TCS Daily

Royalty Pains

By Max Schulz - January 18, 2007 12:00 AM

The final big-ticket item in new House Speaker Nancy Pelosi's first-100-hour agenda, to be taken up today, is an energy proposal that will do nothing to help achieve long-term energy security. Instead it will merely serve to satisfy Democratic bloodlust about "Big Oil" and the energy industry's recent high profits.

The heart of the Democratic proposal is a stated plan to roll back corporate welfare for oil and gas companies, using those savings to invest in alternative energy technologies. Congressional leaders also want to restructure the royalty payment system for leases in the Gulf of Mexico that they say will fleece taxpayers of more than $10 billion.

In reality, the plan is designed largely to punish oil companies because of their profits, and to continue beating up the Bush administration for supposedly too-cozy ties to the petroleum industry. An additional bonus for Democrats is the irony that the scandal over lost royalty payments traces back not to any oil industry or Bush administration perfidy, but to gross mismanagement on the part of the Clinton administration Interior Department.

Democratic candidates across the country last fall campaigned on repealing the tax breaks to Big Oil that were said to be a prominent feature of the energy bill President Bush signed in 2005. Critics including Rep. Pelosi lambasted the major oil companies for garnering tax breaks they didn't need at a time of rising crude oil prices and record billions in profits.

But, contrary to Pelosi's accusations, the tax breaks in the energy bill were neither requested by, nor included to benefit, Big Oil. In late 2005, at a contentious Senate hearing to investigate skyrocketing gasoline prices, Louisiana's Democratic Senator Mary Landreiu revealed that the tax breaks in the energy bill weren't inserted on behalf of giant companies like Chevron and ExxonMobil. Rather, they were designed to protect the much smaller independent producers and wildcatters, many of whom are located in her home state. Congress's intended beneficiary was Little Oil - the petroleum equivalent of family farmers. Although those breaks aren't subject to repeal in the new legislation, the new House leadership is still determined to assail Big Oil.

Pelosi & co. are moving forward with a punitive program that serves no purpose other than to score points against an unpopular industry. A chief proposal will repeal the manufacturing tax deduction Congress passed in 2004, but only for oil and natural gas companies. It will remain in place for all other manufacturers and industries.

Another provision aims to rewrite many of the leases that various oil and gas companies agreed to a decade ago to drill in the Gulf of Mexico. As incentive for them to invest in exploration when oil was trading at $10 per barrel, Congress established a program to waive the standard royalty that companies must pay the government. Generally (though the law is garbled on this point) an "escape clause" should be inserted in the lease agreements, eliminating the waiver if the price of oil climbs above $34 per barrel. For reasons that are unclear - and are the subject of a federal investigation - the Clinton administration officials who drew up more than 1,000 leases in the late 1990s failed to include the escape clause language. Now that many of these leases are finally starting to produce, and oil is trading at well over the $34 per barrel threshold, the government is missing out on a royalty windfall. Some companies have agreed to renegotiate their leases. Others insist they have legally binding contracts that they signed in good faith. The problem will be sorted out in the courts, regardless of the steps taken by Congressional Democrats. It's a major screw-up all right, but the culprit is not Big Oil. It's Big Government.

The Democrats' plan of attacks on the oil majors goes from bad to worse with their notion that the ill-gotten gains should instead be invested in renewable energy research. Democrats are proposing a dedicated fund to look for alternatives to oil and gas. Good luck. The federal government has been subsidizing renewable and alternative energies for decades, with little to show for it. Wind and solar power combined provide just a fraction of one percent of the energy we use. Oil, gas, coal, and nuclear do all the heavy lifting in our energy economy. That's not going to change anytime soon, no matter how much the Nancy Pelosi Congress demagogues this issue.

Max Schulz is a senior fellow at the Manhattan Institute.



