in the short term, relieve our shortage in refining capacity.

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Pickens Plan Presentation Before Senate Committee

On 22 July 2008 Boone Pickens presented his energy plan before the Senate Homeland Security Committee chaired by Senator Joe Lieberman (I) of Connecticut. The hearing was requested by Senator Susan Collins (R) of Maine and telecast on C-Span with a rebroadcast late night 22 July or early morning on 23 July.

I caught the rebroadcast early Wednesday morning missing the first part of Mr. Pickens presentation but heard about 20 or 30 minutes of it. To me, the essence of Mr Pickens’ initiative is to convert the mass of U.S. transportation from gasoline to natural gas, especially heavy transportation, and the development of wind power throughout the heartland, from Texas into the Dakotas, with the potential of developing as much as 400 gigawats of electrical energy. In addition to these proposals, he had a plan for developing the infrastructure to carry the newly developed energy source. Of note, he pointed out that natural gas provides power that alcohol based fuels cannot, i.e., horsepower. His natural gas proposal seemed to me most realistically aimed at the current non-rail freight transport system in the country today … aimed at decreasing our dependency on foreign oil in the transportation sector, primarily commercial, by 38%. When asked, he estimated that the cost for developing this wind power would be about $500 billion with an additional $100 billion for infrastructure. He pointed out that this was still less than the current estimate ($700 billion) of the cost of oil imports for one year at the current price of crude oil. Mr. Pickens pointed out that known natural gas reserves within the United States have doubled in the last 10 years.

The second speaker was Gal Luft of the Institute for Analysis of Global Security. He pointed out that 2008 would be the first year that the United States will pay to foreign countries more than we pay our military to protect us. He challenged Mr. Pickens plan which is based partially on natural gas, stating that the United States is currently a minor producer of natural gas with only (?) 4% of the known natural gas reserves in the world. He stated that several natural gas producing nations with most of the known reserves are currently forming a natural gas cartel and that the United States would only be substituting an oil based problem for a natural gas based one. I don’t know if he’s taken into account the increase in known natural gas reserves that Mr. Pickens alluded to. Mr. Luft also pointed out that OPEC is essentially producing the same amount of oil that it was producing 35 years ago, that the 65% increase in oil production in the past 35 years has been accomplished by non-OPEC nations. He stated that OPEC has historically decreased its production as the United States has increased its production.

Mr. Luft’s proposed solution was the implementation of flex-fuel cars, able to use gasoline, ethanol and methanol (GEM). He further stated that the cost of adding the flex-fuel capacity to American autos would be about $100. Apparently, there is currently a bill before Congress that would make the flex-fuel requirement law with 50% of autos sold in the U. S. being required to have the flex-fuel capacity and 80% by 2015. He stressed that this was part of an “open fuel standard” which would allow market forces to lower and dictate the cost of fuel through competitive pricing.

The third speaker was Geoffrey Anderson of Smart Growth America. His presentation was on the future development of “walkable communities” as opposed to “drive only communities”. Basically, what he was referring to was the fact that the past century’s residential development had been geared to the development and widespread use of the automible as the primary means of transportation … to the point that most residential developments were based on the necessity of the automobile to reach required services. One fact he presented was that currently only 11% of school children walked to school as compared to 50% in 1960. He discussed a “walkable community which had been developed in Atlanta, GA. It was anticipated that the residents in that community would only drive an average of 27 miles per day compared to the typical (?) 34 miles per day that the average Atlantan drove. They found that the average resident of that community actually drove only 9 miles per day, 1/3 of their estimate. A “walkable community is one where nearly all essential services and many nonessential services are within walking distance of the resident’s home. He envisioned “walkable communities” interconnected by convenient forms of mass transportation.

