Obama Tours Solar Array At Las Vegas Air Force Base

CHARLES BABINGTON | May 27, 2009 06:26 PM EST |

President Barack Obama on Wednesday hailed solar energy as a cost saver for a major Air Force base, one stop on a Western trip devoted to raising political money and promoting his economic policies.

Obama’s aides had mocked reporters for making a fuss over his first 100 days in office, but the president was eager to assess the first 100 days of his $787 billion economic stimulus package.

It has “saved or created nearly 150,000 jobs,” he said, including “jobs building solar panels and wind turbines; making homes and buildings more energy-efficient.”

The White House job claims are difficult to verify because they are based on estimates of how bad the economy might have been without the stimulus rather than actual employment data. The country has lost 1.3 million jobs since February, a figure the Obama administration says would have been far higher if not for the recovery effort.

Obama also announced more spending for renewable energy after touring a large field of solar panels at Nellis Air Force Base, near Las Vegas. The sun-powered cells provide a quarter of the base’s power needs, Obama said, speaking in a large hangar warmed by the desert heat.

“That’s the equivalent of powering about 13,200 homes during the day,” he said, and it will save the Air Force nearly $1 million a year.

Obama said more than $467 million in stimulus money will be used “to expand and accelerate the development, deployment and use of geothermal and solar energy throughout the United States.”

The president sandwiched the midday event between two political fundraisers: one on Tuesday night in Las Vegas for Senate Majority Leader Harry Reid, D-Nev., and one set for Wednesday night in Los Angeles for the Democratic National Committee.

At Nellis, Obama addressed 400 people, including Air Force personnel, civilian workers and families living on the base.

The base’s $100 million public-private solar power system covers 140 acres and generates more than 14 megawatts of electricity.

As he departed the hangar, Obama bypassed his limousine and walked a quarter-mile along the tarmac to examine fighter jets, chatting with Air Force personnel as he went.

Our perspective:

Solar is the new energy growth maket. For the first time, with Federal and State incentives, the investment is solar finally makes sense.

To find out more how you can make solar your solution email george@hbsadvantage.com  or call 856-857-1230. We will review your opportunity and discuss the financial options available.

Natural Gas Market

Apr 30, 2009 –

As was the case with other industries that have been deregulated, natural gas deregulation has resulted in competition which helps lower the cost of natural gas and increase customer choices.

Deregulation is the process of lessening the amount of government restrictions an oversight applied to private companies. The natural gas industry has been gradually deregulated over the past ten years.

Before deregulation, utilities charged their customers for all the necessary steps to get the natural gas from the gas well to the customer’s home or business. This included purchasing the natural gas, delivering it to the customer, measuring the customer’s use,providing emergency service, and billing the customer.

One effect of deregulation has been that customers may now choose to purchase only part of the full line of services that are offered by the utility. This ability to choose is called
unbundling. The complete package of services has been unbundled so that a customer can choose to separate the gas purchasing transaction from the delivery — or transport — transaction.

Our Perspective:

Natural Gas prices are the lowest they have been in 3 to 4 years. For companies spending more than $3000 a month we are finding 20% to 30% saving over what they have paid over the past year.

One of our new clients signed up today and will see more that $42,000 savings over the next year.

Like to know more? Feel free to contact us. There are no additional fees, your savings fall to the bottom line.

Email george@hbsadvantage.com  or call 856-857-1230

EPA: Recession Won’t Stop Clean Energy Revolution

ANGELA CHARLTON | May 28, 2009 05:01 PM EST |

PARIS — The top U.S. environment official says it’s time for the United States to shed its energy-wasting image and lead the world race for cleaner power sources instead.

After several years with a relatively low profile under President George W. Bush, the U.S. Environmental Protection Agency “is back on the job,” EPA Administrator Lisa Jackson told The Associated Press on Thursday during a trip to Paris.

What the EPA does domestically this year will be watched closely overseas. Nations worldwide are working toward a major meeting in Copenhagen in December aimed at producing a new global climate pact. The U.S. position on curbing its own pollution and helping poor countries adapt to global warming is seen as key to any new pact.