Oil Companies
The Democrats will show their true colors inspite of trying to depict themselves as centrists before the election. They will get punitive with the oil companies and support their own special interest groups in the alternative energy realm. Oil prices will rise with their tactics and with the increase of the minimum wage, inflation will get worse. The economy will shrink along with federal tax revenues.
The voters have a short attention span but they will be able to see two years back and how it is before the election.

A point on the side of the Democrats
Couldn't a 'dedicated fund' give us the hydrogen cars that will eliminate most of the air pollution? Maybe!!!

I am a firm beliver in conservation and alternative energy. I am a beliver that this technology needs to be driven by the free market rather than government handouts of taxpayer wages to political supporters on either side.
My idea would be to let the energy companies lose all government subsidies and let the prices rise to true market levels. Higher energy costs will drive new technology and conservation much faster than government subsidies to political friends. There would be some pain in the short term but we would have energy independence sooner this way.

energy independence
I applaud your free market approach to seeking solutions but, I have to ask what "energy independence" truly means? Fuel cells are fueled with hydrogen cracked from natural gas. The producers of natural gas are the targets of this legislation. One is not independent of the other. Intuitively, I suppose you mean independence of fuel from other nations, but our nation is moving further and further away from this notion by limiting and prohibiting fuel extraction and production in our own country, thus forcing producers to go elsewhere to provide what we demand. The Democrat's position on this issue is schizophrenic.

Mass transfer of energy reliance onto existing alternative technologies will require the burning of billions of barrels of oil, billions of tons of coal, trillions of cubic feet of natural gas in order to realize the effort. One is not independent of the other. In order to mobilize this effort billions of tons of metal ores, billions of tons of silica sand, and billions of barrels of oil (for plastics) will be consumed in constructing the fuel cells, bulldozers, refineries, photovoltaic cells, wind mills, hydro-dams, etc. Again, one is not independent of the other.

What if we were to switch to bio-diesel to run our cars? Fine. How many millions of new acres of arable land will be required to provide the fuel for the 50 million vehicles running every day in the U.S.? We'll have to irrigate those millions of acres -- how will we provide for the extra demand on dwindling aquifers?

Being a firm believer in conservation and alternative energy is great. I simply ask that when you say this, you affirm a conviction that in order to achieve this goal you are also a firm believer in ramping up industrialization and the beneficiation of existing fuel resources within our own borders.

My suggestion and belief is a pragmatic one. All that I have stated above is necessary to achieve our mutual goal. I propose that in the meantime, we (U.S.) should be buying as much oil as we can on the open market, at whatever the cost, and ship it back within our borders and store it in porous rock formations. Re-fill our oil reservoirs.

Lost money in the Gulf of Mexico
Schulz emotionalizes the issue by describing it in terms of "punishing" the oil industry for their profits. Instead the issue has to do with government giveaways.

Oil within territorial waters is the property of the American people, as is every other public property being held in trust for us. And it has been mismanaged.

Sweetheart deals have allowed this oil to be given away to corporate interests-- or even, as has been alleged, to "wildcatters"-- in exchange for payments of zero dollars ($0). The value of the thing being given away is in the billions of dollars.

Naturally it would not occur to anyone that in the remotest stretch of the imagination, this was anything but an inadvertent omission. So all the new Congress is doing is correcting an error.

Look on the bright side, oil guys large and small. We're not asking you to give back the money we so foolishly allowed to be piddled away. You got away with this scam for a number of years. You're ahead of the game.

And if the scam started back during the Clinton years, it's not even about the Republicans. So don't be so touchy. You're getting off scot free.

"Pelosi &co. are moving forward with a punitive program that serves no purpose other than to score points against an unpopular industry."

Actually it sounds very much to me like previous Congresses have passed legislation that's not in the country's best interest. And this is corrective legislation. It's all about the money, and the responsible management of public assets-- not laying blame.

