economics

Wed, 2012-12-19 10:16Farron Cousins
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Group Sues Obama Administration Over Offshore Oil And Gas Leasing Program

A lawsuit has been filed against the Obama administration over the economic claims that the Bureau of Ocean Energy Management (BOEM) made in their 5-year plan to open up new areas around the United States to offshore oil and gas leasing.  The suit, filed by the Center for Sustainable Economy (CSE), says that the administration not only grossly exaggerated the economic benefits of increased energy exploration, but also that they failed to take all costs into account.

BOEM’s plan would lease a total of 15 new areas for exploration, including areas within the Gulf of Mexico, the Cook Inlet, Alaskan waters, and the Beaufort Sea.  But rather than focusing strictly on the environmental impact of the projects, CSE took an approach that tends to have better results in Washington – Economics.

The economic argument is very powerful, as CSE explains that the increased oil and gas exploration will cost the United States more than it will gain.  And according to federal laws (specifically Section 18 of the Outer Continental Shelf Lands Act), in order to grant permission for projects such as the leasing program, there must be a net public gain. 

For example, the best estimates for the amount of money to be made from oil and gas in these areas ranges from $1 to $2 billion per year.  However, these areas currently provide an economic boost of as much as $70 billion a year from fishing, tourism, and other activities, all of which could be decimated in the event of an oil spill.

Read more: Group Sues Obama Administration Over Offshore Oil And Gas Leasing Program
Tue, 2012-07-03 15:51Ben Jervey
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Bloomberg Stunner: How Chesapeake Energy Paid Less Than a 1% Tax Rate On $5.5 Billion in Profits

Chesapeake Energy, a company that is no stranger to financial scandals, has found itself on the front page of the financial papers again. This time, the subject is taxes. Or how Chesapeake barely pays them.  

Over its 23-year history, Chesapeake Energy, the second largest producer of natural gas in the U.S., and the company described by its founder and CEO Aubrey McClendon as “the biggest frackers in the world,” has earned roughly $5.5 billion in pre-tax profits. To date, the company has paid $53 million in taxes. That’s an effective tax rate of under 1 percent - a massive taxpayer subsidy.

The corporate income tax rate in the U.S. is 35 percent. 

The Bloomberg article that exposed these stunning figures is quick to note that this is far less than the 12 percent rate that GE paid in 2010 that caused such public outrage, and even a tiny percentage of the 18 percent effective rate that Google had to answer for.

So how does Chesapeake pull this off? Mostly, it’s due to a rule written in 1916 that allows oil and gas producers to, according to Bloomberg, “postpone income taxes in recognition of the inherent risk of drilling wells that may turn out to be dry.

The break may be outdated for companies such as Chesapeake, which, thanks to advances in technology, struck oil or gas in 99.6 percent of its wells last year.“ When the policy was written, drillers struck “dry wells” roughly 80 percent of the time.

Read more: Bloomberg Stunner: How Chesapeake Energy Paid Less Than a 1% Tax Rate On $5.5 Billion in Profits
Wed, 2012-03-07 20:03Farron Cousins
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Republican Claims About Gas Prices Demonstrate Lack Of Knowledge About “Free Market”

As the national average for gas prices pushes closer and closer towards $4 a gallon, Republicans have wasted no time in attempting to convince the public that President Obama and his “hostility” towards the oil industry is the reason we’re feeling the squeeze at the pump.

Fox News recently leant space on their website to let Republican National Committee Chairman Reince Priebus feed debunked talking points to Fox readers in an error-filled op-ed:

Read more: Republican Claims About Gas Prices Demonstrate Lack Of Knowledge About “Free Market”
Wed, 2012-01-11 07:47Brendan DeMelle
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Shale Gas Bubble: Bloomberg News Confirms NY Times Finding That Fracking Boom Is a Bust

Image credit: Shutterstock/Complot

As news outlets across America take a more rigorous look at shale gas and fracking issues, it’s encouraging to see how the media coverage is finally starting to cut through the oil industry’s misleading rhetoric to explore the realities of the myth of gas as a viable ‘bridge fuel.’

The gas industry’s loud-mouthed front group, Energy In Depth, repeatedly attacked The New York Times for their excellent Drilling Down series last year, focusing particular ire on journalist Ian Urbina. EID’s penchant for attacking the messenger shows no sign of letting up in 2012, but as other news outlets look more closely, they are not only confirming what the NY Times series found, but also adding additional evidence of the many problems with shale gas development.

The latest effort from Bloomberg News, “Shale Bubble Inflates on Near-Record Prices,” illustrates how the media’s grasp of the unconventional energy industry landscape has evolved and improved in recent months. 

This excellent reporting by Bloomberg confirms many of the facts that The New York Times reported last summer in “Insiders Sound an Alarm Amid a Natural Gas Rush” and “Behind Veneer, Doubt on Future of Natural Gas.”

While many major outlets have covered the myriad environmental and public health risks of fracking and related drilling practices, the NY Times and now Bloomberg have both exposed the fact that the economics of risky and expensive unconventional gas recovery simply don’t match up with industry geologists’ claims of a “nearly limitless” supply.

Investors are increasingly taking notice of the unpredictable nature of this industry and questioning its risky behavior. Is there really as much gas down there as the industry claims? If so, how much is economically recoverable?

Read more: Shale Gas Bubble: Bloomberg News Confirms NY Times Finding That Fracking Boom Is a Bust
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