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President Trump: This Is How To Bring Back 1 Million Energy Jobs

Dear President-Elect Trump,

There’s work to be done. And I know you’re up for a challenge. In fact, I’m now sure of it. So let me lay out a policy position that I am truly hoping you will adopt as your own.

I’m talking about natural gas as a transportation fuel: cheap, clean, abundant natural gas. And I’m talking about U.S. energy independence, balanced budgets, jobs, trade and the environment.

We use natural gas for power generation and as a heating fuel but that’s an old story for a new reality. Fracking has unlocked a phenomenal amount of gas in the last decade. Our onshore wells are rivaling the reserves of the deep offshore giants. And we’re getting much more for much less these days. North America also has over 2 ½ million miles of pipeline with more coming on line plus distribution capabilities in every urban center in America and Canada. All that’s missing is an appetite for it.

Shale gas has been targeted by drillers for decades, but the big volumes that first started coming out of the Barnett then the Haynesville, Marcellus and some newcomers are now about a decade old. That’s 10 years! Ten years since Aubrey McClendon and Boone Pickens called for a natural gas economy and ten years with no net effect other than a well deserved break for consumers, a few export licenses and an uptick in power generation usage (though that is now being challenged in the courts).

Other than that we’ve blown it. We’ve damned ourselves to the status quo.

That’s why this is so beautiful. Is all you have to do is pick up the ball that has been dropped at your feet by the oil and gas industry. Use that bully pulpit you just won and you’ll be regarded as one of the best presidents ever, the one who truly did deliver jobs and a cleaner environment. All segments of America will benefit, from our labor force that is desperately in need of work to our progressives and their carbon concerns.

Here’s how you do it.

Jobs

There’s a lot of low hanging fruit here. Hell, you could scoop up energy jobs in baskets. And these aren’t minimum wage hospitality style jobs. A motivated frac hand or drilling supervisor without a college degree will make over $100,000 a year and will own a new pick up with a bass boat and a Harley in the garage. You’ll also be pumping money into distressed rural communities where $100,000 goes a long way. And those are taxable dollars. That translates into deficit reduction; much better than paying out benefit claims which move your budget in the opposite direction.

And these jobs will be purple. They will be in all states, red and blue. States with and without drilling activity will both benefit and see a resurgence in manufacturing and infrastructure deployment.

The upstream extraction business will get a much needed shot in the arm. Our domestic oil and gas industry has trimmed employment numbers by 100,000 over the last 18 months. The industry is bleeding. Moving towards energy independence means you will be keeping and creating jobs here. You will be instilling much needed stability in pricing which will help dampen the boom and bust nature of the business.

Then there’s the mid-stream business. Our network of pipelines is good but with methane emission concerns it will need to get better. And it will need to be expanded. The steel needed will employ thousands and those needs will continue. It won’t be a one shot deal. Multimillion dollar compressor plants and stripping stations will be required. The high BTU sources for large multibillion dollar cracking plants will stabilize and get builders (like Shell) to move ahead with long postponed plans that will prove inconceivably good for employment.

The construction industry will boom, particularly road builders who have lived too long off withering omnibus and stimulus spending plans. Nearly every trade union will benefit as our existing network of pipelines is tapped into for transportation. The size and scope of this infrastructure expansion will rival the Eisenhower administration’s interstate highway system.

Fleet conversions to bi-fuel capabilities, a relatively cheap process, will require millions of man hours. Diesel mechanics make good money and will be in high demand. So will other trades as natural gas pumping and distribution kiosks are installed at existing and newly constructed service stations.

You will be providing salvation. Skilled American labor is under attack. And it’s not just coming from foreign shores. Its right here and its home grown. It’s called technology. Tim Cook, Mark Zuckerberg and the Google guys have taken on big office construction projects, but otherwise haven’t given much back to our blue collar base—nothing sustaining anyways.

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Unlike our wildcatters, auto titans and steel magnates, the wage earning jobs created by the technocrats either go overseas or are largely nonexistent. Robotics technology now being developed by Google has creepy-looking robots doing the work of $22/hour warehouse laborers. This is an unstoppable trend, and there are strong arguments on both sides, but the undeniable truth is that we’re witnessing the death of American labor.

Our non-existent energy policy is allowing great jobs to exist overseas through our reliance on foreign oil. The massive transfer of wealth we used to hear about is also a massive transfer of jobs. With a shift in policy, the domestic oil and gas industry could get these jobs back to where we want them—in America.