The last speaker was Dr. Habib Dagher, the director of the Advanced Structure and Composites Laboratory at the University of Maine. He spoke on the development of offshore wind power and stressed the acute need for that development by the residents of Maine because of the dramatically increasing cost of fuel oil which has been paralleling the cost of crude oil. He stated that the average cost of fuel oil for the average Maine household was projected to be about $5,000 this coming winter accounting for about 25% of that household’s annual budget. He presented a map that showed three primary areas where offshore wind power could be developed … off the northern Atlantic coast, in the Great Lakes region and off most of the Pacific coast. He addressed some considerations regarding wind variability and power storage. He did admit that it would probably take five to seven years to actually begin deployment of this power source. The potential energy production for each of these regions ranged from 150 to 400 gigawatts, similar to as well as complimentary to Mr. Pickens proposal, but, as he pointed out, closer to population densities with less infrastructure requirements. He did state that all of their proposed wind generators would be located greater than 20 miles offshore … over the horizon … out of sight, Senator Kennedy … and at greater cost. I did find it interesting that he completely avoided referring to the Cape Cod area as well as the mountains in southeastern Maine as well as those in New Hampshire Vermont and western North Carolina. But he was talking only about offshore, wasn’t he?

As both Senator Collins and Senator Lieberman pointed out, all of these proposals seemed to be complimentary.

Watching nearly all of the proceedings, I was acutely aware of the similarities ( sans wind power) of the “walkable community” proposal to the small community where I grew up in middle Georgia. There were four small towns in the county ranging in size from 500 to 3500. Practically all essential services were to be found within each community or within the county. The longest distance between the towns was about 19 miles and all were interconnected by rail as well as highway. It was actually possible to travel from one town to another by rail although, by the time I came along in the 1950’s, commuter rail was already being killed by a pro-union Democratic congress more interested in subsidizing automobile use with the development of the Interstate Highway System under the guise of national defense as well as its obvious subsidization of air travel through federal control and support of airports and air traffic control.

One thing that did strike me about the hearing was the total lack of even one Democratic senator’s presence during the nearly one and one half hours that I viewed. Another thing that stuck me was that the “Massachusetts Situation” was alluded to or tiptoed around. Nantucket Sound was specifically mentioned and, therefore, Senator Ted Kennedy’s obstruction of that project was alluded to.

Frankly, it sounds like we need to back up at least 50 years … or more like 100 years … in the transportation realm … and try again. I once read that modernization didn’t always equate to progress … or something like that.

Postscript: It’s now 4:53 am and I’m watching the beginning of the third broadcast of T. Boone Pickens’ presentation. As I suspected, there doesn’t appear to be even one Democratic senator who has shown Mr. Pickens the courtesy of listening to his presentation. And least I forget, as well as to be fair, only three Republican members were present. What a bunch of … buttheads!

Roll Call:

Present:

Joseph Lieberman (I), chairman

Susan Collins (R), co-chairman

George V. Voinovich (R), OH

Pete V. Domineci (R), NM

———-

Absent: (The Roll Call of Shame) …

Carl Levin (D), MI

Ted Stevens (R), AK

Daniel K. Akaka, (D), HI

Thomas R. Carper (D), DE

Norm Coleman (R), MN

Mark L. Pryor (D), AR

Tom Coleman (R), OK

Mary L. Landrieu (D), LA

Barack Obama (D), IL

John Warner (R), VA

Claire McCaskill (D), MO

John E. Sununu (R), NH

Jon Tester (D), MT

Barack is Concerned about the Economy?

Senator Obama is sticking barbs into General Petraus with whom his disagrees about troop withdrawals in Iraq while defending his stance saying that General Petraus doesn’t have to deal with the $10 billion that is being taken away from the American economy by the Iraq war each month.

That’s right. Barack is worried about the $10 billion that the war in Iraq is costing the United States.