Jackson was in Paris for international talks on how rich governments can include global climate concerns in overall development aid.

She dismissed worries that economic downturn was cutting into aid commitments or investment in new energy resources. She said the United States should take the lead on clean energy technology, recession or no.

“We have to get in the race now _ and win it,” she said. “I don’t expect a moving backwards because of recession.”

At climate talks in Paris earlier this week, European environment ministers welcomed greater U.S. commitment to environmental issues under the Obama administration _ but said it still wasn’t aiming high enough in its targets for cutting U.S. emissions.

Jackson said a shift in the American mindset is only beginning.

Talking about energy efficiency and saying companies should pay to pollute _ “that’s a revolutionary message for our country,” she said.

For a long time, she said, “People didn’t even expect the EPA to show up” at events, much less set policies that could be seen as examples for the rest of the world.

“Now it seems like every day we’re rolling back or reconsidering a Bush era policy on clean air,” she said.

She said it was time for the United States to take a more active role in limiting chemical pollutants, after falling behind Europe in that domain.

The U.S. also has lessons to learn from countries such as the Netherlands, she said, after visiting its low-lying, flood-prone lands to study ways cities like her native New Orleans can better manage water.

Our Perspective:

It is good to hear the administration making positive comments about our energy’s future. Alternative energy is a growth business and the correct path for insuring our future energy indepenence.

Let us know your thoughts? You may leave a comment or email george@hbsadvantage.com

Would you like to know more about the financial opportunities that drive this investment. Feel free to contct us.

Wind Power Finally Getting Its Due

Written by T. Boone Pickens

Earlier this month I made a point of going to WINDPOWER 2009, the world’s largest conference on wind energy. Yes, it was in the Windy City, but the truth is it’s not always in Chicago. Next year’s conference will be here in Dallas and you need to put it on your calendar.

A decade ago you could have packed everyone who showed up at an event like this in a pint-sized 7-11. Those days are gone. Last year, attendance at this event topped 13,000. This year? More than 23,000. And it wasn’t just exhibitors (though there were close to 2,000 of them there as well). The roster of key policymakers who participated at WINDPOWER 2009 was impressive, including Interior Secretary Ken Salazar, Energy Secretary Steven Chu, and FERC Chairman Jon Wellinghof. All of them echoed the statements made by President Obama that alternative energy and renewables are important elements in this administration’s energy plan.

That’s not just sound energy policy but it’s good for the economy as well. Business is booming in the wind energy sector, and you know who is most keenly aware of that? America’s governors. Over the last year as I’ve been promoting the Pickens Plan, I’ve met wind state governors such as Brian Schweitzer of Montana, Bill Richardson of New Mexico, and Jon Huntsman of Utah. Back when she was Governor of Kansas, Health and Human Services Secretary Kathleen Sebelius hosted the very first Pickens Plan Town Hall Meeting in Topeka.

But what really stood out was the governors who attended WINDPOWER in Chicago were not from traditional wind power states. They were from Michigan, Wisconsin, Iowa, Ohio, and of course, Illinois. If you take a look at the Energy Department’s wind map, you’ll see that these states are not in the Wind Corridor, which runs the length of the Great Plains from the Texas Panhandle to the Canadian border. Yet, they are profiting from wind energy, thanks to the enormous number of job that are being created to manufacture turbines and other equipment, build infrastructure, and improve efficiency. These states have a vested interest in wind energy.

We all do. Right now there are wind farms and manufacturing facilities in 48 out of 50 states. While our country is fighting its way out of a recession, this industry and others in the burgeoning green economy are bright spots, creating permanent, good-paying jobs, putting people to work, and helping America cement its status as a global leader in the energy industry.

This is one of the basic principles of the Pickens Plan, and it goes straight to the heart of what I’ve been talking about since I launched the plan last July. Right here in America, we’ve got plenty of energy waiting to be tapped. The only problem is that for the last four decades we haven’t had the leadership to harness it or develop it or drill for it. Instead, we took the easy way out. Cheap imported oil became the crutch that everyone leaned on, only now we know it’s not cheap anymore.