If the Big Oil guys never asked for this legislation, as Schulz maintains, and they don't need the money, they certainly will have no problem giving up an undeserved break. And I'm sure when they look themselves in the mirror in the morning, they'll feel much better about it.

Removing government subsidies
"My idea would be to let the energy companies lose all government subsidies and let the prices rise to true market levels."

I'm with you there, bertly. But if the playing field ever got levelled, cheap, limitless nuclear energy would become very pricey indeed. Especially if industry had to pay for disposal costs and risk insurance.

If we rescinded all depletion allowances it would make quite a nice revenue enhancer-- and would come in handy in these times of routine deficits.

There is much truth in what you say. It would be a stretch for me to argue differently. My biggest concern is politicians steering the process with their sticky fingers.
I guess that buying oil and gas from countries that do not covertly or overtly threaten us, and are good world citizens does not bother me as much as enriching our enemies.

Increasing our fuel supply
If in fact evil Democrats have been "limiting and prohibiting fuel extraction and production in our own country" the solution to our shortage of refinery capacity would be to locate refineries in nearby countries. I'm sure Trinidad wouldn't mind having another refinery on its property. And they might well be willing to look the other way as to bothersome-- ahem!-- environmental concerns.

But a simpler explanation might be that if we had extra capacity we might not have so many price-spiking shortages. It would be harder to maintain retail prices at a desirable level with greater refinery capacity.

The strategy would be much the same as the one just discussed within OPEC, where they considered, then rejected, cutting back crude production in order to keep price levels up.

And if we take the longer view, it is not absolutely necessary that we extract every last drop of crude within US jurisdiction at this moment. It might be useful to keep known reserves in environmentally sensitive areas (ANWR) as strategic reserves-- a rainy day nest egg to be tapped only in times of great need.

Today, as is apparent from our currently abundant supplies and dropping prices, does not qualify as a time of great need. So for the time being, let's just keep our reserves as reserves, and deplete everyone else's oil first.

Good points
The old supply and demand equation will ballance things out if left alone by all politicians.
I recently spoke to a man with considerable contact with our government, good and bad. He calls most politicians Demicans and Republicrats. I did say most, and believe there are people on both sides that want to do the best for America. Their numbers are few in my belief.

If ANWR is as "environmentally sensitive" (a term with no real meaning) as you claim it is, we absolutely should not wait until we are desperate for its oil. If this were the case, oil would be pumped without regard for the environment (as happened in CCCP and post-collapse). ANWR would best be developed during times of plenty, when work can be carefully monitored, measured, and moderated to accomodate the "sensitive environment". How about this: we develop ANWR now, using the most advanced technologies available, and store the oil in the plundered Naval Petroluem Reserves in the lower 48 states. Regardless of when, this is the direction that all this oil will go anyway. Once we get rid of all that nasty, war-causing, global warming-causing oil up there on the North Slope, we can let nature take its course and ANWR would be preserved - forever.

Yes and No
If the omission was inadvertent then the leases should be renegotiated (in fact, I doubt that the leases would even be valid in this case).

If the omission was intentional, perhaps intended to stimulate drilling in the Deep Water Gulf or some other area, then the lease is valid and must stand. At the time the leases were signed drilling in the Deep Water was highly speculative and the successes we see now might very well not have occurred without the additional incentives.

However, it's not clear what leases are involved. My guess, and it's just a guess, is that the omission was inadvertent since the official involved probably wouldn't have had the authority to make such a drastic change to a standard contract (an Oil Lease is largely boilerplate) and there's no obvious paper trail supporting the omission discussed in the article.

In the end, it boils down to whether or not you believe in the Rule of Law. If you sign a valid contract then you live with it even if you later wish you had negotiated a better deal.