The challenge for you is that we’re getting closer and closer to being a society of the have and have-nots. Surely you see this. So under your stewardship you’re going to need to create every job you can or you will never be able to achieve a balanced budget. Ever.

The Environment

Running the gauntlet of environmentalists will be daunting. Theirs is an inherently angry crowd and it doesn’t help that their defacto leaders don’t bother with nuisances like the truth. Disinformation and fear mongering are their hallmarks. Unfortunately the oil and gas industry is such an easy target. We’re not good at defending and explaining ourselves. But we are good at taking a beating.

I for one think it’s time to fight back so let’s start with the easy stuff. Let’s start with Josh Fox and his Oscar nominated film Gasland. Instead of portraying facts as facts, Fox used fiction as facts not once but twice. Sadly, our media never did much of a job reporting on the fact that the now famous water spigot spewing methane is a natural occurrence in Dimock, Pennsylvania. It was never the result of fracing. Naturally occurring biogenic methane is combustible and resides at the surface in the Dimock area. Everyone there knows it. You can break a hole in pond ice and light the trapped gas on fire. And you could do this long before drilling showed up.

When both the EPA and Pennsylvania’s Department of Environmental Protection reported this fact, Fox simply went out and did it again in Gasland 2. This time he filmed a man igniting water spilling out of a garden hose in Texas. Turns out the hose was injected with methane so Josh could get his shot.

This does not bode well for Josh’s honesty or competence, or both. Should you still have your doubts, consider that Colonel Edwin Drake, the discoverer of oil in Titusville, Pennsylvania, drilled his discovery well to a depth of 69’. In this same area, most water wells are drilled into the Mountain Sand at a depth of 200’. That means you have to drill through oil and gas to get to water. Too bad the simple unbiased truth is so hard to come by.

Then there’s the Hollywood crowd. Leonardo DiCaprio is given an open mic at Davos because, well, he’s a celebrity living in a celebrity crazed culture. I think we can all appreciate his honest concerns but when he calls the oil and gas executives in the crowd “greedy’ that opens him up to the same criticism. Mr. DiCaprio is well known for racing around the globe on private jets—essentially dumping carbon onto the rooftops of the less fortunate. He also appears to be a big fan of leasing diesel guzzling mega yachts. Good thing these sea going behemoths run on solar power (Haha). These are the things nobody sees. What they do see is Mr. DiCaprio in his very public Prius. There is another “P” word for this. Phony.

As to the greedy comment, the huge sucking sound you hear on a film set are the top line budget dollars being vacuumed into Mr. DiCaprio’s well-lined pockets. About one quarter of any given film crew, particularly the production assistants and interns, do not make a living wage.

Laurie David, trustee of NRDC, producer of An Inconvenient Truth, and ex wife of Seinfeld co-creator Larry David has an interesting take on the well-heeled environmentalist community. When questioned about commuting on private jets between Los Angeles and her 25,000 square foot home on Martha’s Vineyard her response is “I’m not perfect… You cannot hold people to a standard they cannot meet.” Each of those flights consumes about 1,500 gallons of fuel. An average American consumes about 800 gallons of gas in a year. Again, we have another phony problem.

Then there’s Robert Kennedy and Vice President Al Gore and their inconvenient truths and the rest of the “do as I say and not as I do” crowd at the forefront of the environmental movement. This is the crowd that is now busying themselves with ways to punish those that don’t share their beliefs. That’s right, agree with them or you will be punished.

It’s too bad that hardened activism has overtaken simple though effective conservation. Why not insulate the attic, save up for new windows and turn off running water? Simple and inexpensive conservation would yield results overnight. But good luck getting Mr. DiCaprio or Michael Douglas to headline a fundraiser with the rallying theme of 32 psi tire pressure. (President Obama once mentioned this but was roundly and sadly criticized.).

The Sierra Club could have helped at one time but not anymore. They gladly accepted $27 million in donations from Chesapeake Energy for work on replacing coal with natural gas, but the new and outraged administration there has put the brakes on. That’s too bad because the Sierra Club could have helped move us much more quickly into a cleaner environment. Instead they have chosen gridlock. Given their new stance maybe they’ll give all those millions of carbon dollars back to Chesapeake. It would demonstrate the kind of ethical spine that their movement lacks. Plus, Chesapeake could really use the money.