Last year, as our economy stalled, we spent $475 billion on imported oil. Can you believe that? I can’t. Half a trillion dollars. The greatest transfer of wealth in recorded history. And to make matters worse we still haven’t learned our lesson. According to figures just released, our trade deficit on oil imports widened in March for the first time in eight months. We’re still importing more than two-thirds of the oil we consume, and that’s got to stop.

The purpose of the Pickens Plan was to put a lot of ideas on the table in order to help our country develop the energy plan it so desperately needs and deserves. Wind energy is one of the best, and if you don’t believe me come to Dallas next year and see for yourself at WINDPOWER 2010.

U.S. unemployment likely to peak above 10 percent: CBO

Thu May 21, 2009 10:24am EDT

Reporting by Jeremy Pelofsky; Editing by James Dalgleish

WASHINGTON (Reuters) – The U.S. economy will likely start growing again in the second half of this year but unemployment will likely keep rising through 2010 to peak over 10 percent, the Congressional Budget Office said on Thursday.

“The growth in output later this year and next year is likely to be sufficiently weak that the unemployment rate will probably continue to rise into the second half of next year and peak above 10 percent,” CBO Director Douglas Elmendorf said in prepared testimony to the U.S. House Budget Committee.

It will likely take several years for the unemployment rate to fall back to levels seen before the recession hit, in the neighborhood of 5 percent, he said in the prepared remarks.

 

Let us know your thooughts. You may leave a comment or email george@hbsadvantage.com

Competition Heats Up In Race For Electric Car Dominance

JEAN H. LEE | May 18, 2009 12:57 PM EST |

SEOUL, South Korea — Urban visionaries in London and Seoul, two of the world’s busiest capital cities, foresee buses gliding through their streets with speed, ease and efficiency _ without emitting the exhaust fumes that scientists say are contributing to global warming.

Under Mayor Boris Johnson’s vision, London’s iconic red double-decker Routemaster buses would be back on the streets _ but powered by electricity, not gasoline.

Engineers at South Korea’s top-ranked KAIST university are meanwhile working on a novel prototype for an electric vehicle system: one that provides power on the go through induction strips laid into the roadway.

Cities _ which house 75 percent of the world’s population and generate 80 percent of its pollution _ must take leadership in tackling the problem of polluting emissions, Johnson said Monday in Seoul on the eve of the third C40 Large Cities Climate Summit.

“I think as a collective of cities, what we should be doing here in Seoul is agreeing that we are going to stop the endless addiction of mankind to the internal combustion engine,” he told reporters. “It’s time that we moved away from fossil fuels. It’s time that we went for low-carbon vehicles.”

“Cars form many problems that we see in Korea as well as other countries. We use hydrocarbon organic fuels, mostly petroleum, and that, in turn, creates environmental problems _ and Seoul is notorious,” said Suh Nam-pyo, president of KAIST in Daejeon, south of the South Korean capital.

Seoul, population 10 million, is getting warmer three times faster than the world average, the National Meteorological Administration said Monday.

The obvious solution, Suh said, is to “replace all these vehicles with vehicles that do not pollute the air and do not use oil.”

Back in March, Johnson zipped down a British highway in a U.S.-made electric car that he wrote marked “the beginning of a long-overdue revolution.”

He rhapsodized in a Telegraph newspaper editorial that the Tesla has no exhaust pipe, carburetor or fuel tank, and “while every other car on that motorway was a-parping and a-puttering, filling the air with fumes and particulates, this car was producing no more noxious vapours than a dandelion in an alpine meadow.”

Last month, he launched an ambitious plan to get 100,000 electric cars onto the streets of London by 2015. He pushed for the creation of 25,000 charging stations and vowed to convert some 1,000 city vehicles to make London the “electric car capital of Europe.”

“The age of the diesel-emitting bus has got to be over in London,” Johnson said.

He has promised electric motorists an exemption from the congestion charge imposed on drivers in central London, an annual saving of up to 1,700 pounds (about $2,600).

But that discount would barely make a dent in the eye-popping price tag of electric cars now on the market; the sleek Tesla that Johnson took for a spin costs more than $100,000.

