Sunday, January 01, 2006

Oil, Gas, and Maria Cantwell

I recieved this column, written in the Wall Street Journal, in an email at work and found it to be spot on, thought I would pass it around. (Needless to say I have no relation to the author).

27 Dec 2005 20:00 ET WSJ(12/28) Column: The Real 'Oil Crisis'
(From THE WALL STREET JOURNAL) By Holman W. Jenkins Jr. (Editor's Note: Mr. Jenkins is a member of The Wall Street Journal's Editorial Board and author of the weekly Business World column.)
Sen. Byron Dorgan, who keeps himself deliberately uninformed about the workings of the private sector lest it cast him into doubt about his easy demagoguery, recently castigated the oil industry for "buying back stock, hoarding cash and drilling on Wall Street." He is one of several who've backed legislation to confiscate the industry's "windfall profits" if companies don't reinvest the money in new energy projects.
In fact, the capital markets are in charge of deciding where money is best invested, and oil companies are only in charge of doing what corporate governance reformers insist all companies should be doing -- being careful with their shareholders' money. That's why the six biggest oil companies, Mr. Dorgan's fury notwithstanding, are expected this year to allocate more than 60% of their profits to dividends and stock buybacks while reinvesting only about one-third in the oil business.
Manifested here is not pigheadedness or any need to be instructed by Congress about how to make money. Opportunity is what's lacking.
Mr. Dorgan perhaps hasn't noticed but Big Oil has become a pygmy. It accounts for less than 16% of the world's current production and less than 10% of the reserves that will supply our needs in the future. The industry doesn't reinvest more in energy development because, bluntly, most of the opportunities are off limits to it.
The real powers today are the Saudi state oil company, the Iranian state oil company, the Venezuelan state oil company, etc. Not only are governments in control of most of the world's oil and gas reserves, but increasingly they decline even to make use of the technical and management skills of Big Oil anymore.
This trend is worrisome not because we fear an axis of America haters might cut off our supply someday (these governments want our money even more than we want their oil). Rather it's worrisome because oil wealth empowers destructive elites and raises the stakes of political competition in states that, if you look closely, are all too ripe to earn the sobriquet "failing."
Down the road traveled by Saddam Hussein's Iraq now are headed Vladimir Putin's Russia, Hugo Chavez's Venezuela, Mahmoud Ahmadinejad's Iran and perhaps the Bolivia of President-elect Evo Morales. The formula: By deliberately limiting their nations' development to the energy sectors under their control, politicians make themselves the source of all opportunity and wealth for their peoples. You heard it here: The world can expect to pay a price in instability for decades to come thanks to this phenomenon.
Foolish or worse, then, is the agenda of the Global Policy Forum, a tired leftist group that monitors and lobbies the United Nations and has taken recently to denouncing the new Iraqi government for contemplating "production sharing" agreements with international oil companies. Such deals are always and everywhere a ripoff, insists the group, never mind that Libya just signed a bunch that were distinctly favorable to Libya.
Alas, the corrupting politicization wished upon Iraq's oil industry is becoming a universal norm. Consider the perfected idiocy of Sen. Maria Cantwell of Washington, who bought her Senate seat with a now-diminished dotcom fortune and has reason to worry about whether voters will find her worth re-electing. This undoubtedly explains her sudden and shrill emergence as the most unhinged of oil-industry bashers.
Last week she was quick to confuse the filing of a lawsuit with proof of guilt, denouncing BP and Exxon because they were named in an antitrust complaint by the deservedly obscure Alaska Gasline Port Authority. Ms. Cantwell was likely impressed by the name of David Boies, celebrity lawyer, as counsel for the plaintiffs. In fact, the AGPA consists of three Alaska municipalities whose plan for a gas liquefaction facility in the port of Valdez was recently rejected by the state as lacking any means of financing.
The group has decided to blame its troubles on BP and Exxon for allegedly sitting on undeveloped natural gas reserves in Alaska in order to drive up prices in the U.S. domestic market. This overlooks the fact that the two companies supply just 12% of the natural gas in the lower 48, so any such manipulation would benefit mostly their competitors.
In reality, the AGPA nakedly exists to divert Alaska's untapped gas wealth into a local construction boondoggle, lacking any economic rationale. Indeed, the mere act of liquefying Alaskan gas and loading it aboard a ship would put the state in competition on absurdly unfavorable terms with far cheaper suppliers of liquefied natural gas in Qatar, Indonesia, Australia, Russia and elsewhere.
In contrast, a pipeline to the Midwest would deliver the gas, without the expense of liquefaction and refrigeration, directly to a large, landlocked market where supply is short and getting shorter. That's why Exxon, BP and a third leaseholder, Conoco, prefer this approach and are prepared to finance it, joined by Alaska's sane governor, Frank Murkowski.
This should be a no-brainer, but the little Putins of the Alaska Gasline Port Authority, cheered on by the silly Ms. Cantwell and the cynical Mr. Boies, are determined to politicize what should be a straightforward economic decision. This is not just bad economics for Alaska. It's an example of increasingly nonsensical policymaking by energy-consuming nations, promoted in the U.S. by kneejerk oil industry critics on Capitol Hill.
Folks like Ms. Cantwell and Mr. Dorgan should look up from their polling data once in a while and take stock of the world, as statesmen are supposed to do. Their juvenile and myopic electioneering strategies are a big wet favor to the likes of Messrs. Putin and Ahmadinejad. Now is the time our leaders should be seeking to strengthen a profit-motivated global oil industry to balance the power of oil-controlling governments that don't have America's interests at heart.

