Posts Tagged ‘Oil and Gas’

Programs Built on Cyclical Funding Sources

Friday, July 31st, 2009

They say hindsight is 20/20, and as it turns out, every once in awhile foresight is also 20/20. Want an example? Well, four years ago this weekend, I had this to say:

No one can dispute that oil and gas prices and the resulting tax revenue is cyclical in nature. So, why on earth would anyone be proposing new programs to be paid by these inconsistent revenues? It is a recipe for financial disaster.

Unfortunately, the link to the new program of the time is long since dead, but the premise put forth is still very much true. In fact, consider the following from a recent New Mexico Business Weekly article:

Revenue at the New Mexico State Land Office is expected to plunge by at least $250 million in the current fiscal year, a direct result of the drop in oil and natural gas prices.

Those falling prices are expected to have an impact on the state government’s overall budget, and they have some experts predicting a state budget shortfall of between $350 million and $800 million.

I hate to say it, but I told you this was going to happen. Just like I told you we were on our way to 10% unemployment.

Congressman Harry Teague has a BIG Problem

Tuesday, July 7th, 2009

Congressman Harry Teague of New Mexico’s 2nd Congressional District has a big problem. No, it’s not that former Congressman Steve Pearce has decided to take back his seat. Actually, that fact simply exponentially compounds the problem.

Congressman Teague’s problem is that his first major vote impacting the lives of his constituents was a vote against their best interests:

As a Democrat from a right-leaning part of the state that is largely dependent on gas and oil, Congressman Harry Teague had to walk a fine line on the cap-and-trade bill that passed the House on Friday.

Teague stopped by Roswell on Wednesday, in part to explain and defend his vote in favor of the bill to constituents here.

“I had an idea it wasn’t going to be popular with everybody,” he said.

The bill that passed the House drew fire from both the right and left. Conservatives argued that placing any kind of restrictions on carbon would be economically damaging, especially given the current recession. Some commentators claimed that it would raise energy bills by 30 percent, although the Congressional Budget Office said it would cost the average household closer to $175 a year by 2020. Americans for Tax Reform issued a release estimating that the law would cost New Mexico’s Second District $383.76 million in lost income in 2012, the year the bill starts to take effect.

Congressman Teague knew the vote was going to cost people living in the District more. He knew that it was going to cost the area jobs. Most importantly he knew “it wasn’t going to be popular” with his constituents, but he did it anyway.

That’s a problem. That’s a big problem.

I spent a lot of the primary season of last election cycle running from one end of the district to another. And, I have to say that the people down there really impressed me with their hospitality and there no nonsense approach to life. They don’t take kindly to spin, and they call it as they see it.

There not going to be fooled by silly statements:

Teague argued that there will still be substantial benefits to the bill, citing estimates that 40 percent of the people in his mostly-rural district will actually see a decrease in their electricity rates. He also believes that it will create new jobs in the renewable energy sector.

Because they know that if 40% are seeing a decrease in their electricity rates, that means that 60% – otherwise known as the MAJORITY – will SEE AN INCREASE in their electricity rates. They also know that oil and gas provides the jobs that puts food on their tables keeps a roof over their families heads and builds New Mexico schools.

I doubt very much they are going to take kindly to a man who made his millions from oil and gas talking about the fantasy of renewable energy jobs. It won’t be lost on them that those incentives for the supposed new renewable energy jobs are going to solar plants in Albuquerque, not to Roswell or Hobbs, Capitan or Carlsbad.

And, if the best the DCCC can do is to attack Steve Pearce on fiscal policy, then they are in trouble:

The DCCC said that votes by Pearce for policies advocated by former President George W. Bush “created the economic crisis, growing the federal debt by $2.3 trillion from $3.5 trillion to $5.8 trillion.”

Okay, let’s just state the obvious. We can all agree that Republicans spent too much while they held power. We can also say unequivocally that the Democrats are set to outspend them. So, this line of attack just isn’t going to work.