And scientists are still grappling with the massive, sensitive, costly and fast-depleting batteries that take the place of international combustion engines and gasoline. Electric cars run between 40 and 120 miles (60 to 200 kilometers) on one charge, and it takes anywhere from two to seven hours to fully recharge, said Christian Mueller of the IHS Global Insight consulting firm.

“Everybody is frantically working on coming up with a viable electric car,” he said from Frankfurt, Germany.

Batteries “aren’t yet at a state where we can say they are cheap, they’re reliable and they’re easy to come by. They all still have their technical drawbacks,” said Mueller, who specializes in electrics and electronics.

The lithium supply for batteries is finite, and the question of where to charge them becomes complicated in cities where residents cannot easily plug their cars in overnight. A California company, Better Place, has introduced a promising battery-swapping technology.

Suh, an MIT-trained inventor with some 60 international patents to his name, approached the challenge from another angle.

“Why not have power transmitted on the ground and pick it up without using mechanical contact?” he said in an interview in his office overlooking the staging grounds for the university’s electric cars.

KAIST’s “online” vehicles pick up power from trips, or inverters, embedded into the road rather than transmitted through rails or overhead wires. A small battery, one-fifth the size of the bulky batteries typically used, would give the vehicle enough power for another 50 miles (80 kilometers), said Cho Dong-ho, the scientist in charge of the project.

South Korea produces its own nuclear power, meaning it can produce a continuous supply of energy to fuel such a plan.

President Lee Myung-bak, whose government gave KAIST $50 million for two major projects, including the “online” electric vehicle, took a spin in February.

Online buses are running at the KAIST campus and will begin test runs soon on the resort island of Jeju.

But Seoul, which has promised to set aside $2 million for the underground charging system, is within Suh’s sights. He said 9,000 gasoline-fueled buses now crisscross the capital, with 1,000 going out of commission each year. He envisions replacing those aging buses with electric models. Initial test runs are expected to take place this year.

Mueller, the consultant, called it a creative approach with potential.

“It sounds very intriguing; you don’t store your energy, you provide it on the go.” he said. “The (battery) storage problem is overcome instantly. That would be a very intriguing way of doing it.”

___

Associated Press writer Jae Hee Suh contributed to this report.

Homeowners Associations: The Enemy of Solar?

May 15, 2009, 8:15 am

By Kate Galbraith

Kirk J. Condyles for The New York Times Not all homeowners associations approve of this sort of thing.

John Wood, a homeowner in Woodbury, Minn., wanted to put solar panels on his roof. Last month, his homeowners association rejected his application.

“I felt extremely disappointed,” Mr. Wood said by telephone.

He added: “It made me think that homeowners associations are in place to do only one thing, and that is to maintain the status quo, and they have no interest in any sort of change whatsoever.”

Al Rudnickas, the president of the board of the Wedgewood Association, the homeowners’ group, said that the board was open to less obtrusive technologies like solar shingles. But in this case, “The feeling of the board was that what was proposed wasn’t aesthetically pleasing in keeping with the standards of the community,” he said.

Mr. Rudnickas said that the association invited Mr. Wood to submit a modified application, but Mr. Wood — who is the first homeowner in the association to apply for solar panels — said he was not sure whether he will do so.

Mr. Wood’s case, first reported in the Woodbury Bulletin, has echoes around the nation.

 

In Somerset County in New Jersey, a homeowner was ordered to take down 28 panels.

In California, another homeowner, Marc Weinberger, sued his homeowners association last year after his efforts to put solar panels on his roof were rejected.

Mr. Weinberger and his lawyer, Michael McQueen, have since told Green Inc. that their motion for summary judgment was granted, and Mr. Weinberger installed a system early this year.

In another California case, Marty Griffin, a homeowner in Santa Clarita, applied to put solar panels on a hillside on his property. The association said no, but he went ahead anyway and got sued.

The litigation has been under way for more than a year. Mr. Griffin says the association did not respond in a timely way to his application; a lawyer for the association, Ricardo Cestero, told Green Inc. that Mr. Griffin “did not follow correct procedures.”

Mr. Griffin details his saga, including legal documents, on his Web site.