Royalty pains
Further to the same well-made points in the article, the US Drill Rig count is at the highest level in the last 20 years; and Chevron's Jack 2 disovery was undertaken at least in part because of the financial and tax incentives for such expensive, high-tech, deepwater drilling.
Let's cut all those things off as quickly as possible.
Jack Rafuse

California Prop 87
Prop 87 set out to do exactly the same thing. It, like this proposal, said that it was not imposing a tax, it would just collect $4 billion from oil companies and dedicate that new income stream to develop alternative fuels. California voters rejected Prop 87, 55% to 45%. Are any of our legislators from California?

Don't look now, but we are importing refined fuel products.

As to leaving ANWR for a rainy day, it will take at least 5 years from the time congress gives permission until the first barrel flows. Also, ANWR's not that environmentally sensitive. Especially not the areas where they are talking about drilling.

As to your talk about draining everyone else's reserves first, once again you make it obvious that you have no concept of the time value of money.

As SH likes to say, get yee to an econ book.

Right on, Mr. Howard
Rule of Law and abiding contracts -- this principle should be integral to our education system and course of business. If a stronger emphasis was placed here, one would be far less likely to enter into an agreement that one cannot uphold.

This must be why those evil capitalists leave all of their oil in the ground,
they know that they will get more for their oil in 100 years, so why pump it now?

why do you insist on lying?
The industry does pay for disposal costs and liability insurance. This has been explained to you several times now. Why shouldn't the oil industry get depletion allowances? Every other industry uses something similar.

Oh yea, you have declared that everything you don't understand is a conspiracy to impoverish you.

why do you insist on lying?
The industry does pay for disposal costs and liability insurance. This has been explained to you several times now. Why shouldn't the oil industry get depletion allowances? Every other industry uses something similar.

Oh yea, you have declared that everything you don't understand is a conspiracy to impoverish you.

why pick on the oil industry for the removal of tax breaks?

sweetheart deals
Even if you could prove that this was a sweetheart deal, you still have to deal with the fact that the govt signed a contract with the oil companies.

Are you honestly taking the position that the govt has no obligation to honor the contracts it signs?
We already know that you have taken the position that govt must honor contracts that it hasn't signed.

Why do you take such a hypocritical position?

Even if the omission was inadvertent, the contract would still be enforceable.
The only way it wouldn't be enforceable would be if either signing party was not legally entitled to sign. IE, without proper power of attorney, I could not sign a contract that obligated you to anything.

If the army of govt lawyers who go over these contracts before they were signed, did not pick up the omission, then that's the govts problem.

If the mistake were in the govts favor, do you think roy or any of these Democrats would be so eager to force a renegotiation?

More taxes on oil to come!
In addition to the Federal government collecting royalties on leases for Federal onshore and offshre lands that produce petroleum, the government collects gasoline taxes on each gallon, as well as income taxes on any profits that are left. Any dollar that is not paid to the government as a royalty is a potential dollar of profit, which is fully taxed as income at the applicable rate.

Democrats also want to reinstate the Superfund tax on the oil and chemical industries, which would support environmental cleanup by EPA, and allow Congress to divert funds currently supporting the Superfund into other projects. When the Superfund was first established in 1980, it might have made sense to build up the fund directly through a special tax because it takes years to collect reimbursements from the specific companies who owned a contaminated site. However, after 26 years, those companies have mostly been identified and sued and the monies collected, so a lot of money is already in the pipeline to pay for cleanup, coming from companies who actually profited in some way from the operations that created the contamination.

Simultaneously with the Superfund Act, the Resource Conservation and Resovery Act (RCRA) regulations went into effect, which prevented the negligent management of hazardous waste that had created Superfund sites in the first case. Companies have been paying the costs of proper waste management ever since, including heavy fines if they lapse, plus the costs of cleanup if their lapse leads to new contamination of the environment.

The argument of Nancy Pelosi that the Superfund tax needs to be reinstated to "make the polluter pay" is bogus. The companies who actually polluted in the past have paid and are still paying for the costs of cleanup. In the meantime, most oil and chemical companies have been largely compliant with RCRA, the Clean Water Act, and the Underground Storage Tank Act, so they are NOT POLLUTERS! Placing a tax on them is (1) a lie and (2) unfair because it punishes those who obey the laws for the negligence of those who have now (after 26 years of regulation) are intentionally disobedient and defiant.