Moreover, the truth is that there are three things you can say about Steve Pearce without question:

  1. Steve Pearce is a fiscal conservative and has a long record of voting “No” to frivolous spending regardless of who was introducing it.
  2. Steve Pearce is a social conservative who walks the talk just like the folks I met in the 2nd Congressional District – R and D alike.
  3. Steve Pearce didn’t forget where he came from in two terms in Congress. He knew how he made living, and he knew that raising the cost of energy for the majority of rural New Mexicans hurts.

That last point is of vital importance. See no matter what kind of attacks come out of the DCCC or the statewide Democratic Party, nothing changes the fact that it only took six months for Congressman Harry Teague to forget what got him where he is today and to stop representing the interests of his constituents.

Education + Work Ethic = Achievement

Tuesday, November 11th, 2008

A week ago, American Home filed bankruptcy. Yesterday, Circuit City filed bankruptcy – before the Holiday Season with serious ramifications for retail property owners:

U.S. shopping center and mall property owners took a thumping on Monday as investors feared Circuit City Stores Inc’s (CC.N: Quote, Profile, Research, Stock Buzz) bankruptcy filing would usher in more failures and take property owners down with them.

It has been reported that next quarter Eclipse Aviation might be closing shop. In China, people are abandoning the cities and moving back to the countryside. This is not just a U.S. recession. This is a major world recession, and giving AIG another $27 billion is not going to keep it from happening.

The government restructured its bailout of American International Group Inc, raising the package to a record $150 billion with easier terms, after a smaller rescue plan failed to stabilize the ailing insurance giant.

The Federal Reserve and the Treasury Department announced the new plan on Monday as AIG reported a record third-quarter loss of $24.47 billion, largely from write-downs of investments.

The new package, at least $27 billion more than was previously extended, will leave the government exposed to billions of dollars of potential losses.

I was on the phone with a friend, and I predicted as a nation we could hit 10% unemployment before we hit the bottom. A bottom I don’t expect us to hit until after the 4th Quarter of 2009. This year’s retail holiday season could be one that shrinks for the first time in a long time, and my guess is that next year will be worse.

I’m a naturally optimistic guy, but there is a difference between being an optimist and a dreamer. Now, I do have one really big fear – newly elected New Mexico Democrats will overreach. Contrary to what some folks might suggest, I don’t think the Democrats need to “shut up about winning the election and go about maintaining the status quo.”

They won, they’re entitled to try their way. After all, campaign promises were made, and they are going to have to try and deliver on some of them. That’s not the problem. I think it’s a mistake, but hey, I’m obviously in the minority. The real problem is if they try and deliver on ALL of them. It is not possible.

Take cap and trade legislation on oil and gas for instance. I’ve mentioned once before that this was on the table for the legislative session. The thing is, there couldn’t be a worse time than right now to pursue this type of the legislation:

“If policy makers ignore the global nature of climate change, it will drive U.S. companies to relocate overseas to low-cost nations where there is little or no environmental regulation,” Mullikin said. “This relocation fails to accomplish the goal of reducing global greenhouse gas emissions, and will likely make global emissions worse.”

For example, Mullikin said that China’s carbon dioxide (CO2) emissions increased more in one year (2006-2007) than U.S. emissions have increased in the last decade (1997-2007). In 2007, China passed the United States and now accounts for 18 percent of the world’s CO2 emissions, releasing over 800 million metric tons more CO2 than the United States last year.

The shift of clean, regulated American industry to nations with little to no environmental regulation will result in lost U.S. jobs. Proposals like a cap and trade program will also increase energy prices for consumers.