In their passion over providence, our activists blindly pick winners and losers. Electric cars are winners. Natural gas is a loser. But what of the nickel smelting required to manufacture the NiCd, NiHD and Li-ion batteries used in electric cars? Nickel smelting’s byproducts are acid rain with heavy concentrations of lead and arsenic. These byproducts are vented into the atmosphere through smokestacks.

Look up Sudbury, Canada’s Superstack. It’s the tallest stack in the Western Hemisphere. It was built to 1,250 feet so that the toxins that once deforested Sudbury are now being released higher up in the atmosphere. So Sudbury survives but so much for its downwind neighbors. The theory here was the old adage, “dilution is the solution for pollution”. Not so anymore.

Lead acid batteries are also showing up in plug-ins and hybrids and with them comes extraordinary risks of soluble lead and sulfuric acid entering our waste stream (i.e., the environment). Lithium does not occur in a pure or natural form on earth so it is mined from open pits and underground and processed with enormous amounts of water, CO2 and chemical baths. Nevada and Wyoming have lithium deposits, but most of it is found and processed in Bolivia and other parts of South America where there is little environmental oversight. Just like the mining and processing phase, the manufacturing phase of Li-ion batteries is also energy intensive and entirely reliant on fossil fuels. And then you throw in some nickel and cobalt and we’re back to another bad choice.

Coal also accounts for about one third of the electric power generation in the U.S., thus the “coal burner” moniker used in regard to electric cars. Plug in hybrids and electric cars are recharged though an aging electrical grid that is notorious for supply disruptions and power loss. Transmission lines are subject to conductivity and resistance factors that create inefficiencies. That means much more coal must be burned to overcome the power loss at the delivery point.

Then there’s the issue of disposing NiCad, NiMH and Li-ion batteries. And please forgive my bumptiousness, but as Mr. Trump is fond of saying, “believe me”, this is going to be a problem.

Nevertheless, their appeal is indisputable. In the old days, our polite society reserved the best parking spaces for expectant mothers. Nowadays, with a more progressive mindset, the best spots are reserved for hybrids.

My suggestion would be to cut out the middleman and avoid some of the public expense of repairing, upgrading and further expanding our electric grid. Moving directly into natural gas vehicles makes an enormous amount of sense. You don’t need a hybrid’s dual fuel set up and you will be laying down a much less carbon intensive footprint. But plug-in hybrids and electric cars are more popular possibly because buyers don’t fully understand this compromised power source and its inefficiencies related to the grid.

This brings us back to messaging.

You will need to separate the wheat from the chaff. Some of the arguments presented by our environmentalists are fool’s gold at best. Wind and solar will not move trains, planes, trucks and ships. Only fossil fuels can. Maybe someday fusion and fission will but not any time soon. Hydrogen fuel cells are coming but hydrogen is manufactured by methane, as is electricity, and it is expensive. Water vapor emissions created by hydrogen interacting with oxygen is the Holy Grail, but the upstream fact is that natural gas will be required to produce the hydrogen. So where exactly does this leave us?

So why not pick the right fossil fuel until we can move completely into renewables? The shale phenomenon is only a decade old, with most of the advances in engineering—and in environmental stewardship— coming in the last few years. he momentum for addressing and eliminating environmentally contentious issues is there and will continue.

Also, and because we are a debtor nation on a trajectory of much more debt, there is a strong argument that the fuel of the future should not, or more accurately, cannot be subsidized.

So let’s get after natural gas and work on other fuels along the way. Hopefully our best minds will find acceptable alternatives but who’s to say that their efforts won’t someday be blocked by the same real and unreal concerns now in the way of natural gas deployment?

Three Mile Island, Chernobyl and Fukushima may not be on the next generations’ mind, but some well-funded environmental group will dig it up and kill deployment of the next super fuel through adjudicated delays and due process. In this likely and lengthy scenario, better to be burning clean rather than dirty sources and better to be employing fellow Americans over outsourcing our energy jobs overseas.

If environmentalists want to start a serious discussion they need to pick serious representatives. The current class is not up to the task. They’re mostly folly and phonies. The solution needs to be science based with the ultimate goal of being as green and economic as possible. The indignance and venom that we see so much of is all theatrics and no traction. Kind of like the presidential debates.