Additionally, many of the Superfund sites were created by organizations that were NOT part of the oil and chemical industries. All airports (mostly public entities) have extensive contamination from leaking fuel tanks and aircraft maintenance chemicals. Cities with municipal landfills have leaking household and industrial chemicals that pollute groundwater. Many of the largest contamination sites in the country are on facilities owned by the Departments of Defense and Energy. Those government entities are just as much "polluters" as the chemical and oil industries, but they never were taxed to support Superfund. Any state, local or Federal government that calls for taxes on business to pay for cleanup of the environment is hypocritically diverting attention from its own past mismanagement of petroleum and hazardous waste.

not just them
All governmental taxpayer funded incentives should be lifted from the alternative energy and medical/drug industry. Total free market approach.

First, shoot all the reindeer...
It's probably not even possible to have a conversation with someone who thinks "environmentally sensitive" is a meaningless term, but I'll try.

You're positing that we should use this oil up when we don't need it-- because if we wait until we do need it, we might do harm to an area you do not think is environmentally sensitive. The argument is, delicately put, rationally challenged.

Instead we take the oil from where it has safely sat for some millions of years and put it somewhere else, at tremendous expense to... to... provide jobs for oil companies that don't have enough to do? So that it can be secured against non-US Navy users? Spell that part out for us, please.

The technologies available to us tomorrow will certainly be superior to those in use today. And the return on effort will be higher, as the oil price will, in time of great need, have skyrocketed. Methinks you are just hurriedly arguing for argument's sake.

tax breaks not intended for Big Oil
So if the tax breaks were intended to benefit Little Oil and not Big Oil, what's the harm in rolling back the tax breaks for Big Oil? Had the original tax breaks been worded so that only Little Oil had gotten the breaks in the first place, this wouldn't have been an issue.

Not adding up yet
The precise spot ANWR wants to drill is already in use, by reindeer herds in seasonal calving. There might be a time of great need when we would want to shoulder them aside-- but that time has not yet come. Right now all we have in an opportunity for some to profit.

Others are already in the business of selling their oil, already in production. We are only buying what they offer for sale. This has zip to do with "the time value of money".

You don't yet have an actual argument. Work on it a little longer.

A time and a place for everything
Your comment calls for a degree of speculation. If you take a close look at the issue of royalty relief you'll find it is more of a giveaway-- it's an incentive to do something the oil and gas people would be doing anyway.

Here, for instance, they've obtained the right to drill $65 billion worth of oil and gas at a royalty rate of $0. Normally it would have cost them $7 billion.

The key to the puzzle is here:

"Administration officials say that the benefits are dictated by laws and regulations that date back to 1996, when energy prices were relatively low and Congress wanted to encourage more exploration and drilling in the high-cost, high-risk deep waters of the Gulf of Mexico."

The program was conceived during a time when the industry needed incentives to drill-- in the minds of some, at least. And when supplies were abundant and profits low-- which they were, memorably, during those years of cheap oil.

Times have changed. Now those same companies are making a killing, and need no incentives other than an oil price that has tripled since the program has been in operation.

Time to deep six it.

Why save anything?
Capitalists I know would all elect to pump out every last drop now, retaining the profit for themselves, rather than leave any for their grandchildren.

But clearer heads might say we should save a bit for the folks up ahead in the 22nd century as well. Even if they're driving around in proton drive buggies then, they will certainly have uses for the oil in plastics manufacture and purposes now undreamed of. And by then it should cost gazillions per liter. So it will represent profit and opportunity for someone.

You do have a remarkable skill...
All environments are sensitive and one ecosystem is not more or less sensistive than another, therefore the term is meaningless except in agenda-driven dialogue.