A study by the National Association of Manufacturers showed the potential impact that federal cap and trade legislation could have on New Mexico, particularly if developing nations do not agree to reduce their emissions:

  • New Mexico is at risk of losing over 11,000 jobs and up to $1.2 billion in gross state product by 2020;
  • New Mexico’s household income could decrease by almost $2,300 a year by 2020;
  • Electricity prices in New Mexico are estimated to increase by up to 133 percent by 2030, while gasoline prices are estimated to rise by up to 140 percent.

Can you imagine the loss of 11,000 jobs and $1.2 billion in gross state product on top of the economic recession/depression we are about to experience? Four or five years from now, while the rest of the country is experiencing an economic rebound, New Mexico could very well be falling further into a depression because some folks decide to regulate and tax our biggest economic contributors out of existence.

That’s my greatest fear.

Of course, there is a light at the end of the tunnel. And, it comes from an interview that Peter St. Cyr did with Democratic State Treasurer James Lewis:

Lewis tells us he’s looking at the election of the 44th President of the United States in its historical perspective. He says the country has come along way since the Jim Crow laws, used to block African Americans from voting. Lewis even reminded us that before the 1965 Voting Rights Act his relatives were prevented from voting because they didn’t know how many “bubbles were in a bar of soap.”

“This is a proud moment for me,” said Lewis. “It’s a sense of achievement.”

Lewis says any young person who goes out and gets a good education and has a strong work ethic can achieve anything they want.

We have come a long way, but let’s not forget how we arrived here. The secret is in Lewis’ last sentence above: education + work ethic… not government bailouts and additional regulation. If more Democrats keep this in mind, we just may be okay.

The Stealth October Surprise

Thursday, October 9th, 2008

I just figured out this morning what is missing from this election cycle – the October Surprise. That moment when some terrible secret is revealed that is intended to give the other party the advantage going into the home stretch.

Then I took a look at two articles in this morning’s Journal.  The first was the results of recent local polling (subscription):

“Two-thirds said the economy,” he said. “I’ve never seen it that high.”

Sanderoff, president of Research & Polling Inc. in Albuquerque, said the heavy voter focus on the economy is a political “double-whammy” for Republican presidential candidate John McCain, who trailed Democrat Barack Obama in New Mexico by five points in the same Journal Poll.
“It continues to shine a light on an issue perceived as a strength for Obama while taking away the focus from other issues perceived as strengths for McCain,” Sanderoff said.
“Barack Obama is rising in the polls not only because people see Obama as doing a better job on the economy. We’ve gotten off the focus of national security, the war on terrorism, immigration — the things McCain is seen as stronger on. That’s the double-whammy,” Sanderoff said.
Just last month — when New Mexicans were shelling out an average of $3.69 for a gallon of gasoline — another Research & Polling Inc. survey found the biggest issue facing people in the state was fuel prices, Sanderoff said.
And, the second article tied in nicely by reporting on the falling gas prices:
Call it the good news amongst all the bad: gas prices finally dropping under $3 a gallon all over town.
One sign Wednesday advertising $2.859 for unleaded was a magnet for a steady stream of cars and trucks at the Circle K at the northwest corner of Fourth and Montaño NW during the lunch hour.
“I bought this in 2005 — that’s what I was paying then,” said Ventana Ranch resident Corey Ryan, sitting in line in the cab of his heavy-duty Dodge Ram 2500 pickup.
“I drive this way to work, so I keep my eye out for low prices,” he said, nodding at a gas station sign across Montaño for $3.089 a gallon. “Every once in a while, they get into a price war with the place across the street. Circle K’s got them beat today. We all win out.”
I’m sure it is all just coincidence, but you have to admit it the combination of the two make for one heck of an October surprise.

Just an Observation

Wednesday, August 20th, 2008

In a market driven economy, those who buy products and services in bulk usually do so at a discount. Think about your last trip to a warehouse store. Buy more, and pay less on a per unit basis. Or, think about the last membership offer you received. Your discount was higher for a three year commitment than it was for a month to month commitment.