Hey … over here … back in the good ole’ U.S. …

How about the $78 billion or so that the price of crude oil has been costing the American consumer each month … which, by being an advocate for higher fuel prices, you have been favoring. How did I get $78 billion … $130 avg. per barrel of oil (well below avg. cost of oil this week) x 20 million barrels (this week’s newly announced daily U.S. consumption (down from 22 million) x 7 days x 4.3 (avg. # of weeks per month). That is nearly $940 billion a year … more that $200 billion greater than Boone Pickens’ estimate. Can the United States afford the loss of 15 or 20 trillion dollars in wealth over the next 20 plus years waiting for Obama’s … and the Democratic parties’ … plan to “possibly” reach fruition? And that’s assuming that their hypothetical will work in the first place.

And let’s get this straight … I’m doing more than my share. I’ve filled up my car once so far this month … 7.5 gallons … 170 miles. I literally have to dust my car off every time I use it. If there were some rational form of mass transportation ( like rail), I would be using it. But that’s another blog.

I agree with you totally about wind and solar … but what are we going to do in the intervening 22 years before these sources of energy meet their maximum potential … in the year 2030?

How long can we afford … your wisdom, Senator Obama? You’re looking for foreign policy experience this week “over there”? How about a little domestic reality?

The Oil Company Windfall Profit Myth

While Rome burned, Nero fiddled. Sound familiar. A popular story is that Nero actually started the fires in Rome to clear ground to build his new and improved Rome. The citizenry of Rome were outraged and a scapegoat, the Christians, were conveniently on hand to be given the blame.

Today, with oil prices soaring over $133 a barrel, Congress fiddles and the two Democratic presidential candidates as well as many of the party leaders in Washington have found their convenient scapegoats, American oil companies.

Look at the massive profits they made in the first quarter of 2008. Well, I did look. Everyone should look and see exactly what the Democrats are crying out about. Let’s look at Exxon Mobil as an example:

XOM: Income Statement for EXXON MOBIL CP – Yahoo! Finance

Wait a minute. Where’s that tremendous jump in money that congressional leaders and presidential candidates are crying about? In the first quarter of 2008, Exxon’s total gross revenues are only up by $200 million from fourth quarter 2007 while gross profit is actually down by over $500 million. Since last summer, they’re operating income is up by a little over $2 billion, slightly better than 10% … a respectable increase but not necessarily anything to be upset about or even jubilant about if you own their stock. Since the end of the second quarter of last year their cost of revenue has increased by more than 25% from approximately $55 billion to $70 billion while their total revenue has gone up a little less than 16% from $102 billion to $116 billion.

Exxon Mobile is a BIG corporation:

XOM: Balance Sheet for EXXON MOBIL CP – Yahoo! Finance

It’s total assets at the end of first quarter this year were more than $258 billion. That’s a little over a quarter of a trillion dollars of which nearly half is physical, property and equipment.

Their liabilities or debt is $135 billion leaving net assets of stock holder equity at $123 billion.

The cash flow statement is where Congress plays “gotcha”.

XOM: Cash Flow for EXXON MOBIL CP – Yahoo! Finance

Even though net income has marginally improved from $10, 260,000 at the end of the second quarter last year to $10, 890,000 at the end of first quarter this year, through changes in operating, investing and financing activities, their change in cash and cash equivalents has gone from a loss of over $1 billion to a gain of more than $6.9 billion with it nearly tripling since fourth quarter 2007.

Sure, they’ve increased their stock buy back program from $7 billion to more than $9 billion a quarter … but that’s less than 5% of their total assets. Their change in total cash flow from operating activities seems to have doubled in the past quarter but a close look and removing all of the negatives will reveal that it’s only increased by about $1billion or 5% since the end of fourth quarter of 2007.

Looking back at the Income Statement, on a net income in 2007 of about $70 billion, Exxon Mobil paid income taxes of nearly $30 billion, or about 43% of their net income. What does Congress think is a fair rate for them to pay … 100% … or more?

It’s a fact that these are gargantuan numbers. Exxon Mobil is a gargantuan corporation. Their cash flow and assets are enormous. So are their expenses.