You do not know jack about the oil industry, natural resource management, nor the caribou (not "reindeer" as you refer). There are no reindeer in ANWR -- only on the Seward Peninsula, Siberia and Finland -- and a few farms elsewhere.

You wanted to wait until we are in dire straits to extract oil from "environmentally sensitive" areas, and I am telling you that when it comes to that day, there will be no regard to the sensitivity of the environment. Please dispute this.

Caribou continue to calve and grow by leaps and bounds on the North Slope where oil has been explored for and pumped for 4 decades now. Why is the Porcupine herd, which occasionally calves on the coastal plain within ANWR, any different?

Methinks you have the remarkable ability to speak through multiple orifices.

Can't help notice that Exxon is a partner?
Why should exxon get a tax break of over 2 billion? the company made over 100 billion profit last year.

Times have changed
But I haven't aken any such position. I believe the issue revolves around the granting of royalty relief to new concession holders-- not renegotiating with old ones over oil long since pumped and sold.

And the program, designed to stimulate exploration when oil was going for $20 a barrel and the oil producers were running in the red, is just not appropriate when considering new leases in the current price environment.

The program has to go. It may have been a good idea at one time. It is decidedly not a good idea today.

It's clear
that contracts mean nothing to you. "Times have changed" does not entitle one to break a contract. Let me clue in on a little fact -- times always change. That's why we have contracts, to set compacts and remedies in consideration of change. I don't expect you to understand this principle. Have you ever run a business?

You're off by about $60,000,000,000 mate.
Look up:

for financial statements. There is a link there for annual data, too.

this is a more reasonable approach. Will you defend oil and gas contracts against windfall profits taxes assessed retro-actively?

I'm not so sure
I'm not sure that I agree. Let me elaborate a bit about what I meant by an "inadvertent omission". I my view, to claim that the royalty payment was an inadvertent omission the government would have to demonstrate that all previous versions of the specific contract and related correspondence contemplated a royalty payment. The government (or any party to a contract) can't just say "oops, our bad, here are the real terms that just happen to be in our favor", instead they have to produce evidence that all parties knew about and concurred with the royalty payment in previous versions of the contract. They would, of course, still have to swear in Federal Court to overwhelming incompetence but that shouldn't be hard for the government to prove.

I would liken the case to one where you sell your house. All offers and counter-offers establish a value around $100,000 and you finally agree a price of $100,000. However, the final contract that you sign has a serious typographical error listing the sales price as $10. You would understandably be annoyed when I showed up at closing with a crisp $10 bill rather than your $100k in small unmarked bills. Assuming that you kept your previous paperwork you could easily establish the intent of the contract which should over-ride the final document.

On the other hand, the article talks about more than 1,000 leases that "inadvertently" omitted the royalty clause. I have to revise my prior opinion - I admit that I inadvertently overlooked the number of leases. I think any court would rule that the omission was either intentional or so vast as to be intentional. You can get by with 1 mistake, 1000 mistakes is a policy and The Rule of Law would dictate that the leases stand.

So I guess I agree by disagreeing...

Alright Democrats, Let's See If I Have It Right!
To switch from gasoline cars to hydrogen cars, a large volume of hydrogen must be produced. Natural gas, coal, oil, wood or any other combustible material can be burned to boil water. Boiled water is used to turn large steam turbines that generate mechanical energy. Large amounts of mechanical energy are required to make hydrogen from water.

The hydrogen is either loaded into reuseable containers and transported by train or truck, or transported along pipelines to distribution outlets.

Hydrogen cars are powered by electric motors. The electric motors can get electricity from either lithium batteries or hydrogen fuel cells. Hydrogen fuel cells have been in use for years.

How many reindeer were shot for the Alaskan Pipeline?
How many reindeer were shot for the Alaskan Pipeline and the oil fields at its north end?