Keeping all of that in mind, read how different the situation is if the “product” comes from a government entity (subscription) as described in this article by Sean Olson:

The city-county water board tonight could close a loophole that lets some high water users escape penalties for hogging water in the summer months.

The board will take up an amendment that would affect the top 1 percent of residential water users in Albuquerque, who officials say account for 5 percent of total residential water use.

It would impose higher penalties on about 1,500 residential users who use large amounts of water in the winter months, defined by the Albuquerque Bernalillo County Water Utility Authority as December through March, water authority executive director Mark Sanchez said Tuesday.

For example, the No. 1 residential water user had a $2,989 water bill in 2007. Under the proposed change, it would be $4,811. The 2007 bill that included sewer services was $4,335, and that would increase to $6,157.

The proposed amendment would charge $1.41 extra per unit of water to customers using more than 84 units per month in the summer, Sanchez said. Another $1.41 would be added for every unit above 112.

Why the difference? Simple. This is a classic example of how government run services work. 99% of the users have absolutely no idea what the real cost of water is. They comprise 95% of the water usage. Yet, since they are not responsible to pay real costs, they have no motivation to reduce unnecessary water consumption. Instead, the 1% that use only 5% of the water will be taxed. Will the tax make a difference? Probably not. Since these users either need the water, or find the higher water rate cheaper than fixing the leak that might be causing it.

For a moment think about all of this in terms of the recent spike and decline in gas prices. Everyone felt the pinch, and all of sudden people were driving slower and coming up with solutions to minimize their consumption. Everyone was equally hit. People who operate fleets of vehicles were not charged a premium, nor were those who operate less fuel efficient vehicles. This is a much better approach. Sure there has been public outcry about higher gas prices, but conservation is much more likely in this scenario.

Now, think about all of this in terms of universal public health care, and you’ll understand why it is such BAD IDEA.

Udall and Heinrich Out of Touch

Thursday, August 14th, 2008

When it comes to increased access to domestic oil and natural gas resources, a new poll clearly shows that Congressman Tom Udall and Congressional hopeful Martin Heinrich are apparently out of touch with the majority of New Mexicans:

A new survey finds that 59% of New Mexico voters support increased access to domestic oil and natural gas resources.

It seems that the rest of the country shares the same view. Polls from Pew, CNN, Zogby and others indicate that the majority of Americans from coast to coast are in support of more energy exploration in the United States.

This is a critical shift in public opinion, and one that our leaders in Washington need to recognize. According to federal government data, the United States has enough oil to fuel more than 65 million cars for 60 years and enough natural gas to heat 60 million homes for 160 years. But current policies restrict access to 85% of the outer continental shelf and 83% of onshore federal lands.

If Congressman Udall is elected to the Senate, you can be sure that he will stay true to his record of doing everything in his power to restrict access to offshore oil and gas as well as that which can be found on federal lands. Even worse, if Martin Heinrich is elected to Congress, Tom Udall will have an ally in ignoring the needs of the majority of everyday New Mexicans.

They’ll be living high on the hog off our tax dollars. What do they care about the pain we’re feeling at the pump? It’s easy to be an environmentalist supporting higher energy costs when you’re pulling down a six-figure income paid for by taxpayers.

Since When is $13,000 Staggering?

Tuesday, August 12th, 2008

In support of the eco-terrorists favorite candidate, Martin Heinrich, the Democratic Congressional Campaign Committee (DCCC) has launched a radio attack in the 1st Congressional race against the law and order candidate, Darren White (hat tip: Heath Haussaman).

This segment from the radio spot that had me rolling on the floor:

Darren White has raised $13,000 from big oil interests, and he is asking us to believe he is going to solve the energy crunch? Martin Heinrich has a different approach.

Since when is $13,000 considered a staggering amount? A quick review at the FEC site shows that, Sheriff Darren White had raised $906,062.69 through June 30, 2008 – basically 1.4% of his total contributions. Now, in the name of full disclosure, I should point out that I’ve personally given $2,300 to Darren White’s campaign – basically .25% of his total contributions.