For solar installers, the roadblocks can be frustrating. John Berger, the chief executive of Standard Renewable Energy, a Houston-based firm that designs and installs solar systems for homes, said that the homeowner associations’ prohibitions had already cost him more than $1 million in business.

“It is a big problem,” he said.

Lawmakers in Texas are considering a bill that would prevent homeowner associations from banning solar panels, and similar laws are already in place in a dozen or more states, according to the Database of State Initiatives for Renewable Energy — including Arizona, Colorado, Florida and California, among others.

Mr. Wood said he planned to contact his state legislators in the hopes of enacting this type of law in Minnesota.

The laws, however, are rarely comprehensive, as some of the California cases suggest.

Rusty Haynes, a project manager at the North Carolina Solar Center, which manages the D.S.I.R.E. database, said that some applied only to new construction, and others might be vague or limited in scope.

In Arizona a few years ago, a homeowner was challenged over the color of her panels (they were apparently too dark), despite a state law intended to smooth the process.

Has this happened in your community? Is this an issue for you? Feel free to comment below, or e-mail george@hbsadvantage.com

Energy Usage Increases Despite Efficiency Efforts

by Roberta Cruger, Los Angeles on 05.14.09

Business & Politics (news)

“Electronic billabong:” power strip supping up electrons. Photo via Flickr: by Stibbons

Electronic equipment, including cell phones, iPods, PCs, videogames, and plasma TVs have increased demand for residential energy use annually by 3.4 percent since 1990, according to the International Energy Agency. This trend leads the IEA to estimate that personal electrical energy usage in homes should triple by 2030 worldwide, hence more carbon emissions from coal and natural gas plants. It noted this trend is undoing efforts toward energy-efficiency.

The energy policy advisor to 28 governments (as well as tipsters for Russia, China and India), IEA recommends raising energy-efficiency standards on consumer devices. With energy improvements in home appliances, such as Energy Star refrigerators and washing machines, that usage has lowered. Findings also show that heating and air-conditioning has fallen.

One Billion PCs, Two Billion TVs, Three Billion cellphones.
But the study states that energy use has risen sharply over the past 10 years with the use of electronic gadgets. There are over two billion television sets in the world, close to one billion personal computers by the end of the year, and over half the global population subscribes to a mobile telephone service. These figures are on the rise.

The agency urged that consumers need to make smarter choices and change habits to conserve more energy. In analyzing the data, the report suggests that categories for “functions,” such as surfing the internet, need to be considered, in addition to improvements in products. The report recommended that people’s lifestyles – as well as government policies and manufacturers’ efficiency standards – require dramatic change for energy-efficiency to improve significantly to impact global warming.

Of course, there are other energy-suckers they make recommendations about, too, like oil. But these hidden power-guzzlers start at home. Alternative energy is a solution to greenhouse gas emissions, so perhaps a rise in electricity costs would make a difference.

Our perspective:

Instant gratification continues to rule our daily life. Electronics have made things more efficient, but with this efficiency comes higher energy demand.

What will we do in the future to address this issue?

Do you think our demand will oneday decrease?

Are we will to make tough decisions now to insure that the energy availability will be there for our grandchildren.

Let us know your thoughts?

You may leave a comment or email george@hbsadvantage.com

Climate change is biggest health threat of 21st century

By David Derbyshire
Last updated at 2:44 AM on 14th May 2009
As reported in Huffington Post Green

Climate change is the biggest health threat of the 21st century, leading academics claimed last night.

Those who fail to take the issue seriously are as morally reprehensible as 18th-century slave traders, they said.

A British report said rising global temperatures will trigger food shortages, droughts, wars and floods over the next 100 years, pushing billions into ill-health, disease and poverty.

Health threat: The report said rising global temperatures will trigger food shortages, droughts, wars and floods over the next 100 years

If the world fails to act, future historians will view the current generation with ‘similar moral outrage to how we today look back on those who brought in and did nothing to stop slavery’, the authors said.

The report – commissioned by the Lancet medical journal and University College London – calls on doctors and health experts to take the threat of climate change more seriously.