The Plan

Start with the light duty diesel fleets that return home nightly and incentivize (a) the building of on-site natural gas filling pads and (b) fleet conversions to natural gas through tax credits. This is not a proposal for loan guarantees, subsidies, grants or any other form of corporate welfare as are our current ethanol, wind, solar and other renewable programs. These are one time credits that expire once used. The tax breaks generated will create tens of thousands of family sustaining jobs. Corporate welfare will not be needed.

Your first line targets would be the package movers, mail carriers, municipal fleets and short haulers. Low pressure line fueling is cheap to install. And it’s likely that natural gas distribution is already on site so the cost will not be great.

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Move then to the interstates. Pick the trade routes between urban hubs. Pull in the truck stops like Love’s, Pilot, TravelCenters of America and others. Pull in the pipelines. Incentivize them in the same manner to begin the roll out of a national network of natural gas refueling options for over-the-road truckers. As you connect the dots the acceptance will become greater.

Natural gas versus diesel has pluses and minuses in terms of fuel efficiency and operating costs but for long haul truckers natural gas comes out ahead. Fleets will move into your orbit when you couple conversions with incentives. You’ll even capture the independently minded independents once they see you pushing America-made products and American jobs.

The final push will be the conversion of automobiles. This one will be tougher. Electric hybrids are already far ahead in sales and acceptance. Honda even just discontinued its Honda Civic NGV, considered to be the greenest of the green alternative fuel cars. Low gasoline prices were the final straw. The sales just weren’t there. It’s too bad, because just like its electric counterparts, it could be filled up at home. But unlike them, the dismantling of the car comes at no cost to the environment. You just crush it, melt it and reshape it. There is only one small battery to worry about. Not a bank of them.

With one time incentives, we could get some movement here. Americans love their cars but like a good deal better. Let’s get natural gas kiosks at existing stations in place for the trucking fleets and then begin the automotive push. In due time it will catch on. Back in the 70’s, if you wanted to fill up your Mercedes 300 D (diesel)—the one with the glow plugs—you had to run up to the highway. Now you only need to turn into the corner station.

One big macro-sized push will get the ball rolling. Once it picks up a little speed you should jump out of the way. Trust me; the industry will get this done, particularly if you remove the graceless, bloated hand of government.

The Roll Out

You’re going to need a strong CEO for this task. Government likes to call them “Czars”. So you’re going to need a Czar. When I began this article I was thinking of Aubrey McClendon. He was arguably the single largest contributor to America’s energy resurgence. He was a force of nature, but then on March 2nd we lost him. Incredibly, grievously, he’s no longer with us.

He would have gotten this done for you. Now your task is to find someone who can do for natural gas transportation what Aubrey did for natural gas drilling and production. I hear Mark Papa, EOG’s retired CEO and founder is looking for something to do. Maybe give him a call. Or reach out to your buddy Harold Hamm or pull Rich Kinder out of retirement. Any of these guys could get it done.

What you should not do is hand this over to the DOE. That would be a mistake. You will be inheriting a workforce of 13,800 well-meaning individuals who collect, scrub and publish data. That’s fantastic but outside of that and awarding contracts for renewable research they have no discernible mandate (though to be fair they do provide nuclear oversight).

There has been talk over the years of the DOE developing an energy policy but that hasn’t really happened yet for fossil fuels. So like any reasonable person you may be asking yourself what exactly are we getting for our $30 billion yearly budget. Well, madam/sir, we got Solyndra. Hahahahaha! …Sorry, I digress.

And just as an aside, a little walk down memory lane, remember how good old Ted Cruz talked about killing off the IRS during the campaign? Great stuff. And, hell, why not? You’d get elected to a third term. But this one with the DOE is a no-brainer. And the beauty is that no one would even notice.

Sadly, your predecessor felt that more and more regulations were needed when it was actually vision; just plain old practical vision. He missed that one.

Shale Oil

We’ve been talking about natural gas. But the 600 lb. gorilla in the room is oil. We’re importing 8 million bbls/day, well over 1 million of that from from Saudi Arabia, a country that is inarguably waging war against our domestic oil and gas producers. It’s hard to fault them for protecting market share and refusing to cut production in November 2014, but when they subsequently increased production to all time highs their motives were unequivocally clear.

So the question is why do we continue to enrich the Kingdom? The answer is because we have to.

Among all our Gulf Coast refineries are three that are owned and operated by Motiva. Motiva is not an American company. It is a 50 – 50 partnership between Saudi Arabia and Royal Dutch Shell with the crown jewel being their state-of-the-art Port Arthur, TX refinery which produces more gas, diesel and petroleum products than any other refinery in the U.S. Shell and the Saudi’s designed it to run on low quality sour (sulphur heavy) crude from the Kingdom. Better quality Saudi crudes are sold elsewhere in the world market.