American oil companies are becoming smaller and smaller players in on the world oil scene when it’s looked at in its totality. With the United States being the world’s largest oil products consumer, it’s their job to see that the needs of the American public are met. In doing this, they have to cater to the rules and regulations of the foreign governments that they deal with as well as our own. They have to stay competitive.

OPEC controls the supply of oil from it’s member nations. Couldn’t it be construed as just a little ironic and frankly two-faced that our Congress wants to sue these nations to try to force them to increase their oil output while at the same time, denying access to our own reserves?

Construed nothing … it’s insanity!!!

Barack Obama woos his supporters with promises of solar and wind energy. Where are those solar and wind powered cars and trucks? Solar collecting farms have to be put where there is abundant year round sunlight … yet environmentalists in the 1990’s blocked the connection of a large solar farm in the Arizona desert to southern California power grids to protect the migrating habits of a desert tortoise. The Kennedys don’t want a wind farm in the potentially highly productive area of Nantucket sound.

You can’t put cost effective solar farms in areas where there’s frequent heavy cloud cover and you can’t put cost effective wind farms where there aren’t predictable and sustainable winds.

I’ve written previously that crude oil prices react to news. Yesterday, Boone Pickens said oil would go to $150 a barrel and predictably it’s gone from $128 a barrel yesterday to over $133 a barrel today.

The only predictable thing Congress has done is … nothing!!!

I still believe that some CONSTRUCTIVE action on Congress’ part would have a profound effect on oil prices … and that’s not sticking the oil companies with so-called windfall profit taxes or ludicrously threatening to sue OPEC. That’s about as stupid and juvenile as the snitch threatening, “I’m going to tell your mother!!” Get real!

It’s time for Congress and our presidential candidates to do a reality check … take a look in the mirror … and see where the problem really lies.

Is the Iraq War the Cause of Recession?

Sure, it’s an election year and the spin is getting faster as the manure we’re all standing in is getting deeper, but the latest stretch is really phenomenal.

Recently, we’ve all heard Democratic party leaders attribute the recession … or “economic slowdown”, depending on your orientation … to the war in Iraq.

Okay. So they say.

Now, why was I under the impression that the current financial crisis was just that … a financial crisis … created, not by the war in Iraq, but by the sub-prime mess and the collapse of the housing industry.

I’ve been watching financial news and financial channels for, literally, years … and hearing Nancy Pelosi just matter of factly say that the war in Iraq was the cause of the current recession (yes, I’ll call it that) just plain caught me off guard.

It’s been a while since she said it but as I remember listening to the Senate and House interrogations of General Petraus and Ambassador Crocker, the presumed correlation between the war in Iraq and our economic woes seemed to be a prominent and recurring theme among Democratic inquisitors.

I wondered if I was having a brain cramp or something. Was I and all of those economic experts I was listening to on CNBC and Bloomberg that much out of touch with economic realities? I’m the first to admit that I’m not an economic expert but, at least, some of those people ought to know what they’re talking about … people like Robert Reich, Warren Buffett, Boone Pickens, Ben Stein. I never heard any of them say that the pending or current economic crisis was caused by the war in Iraq.

I understand that San Francisco marches to its own drum. But, I didn’t realize that they are in an alternate world. Well … actually … it isn’t just San Francisco politicians. It’s Democratic politicians in general. Theirs does seem to be an alternate world or universe continually restructured to fit the talking point of the moment.

Maybe they’re spreading their coping ability too thin. They must feel that being opposed to the war in Iraq simply because it is isn’t sufficient reason to oppose it. They must feel that they have to steal the economic crisis from the cause that most learned peolple seem to attribute it to … the subprime mess and the housing market collapse. Go figure. Maybe they’re just getting confused. Now isn’t that a scary thought?

These people are supposed to be in Washington to solve the country’s problems and they can’t even get cause and effect correct.

Maybe they all “mispoke”.