Report author Professor Anthony Costello, of UCL, said: ‘The big message of this report is that climate change is a health issue affecting billions of people, not just an environmental issue about polar bears and deforestation.’

The team of scientists, lawyers, doctors, economists and engineers looked at the health implications of the UN Intergovernmental Panel on Climate Change’s forecasts, including the most optimistic projection of a 2c rise in global temperatures and its ‘catastrophic’ forecast of a 6c rise.

In Britain, climate change will bring more frequent heatwaves – increasing the numbers of elderly dying in the summer, the report said.

In 2003, up to 70,000 extra deaths were caused by the freak summer heatwave across Europe.

Warmer weather will also increase the risk of diseases spread by insects and bacteria, including malaria and salmonella.

But the biggest health impacts will be in the poorest parts of the world.

Droughts and floods will make agriculture more vulnerable in developing countries and trigger food shortages and rising food prices, spreading malnutrition and disease, the report said.

This will increase the chances of wars over water, food and land and trigger ‘large-scale migration’, it added. More than a billion people could be forced to move from rising seas.

Professor Costello said: ‘The health lobby has come late to this debate and should have been saying more. Young people realise this is the great issue of our day.’

Our perspective:

This issue has been batted around for years. While we continue to debate the issue the polar caps are melting.

Some scientist say this is a natural phenomena, while other argue that we have been instrumental in the cause.

We should stop pointing fingers.

The facts is that it is happening and we should be making every effort to stop the abuses that may tend to effect the issue.

Sometimes I think that God just shakes his head.

What we call progress over the past 200 years have put a strain on our environment. Pollutants in our rivers and oceans. Gases released into our atmosphere.

How much is enough!

 This can not be rationized.

We are responsible to pass onto our children a better quality of life.

Let us know your thoughts? You may leave a comment or email george@hbsadvantage.com

Facts and Myths About Offshore Oil

By Chris Nelder | Wednesday, April 29th, 2009

A new battle is brewing over offshore oil drilling. Nine months ago, President Bush lifted a ban on new oil and gas leases off the nation’s coastlines, and the congressional moratorium on offshore leasing expired last September. 

Now Obama’s Department of Interior officials are considering reopening the Outer Continental Shelf (OCS) to leasing, and once again the oil industry is pitted against environmentalists, as well as California residents who remember the ugly mess that a 200,000 gallon crude spill made of the Santa Barbara coast in 1969 after an offshore rig blowout.

 I remember that mess. Some time in the mid-70s, when I was 10 years old or so, my family took a trip to California to visit relatives. After nine long hours in the car from our home in the Arizona desert, I wanted nothing except to frolic on the beach when we finally got there, and I wasn’t about to let my uncle talk me out of going there no matter how bad it was. 

It was nasty. The beach was covered in globs of black goo—so much of it you couldn’t avoid stepping in it—and the whole place reeked. (If you haven’t ever smelled crude oil, it’s smells like exactly what it is: a combination of asphalt and gasoline and everything in between.) We had our fun on the beach, but when we got home, we had to endure a good scrubbing down with turpentine (or maybe it was gasoline) to get the gunk off of our skin.

 So I have sympathy for those who don’t want to see that sort of thing happen ever again. I’ve also been an environmentalist all my life. 

On the other hand, I believe our energy predicament is shaping up to be so dire as to render all such ideology moot. Taking a principled stance on environmental grounds may soon seem like a luxury of a far-gone age. 

Outer Continental Shelf Potential 

Let’s take a look at the numbers. 

According to the EIA (2007 data rounded to billions), total US proven reserves of conventional oil are about 21 billion barrels, of which 4 billion are proved offshore reserves. 

US demand is currently about 6.7 billion barrels per year, so if we relied solely upon our proven reserves and were able to produce it as quickly as we like, we’d only have about a three-year supply. Fortunately, we are able to import more than two-thirds of our oil consumption from elsewhere. Nature limits the rate at which we can pump our domestic oil, a rate which has been in steady decline since US domestic oil production peaked in 1970.

Three years’ worth isn’t much, so we have turned to the difficult and expensive stuff that remains, some of which isn’t even oil: low-grade tar sands from Canada, thin seams of shale in the Midwest, and the OCS.