It amazes me how past environmentally friendly development is not used when considering future development, but only the worst case scenarios. It leads to a credibility gap among people who can think for themselves.

Whoa, good buddy
No one is saying anything about old contracts other than you. From the start I offered that this was not about old contracts. They can keep that money. This is about going forward.

Elsewhere I told someone else saying the same thing "But I haven't taken any such position. I believe the issue revolves around the granting of royalty relief to new concession holders-- not renegotiating with old ones over oil long since pumped and sold."

Now please take a moment to pause, and let this new information filter down into your consciousness. I don't want you coming back tomorrow just to tell me I'm flouting the law of contracts. Okay?

And yes, I've run the business of others as well as having run my own business. I began by understanding the law of contracts. It was the basis of everything I did.

My "more reasonable approach"
You'll note that this was my original position. Didin't I say "Look on the bright side, oil guys large and small. We're not asking you to give back the money we so foolishly allowed to be piddled away. You got away with this scam for a number of years. You're ahead of the game."?

Now let me address your question with another question. Has there been any talk about assessing windfall profits taxes retroactively?

Please note that requiring payment of royalties for taking resources from public lands is not a "windfall profits tax". It's a royalty. A payment in exchange for a thing of value.

Filling in the credibility gap
You sound very lawyerly, asking a question to which you already know the answer. No, they don't shoot reindeer. Nor do they hang them, stab them or bludgeon them.

What they do is displace them. North Slope oil exploration has been going on for quite some time, and the results have been demonstrable. So far the reindeer have always had someplace else to go. But it is apparent that ANWR is just the next step in developing the entire North Slope, and that the reindeer are to be sidelined each time until there is no way for them to reach the Beaufort Sea. At every new step, the same people will be saying "oh, we just want this extra little inch". But the oil goes all the way to the Yukon.

And note that the coastal regions are where they put on summer weight, so they can get across the extreme winters without starving. They need this territory. Far more, in fact, than we need Arctic oil during a time when supplies of foreign oil are abundant.

Here's a map of oil development to date:

I think the more useful approach would be to make of this a strategic oil reserve. Who knows? There may be a time when your grandchild, up there in 2050, needs that oil more than you and I do today.

In your other comment, I'm not certain how it is that people who think for themselves can have a credibility gap. Aren't we supposed to fill those things with knowledge?

Rushing to gulp down the oil
"All environments are sensitive and one ecosystem is not more or less sensistive than another, therefore the term is meaningless except in agenda-driven dialogue."

Absolutely not the case. Damaged environments are very durable. There exists a weed regime, where they hardiest species compete and native or relict species are shoved aside. When this happens there has invariably been environmental degradation. Weedy, disturbed environments have totally different characteristics than do pristine, delicate environments.

An ecosystem is considered to be "frail" when a small amount of input gives rise to a great change in the web of life. Drop a drop of iodine into an aquarium and you can see the effect an input too small to even see (once dispersed) can give rise to an extreme result. So the rule in new development ventures should certainly be to study first, then to commit on the ground.

I will readily admit I have had no personal experience in the oil business-- just as you have obviously had none in environmental concerns. So perhaps we can educate one another.

Reindeer is an Old World term, and inaccurately used here. They are the same species as the American caribou-- just as a European would consider our moose to be an "elk", or our American buffalo to be "bison". Sorry for the confusion.

I will gladly dispute you when it comes to your imaginative speculation about development in the future. My assumption would first be that new technology developed in the future will allow us to reduce our footprint on the land-- just as laparoscopic surgery reduces the surgeon's "footprint" on his patient's body.

Secondly I would dispute your scenario that in our time of need development would be rushed. It's not like we're going to wake up one morning and say "Omigod! We've got to get that oil right now!" Instead, availability will become so scarce that oil in the world of fifty years hence will become so rare and costly that it will be used for specialty applications only.

And in those circumstances the Arctic Reserve will be more likely to be opened slowly, like a bottle of fine old sherry.