Compare my own personal annual gross revenues (in the six figures in a good year) with the hundreds of billions of dollars in annual revenue by the Oil & Gas industry in an average year. So, I guess with all things equal, my contribution is the truly staggering amount.

Now, we know that Martin Heinrich’s “different approach” to the energy crisis involves embracing the advocates of monkeywrenching. And, we know that the oil industry accounts for about 1% of Darren White’s overall fundraising. You tell me which candidate is better suited for Congress.

The Oil Policy Difference

Thursday, July 31st, 2008

Just a couple of months ago, it was widely predicted that prices at the pump would hit five dollars by Labor Day. Now, it seems that we might actually see a drop in prices at the pump between now and the election in November.

However, don’t be fooled. If we see temporary relief, it will be just that – temporary. Relief designed to give the impression that we don’t need to increase domestic oil exploration. If the Democrats expand their control of the legislative branch and take control of the executive branch, we will see gas prices north of five dollars a gallon for a very simple reason (subscription):

Sen. John McCain, the presumed Republican presidential nominee, supports lifting a drilling ban along the Outer Continental Shelf and encouraging more offshore drilling and natural gas production in the Gulf of Mexico. Sen. Barack Obama, the all-but-certain Democratic nominee, has opposed lifting the current offshore drilling bans.

“There is no way for at least a generation that we can get by without more and more oil,” Domenici said. “If we could just use our own, we could save American dollars from flowing out of America.”

Meanwhile, President Bush on Wednesday renewed his request that Congress lift its moratorium on coastal oil and gas drilling.

“The American people are rightly frustrated by the failure of the Democratic leaders in Congress to enact commonsense solutions,” Bush said. “All the Democratic leaders have to do is to allow a vote. They should not leave Washington without doing so.”

Senate Majority Leader Harry Reid, D-Nevada, relented on the offshore drilling issue earlier this week, offering Republicans a chance to offer four amendments to the speculation bill, including one that would bring the drilling proposal to a Senate vote.

Look again at the bolded sections from Michael Coleman’s article. Even a goof like “Give ’em Hell Harry” recognizes the fact that domestic drilling deserves to be on the table. Yet, the Democrats presumptive nominee for President, Senator Barack Obama, remains stubbornly opposed to any common sense solution to ultimately returning market control of gas prices to Americans.

Instead, Senator Obama is perfectly happy to leave us hostage to the dictates of a cartel:

OPEC has rejected US pleas for raising production and the president of the cartel says he expects oil to stay at current price levels through the end of this year. That stands against a market where oil demand has gone up 1.5 million barrels a day for the last ten years.

Now who gets hurt the most when Democrats in the U.S. government insist on blocking domestic oil production? The working poor and middle class families is who:

If gasoline prices move from their current average price of $3.20 to $5, the cost of fuel for a family that spends $50 a week for gas would move up over $1,000 a year. That would wipe out any tax rebate payments from the Federal government and drive the economy deeper into its currently slowdown. It would also further fracture already delicate P&Ls; and balance sheet at large auto makers and airlines. Retailers would get less traffic. Very few industries would be spared some effect.

“… wipe out any tax rebate payments from the Federal government and drive the economy deeper into its currently slowdown.” That’s also an important fact to keep in mind for Governor Richardson’s upcoming taxpayers funded Special Session.

We’re an oil producing state, yet the Governor is doing everything in his power to discourage oil production. He did it when he passed unnecessary pit rules, and he’ll do it again in the upcoming regular session by trying to bring the cap and trade scam to New Mexico.

Of course, in characteristic Richardson fashion, he is hoping to dupe New Mexicans into believing that by giving us a rebate, he is alleviating our pain. However, the plain and simple truth is that, like all other Richardson fiscal decisions to date, he is making it more expensive for most New Mexicans to live.