Thursday, December 22, 2005

Gas Tax Initiative

I know it's a little late, seeing as I-912 has already failed months ago, but here is the column I wrote for the Bellingham Herald (which was not printed) supporting the initiative.

There have been quite a few letters to the editor regarding transportation taxes and spending here in WA state. Some say that King County taxes support the rest of the state and others who say that rest of the state supports King County. Curious about what was true, I contacted the Dept of Transportation directly about how tax collection and allocation breaks down county by county. A Mr. Meale sent me a report, produced on August 11, 2005, with the information I was looking for.

Among other things, the report looked at a twenty year period of actual taxation and spending from 1984 to 2003 broken down by county. For every $1 in State and Federal transportation tax collected in King County, they received $1.09 back for projects. This is an excess of $691million from what was collected. Over the same 20 year period of actual spending the following counties contributed more transportation taxes then they had returned to them: (in order from the most return per dollar to the least): Franklin, Snohomish, Mason, Benton, Pierce, Yakima, Clark, Spokane and then Whatcom County, which came in with the least return at .61cents per dollar contributed. So, a case could be made that we, along with most of the other semi-urban counties, are indeed subsidizing roads in King County and the rest of the state.

The report also breaks down the collection and allocation of the new 9.5cent gas tax and fees as well. King County will receive $1.82 in funding for every dollar they contribute to the new tax, or an extra $1.67billion (yes billion) in spending. So, projects in King County as well as Lewis, Douglas, Pacific, Jefferson, and Kittitas will be subsidized by the rest of the state taxpayers.

This report is pretty eye opening, and lays to rest the argument about who is subsidizing whom. It also addresses future spending, and I encourage everyone interested to get a copy of the report and read it for themselves by contacting the DOT, or emailing me at .

It's pretty obvious that a few of the sub-urban counties have been subsidizing our states road projects through various taxes. Although I do support I-912, this is not the reason. I, and many others, realize that a good system of roads in our state helps everyone by lowering the cost of good stransported to and from the rural, suburban, and urban areas of our state.

So why support I-912? Just because we don't want a new tax?

The real problem myself, and a lot of people I've spoken to, have with the new tax is what it will give us in return and how it came about. While the 520 Bridge and Alaska Way Viaduct do need to be replaced, the plans are just now coming together as almost an afterthought. Even with the new tax providing $2.5billion in funding, the projects are still lacking over $3.7billion for completion (the plans and dollar figures are available on the DOT website). At this point the state has no idea where the extra needed money will come from. Shouldn't we expect completed projects for our investments?

Another reason to support I-912 is to remind the legislature who they work for. This bill was passed at the last possible minute, in hopes of avoiding an initiative (thankfully people organized quickly and got it done). Did you know that any new tax and spending bill has to go to a referendum to the people as per Initiative 601 passed in 1993? Well the legislature placed an "Emergency Clause" on the bill bypassing that required vote by the people. I don't think putting up cable barriers or building holding ponds for runoff here in Whatcom County constitute an "Emergency", do you?

I don't think most citizens would have a problem taxing themselves more for roads, if they were presented with a good, complete, and honest plan that addresses safety problems, congestion, is fully funded, and isn't sneaked past us by the legislature. The 2005 Transportation Funding Package is none of these, that's why I-912 should be supported.

Anyway, I am hoping to post a little more as the new year starts. I also plan on looking into the Whatcom County voter database a little harder. In the last few weeks two voters have been found to be registered at false addresses. One of them was a city council person and the other a political activist. How many others are there?