On the contrary it is right now where the pressure to develop immediately is being "rushed". In our haste we are being told to forget every concern except the pressing need to extract more of our remaining oil. It makes good sense to examine the motives of those shouting the loudest for haste-- as they themselves stand to gain greatly from such a decision.

"Caribou continue to calve and grow by leaps and bounds on the North Slope where oil has been explored for and pumped for 4 decades now. Why is the Porcupine herd, which occasionally calves on the coastal plain within ANWR, any different?"

Let me get back to you on that. What you're asking for is my considered opinion, and the comment is worth addressing thoughtfully.

I do value your objections. I think your points are well worth exploring. But that is not the same as saying I agree with you. Maybe we could continue this dialog with less implicit tension. I will agree, for example, not to discuss your "orifices".

roy loves to display his ignorance
So the reindeer are using the few dozen acres that they need for the drilling rigs, and no other?

Idiots like you made the same claims about Prudhoe bay. There are more reindeer there now, then before the drilling started.

You made the claim that oil left in the ground becomes more valueable, and that therefore we should never drill for it.
I pointed out, that people with actual money on the line (instead of idiot conspiracy theory) are doing the exact opposite of what you claim to be smart policy.

As to the time value of money, you once again demonstrate that you have absolutely no idea what it is about.

Roy, is there no subject on earth, on which you are not totally clueless?

apparently roy that actually reading a post is not necessary
The claim was that that the term is meaningless because it is not defined. Each person puts there own interpretation upon the phrase.

I'm sure that you are absolutely convinced that your interpretation is the only valid one. It goes with the rest of your totalitarian world view.

why stop there
roy doesn't know jack about anything. As he takes great pride in proving, over and over again.

because of the time value of money
look it up roy

roy would rather starve himself, so that his children can also starve
The economy that is being built with that oil, benefits your children.

I love your ignorant jab regarding profit.

As always, what irks roy more than anything else, is that other people earn money, and he can't.

What about other industries?
Should tax breaks be removed from auto, electronics, etc., industries?
What about the tax breaks that you and I, as individuals use?

that's the way to encourage the oil company
offer them incentives. Then when it's time to pay up, remove the incentives.

I love the way roy's mind work. Heads I win, tails I win even more.

Good Question
I feel that less government is better. Basic needs must be met and provided by the government as listed in the constitution. We have somehow gotten away from the government providing basic needs to having it provide most needs for many.
I would like to see tax rates lowered on everybody across the board and have some kind of a consumption tax to meet the governments reduced needs for spending.
The federal government has gotten too large and can not meet the basic needs of the people in an effective way. They do alot of things and not many very well. I feel that state and local government is more responsive to their people. Tax rates and government service levels should be made more at a local or state level. People could choose where to live based on their needs from government.

Considering the needs of all parties...
...that is, the oil companies, the caribou and our grandchildren, let me offer this approach:

I've had the chance to look at this well informed, balanced overview of North Slope oil development as it impacts caribou herds. It appears that the needs of both communities-- the oil companies and the caribou-- can be balanced if a degree of care is taken to represent the needs of both. However in the absence of such a balance there are grave concerns.

Therefore i would suggest this. Let's revisit the subject two years hence, when Bog Oil is no lomger in charge of the federal government. I'm certain any new administration will be properly attentive to the needs of our fleet of SUV drivers, and will also pay some heed to the needs of the Procupine Herd.

Prior to that time, let's say that many Americans feel no great degree of confidence that all needs will be represented in the details of granting development rights.

My scholarly reference:

I do like the notion, as espoused in the sponsored website anwr,org, that oil royalties from such development will go into a dedicated energy trust fund. And I suspect in time the amount being bid for such leases will greatly exceed the current $7 billion.

As always, though, the devil is in the details. Let's see how things play out, and address the issue again up there in the changed world of 2011.

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