What Do You Really Know About Oil?

Wednesday, July 23rd, 2008

Take a look at John David Powell’s article to learn the answer to these questions:

  • For instance, how big is a barrel?
  • What nation supplies the most crude oil and petroleum products to the United States?
  • What nation, other than the U.S., supplies the most crude oil and petroleum products to our country?
  • How much oil do we import from Persian Gulf countries?
  • What’s the difference between crude oil and petroleum products? How much of the cost of oil goes into the price of gasoline?
  • What products that you buy on a regular basis are sold with tax included?

Town Hall on Governor Created Problems

Monday, July 14th, 2008

It looks like New Mexico First will be holding a “town hall meeting” to discuss the shortfalls in addressing the state’s transportation infrastructure needs:

New Mexico’s transportation infrastructure is vital to the state’s economic prosperity and integral to the quality of life, health, and welfare of our citizens. Traditional funding has been well below the actual needs of maintaining a modern transportation system. Federal, state, and local investment in transportation represents less than 40% of the actual needs of the system creating a sense of urgency for states to seek alternative funding options. Both federal and state transportation revenue has not been sufficient to keep up with inflation, the rising cost of construction, and the demands for transportation services of a growing population. Without an increase in investment, our transportation system will become more congested and the condition of our transportation infrastructure will become less safe.

The state’s annual spending has grown by BILLIONS under Governor Richardson. Considering that transportation infrastructure is supposed to be one of the top priorities of any government spending, it kind of makes you wonder how we ended up in this crisis situation. Then again, I guess all you have to do is look at what Governor Richardson wants to do with the latest projected windfall of nearly $400 million to understand:

But Richardson pointed to the revenue projections in renewing his appeal to lawmakers to approve a heath care expansion. The governor has said he’ll call a special session of the Legislature in August or September to consider mandating health insurance coverage for all residents. New Mexico has the nation’s second highest rate of uninsured.

“We can invest in health coverage in a fiscally responsible way,” Richardson said in a statement. “While cynics will no doubt complain about using revenue from oil and gas, I am confident — as I have been for the past six years — that New Mexico’s economy is performing well and will allow us to expand health care coverage to all New Mexicans.”

Yeah, that makes sense. Take a one time windfall and use it to fund a recurring entitlement program at a time when we are unable to meet our basic infrastructure needs. What I find most ironic is that this windfall comes from the oil and gas industry, yet the Governor is doing everything he can to increase operating costs on this industry and push them out of the state:

If the regulations are approved, Gallagher said it will add $150,000 in operating costs for every new well dug in the state.

“If industry drilled just 750 new pits next year, it would mean $112.5 million in additional costs,” Gallagher said. “We hired an economist to calculate those figures, and we presented them to the OCD, the lieutenant governor, and the governor. They’re not just kicking the state’s cash cow in the stomach, they’re gutting us.”

Raye Miller of Artesia-based Marbob Energy Corp. said many operators will cancel plans to drill new wells if the pit rules are passed.

All of this just serves to bring us full circle back to that town hall meeting:

Highway construction costs are soaring and federal funding to improve roads is declining, said Johnny Cope, chairman of the state Transportation Commission. At the same time, rising gas prices are hurting many New Mexicans, he added.

“This town hall will allow us to discuss these issues and explore some viable options to address the transportation needs of all New Mexicans,” Cope said.

Well, here is a thought Mr. Cope… Why don’t you call the Governor and ask him to adopt a three point plan:

  1. Stop adding unnecessary costs to drilling that are just going to manifest themselves as rising gas prices at the pump.
  2. Stop spending oil and gas revenue on creating new unnecessary programs and instead spend it on needed infrastructure.
  3. Stop unnecessary regulation on an industry that provided the lion’s share of our state budget revenue.

It seems to me that if that plan were followed, we wouldn’t even have transportation needs that weren’t being addressed (i.e. funded).