This buy into American soil occurred in 1989 through Texaco. A few years before, also during the Reagan administration, Venezuela’s state owned Oil Company, PDVSA was allowed to acquire CITGO’s large Gulf Coast refineries. Like the Saudi crude, the Venezuelan crudes are also notoriously heavy, sour and cheap, only more so.

Exxon’s Chalmette, LA refinery is also a buyer of Venezuelan crude through a JV and is in a supply arrangement with Mexico for its heavy, sour Mayan crude at its Baytown, TX refinery. Shell’s Deer Park, TX refinery is another of Mexico’s JV partners and Chevron’s and Valero’s Gulf Coast refineries have supply arrangements there as well.

Exposing ownership and supply sources is not meant to be a gotcha moment for now, but in the future it should be. Our Gulf Coast refineries were built to process these heavy foreign crudes at a time when shale was not even a pipe dream. Now that shale oil is here, these refineries should start running more North American crude. Every barrel imported, about 2.7 million bbls/day into the Gulf Coast alone, is a lost opportunity for U.S. labor and for the U.S. tax base.

This is not an argument against trade. Trade is a balance of exchange between two sovereign nations. It is not a one way ticket out of town. That’s foreign aid, not trade. But you already know that as you were elected on it.

Other U.S. refineries without foreign oil alignments have retooled in recent years to run the light sweet (low sulphur) crudes coming out of the shales. It’s the same story as our LNG terminals. They were built just a few short years ago to export liquefied natural gas. Then came shale and last winter Cheniere exported its first ship load of LNG out of Sabine Pass. It cost billions of dollars to redirect the flow but they did it.

WTI is now running at a discount to Brent partly because we do not have enough refining capacity for our crudes. The recent lifting of the crude export ban is great but because we still have these estoppels in place we still sell at a discount.

Running less heavy foreign oil and more light American oil comes with a few problems. Most of the imported heavy, sour crudes are asphaltine-based. U.S. shale crudes are paraffin-based. Heavy crudes are sulphur heavy, light U.S. crudes can have the presence of H2S. These all amount to problems, but these have always been a problem.

Refineries that have made more room for U.S. crude have overcome the problems through chemistry and modifications in the physical refining process. The Gulf Coast refineries operating under foreign ownership, Saudi Arabia and Venezuela, will likely continue to import their own crudes. The refined products, predominately gasoline, are then sold directly or indirectly throughout North America under the Shell, CITGO and Exxon brands.

In a free society we are heard when we vote with our wallets. ‘Nuff said.

Regardless of who’s running what oil, we still need heavy feed stocks but they are readily available from offshore Gulf of Mexico wells, heavy California crudes, conventionally obtained crudes and from the huge reserves of low gravity oil coming out of Canada.

The Keystone pipeline was (is?) planned to deliver heavy crudes into Port Arthur, right at the doorstep of the Saudi-Shell Motiva refinery. Canadian crudes have many of the same characteristics of the Saudi, Venezuelan and Mayan crudes but they are coming from a friendly government without a well documented history of exporting drugs, human rights failures, religious intolerance and chaos. They also do not carry the expense and difficulty of maintaining those relationships.

It is a very viable alternative. Already it is working as some of this crude is making it to the Gulf Coast by rail, an expense that is untenable in the current pricing environment.

China is aligned with Venezuela and will soon own the country if prices don’t rebound. Mexican crude output is on the decline. But the Saudis are in a war they masterminded for market share. They have absolutely no incentive to see their refineries run more American crude at the cost of their own.

The question with the Keystone Pipeline is, did President Obama deliver the environmentalists a victory or the Saudi’s?

Or both?

In Conclusion, President Trump

I run a small frac company. In the last two years I’ve had to prepare for and sit through four different federally directed audits. We’re so small that I don’t even know how they found us. But they did. And though they never find fault, they nonetheless keep coming.

With your election I sincerely hope this will stop.

There are 10 million direct and indirect oil industry jobs in America. The holders of those jobs are paying attention and if we’ve learned anything during this last presidential contest, it’s that Americans, red and blue and left and right are fed up with the status quo.

So let’s get to work on getting our people to work. Please.

By Dan Doyle for Oilprice.com

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