Energy and Capital readers are no doubt familiar with our articles on tar sands and the shales (Bakken, Barnett, Marcellus, and others), but an update on the OCS is probably in order.

The EIA estimates that “technically recoverable undiscovered” offshore oil in the US is in the range of 59 billion barrels—nearly three times as much as our remaining “proved reserves.” Most of it, about 45 billion barrels, is expected to lie in the Gulf of Mexico.

The remaining 31% is what was unavailable under the Congressional moratorium, but according to a testimony before the House last month by acting EIA administrator Dr. Howard Gruenspecht, only about 20% of the total technically recoverable oil in the OCS has been under moratoria.

The United States Geological Survey (USGS) numbers are considerably larger, suggesting that some 85 billion barrels of technically recoverable undiscovered oil may remain offshore. (For the present article, I will avoid delving into the murky details of probabilistic reserve estimates and why they differ from source to source.)

In any case, it’s clear that the remaining oil prize in the US is offshore. So why aren’t we producing it?

Partisans like Sen. Kay Bailey Hutchison (R-TX) would have us believe that it is simply the politics of overzealous environmentalism, banging the drum loudly for offshore drilling and complaining that 85% of the OCS has been off-limits “leaving some of our greatest energy reserves untapped.” Indeed, the “Drill Baby Drill” crowd claims that if only we’d drill the OCS everywhere, we could achieve “energy independence.”

But if only 20-31% of the OCS has been off-limits, why hasn’t the rest been drilled yet?

Risky Business 

One part of the answer is that there simply isn’t any oil in some of those areas. Last July, John Hoffmeister, former CEO and president of Shell Oil’s US operations, told CNBC “The industry is pursuing the leases it has, but to be blunt, the prospective nature of many of those leases is very low. And you don’t go drill oil where you know it doesn’t exist.”

The second part of the answer is also simple: poor economics.

 Offshore oil is expensive, and deepwater oil—wells drilled in more than 1000 feet of water—is more expensive still. Leasing rates for high specification drillships able to produce oil from deepwater formations have run as high as $600,000 per day, which is why we have liked our deepwater drilling players for a long time now.

 Consider the economics of the Mars field as an example. At a water depth of 2,940 feet, it is believed to contain 500 million barrels of oil equivalent. The platform produces some 220,000 barrels per day, at a reported development cost of $100 million. Prior to the development of BPs Thunder Horse platform, it was the most advanced platform in the deepwater Gulf of Mexico, where the best prospects for new US oil production are. The Mars platform was destroyed by Hurricane Katrina, and rebuilt by Shell at a reported cost of $200 million. Assuming those numbers are still correct, at a $300 million total cost the project would take 34 years to pay for itself at $40 a barrel. (By comparison, the Thunder Horse platform produces oil at about the same rate, but has a total cost of around $5 billion.)

Deepwater oil also remains a very risky enterprise, even with modern seismic imaging technology. This week Contango Oil & Gas Co. (AMEX: MCF) reported that it would take a $12.5 million write-off for drilling a dry hole in the Gulf of Mexico. It takes a fluid and committed credit market to sustain that kind of risk, but the world is still in the grips of a credit market freeze.

Morgan Stanley recently reported that enough deepwater projects have been scrapped in the global economic downturn to reduce future crude supplies by as much as 2.4 million barrels per day (mbpd) by 2011, a substantial chunk of anticipated supply. Since August 2008, the company reported that no new lease contracts had been awarded, but 11 orders were canceled and 46 more were delayed.

Perhaps the largest project to be delayed recently is the Manifa project in Saudi Arabia. With a $9 billion price tag and a possible 900,000 barrel per day flow rate, it would be the country’s largest offshore oil development, but progress has been delayed by six months, probably to take advantage of lower construction costs.

How Do We Reach Energy Independence?

Finally, we must also address the flow rate of any new domestic oil. True “energy independence” would mean producing 18 to 20 mbpd, not the roughly 5.5 mbpd we are producing today. Could we do that?

Through drilling alone, the answer is “not even close.” In total, I estimate that if all limits on drilling were removed, including the OCS and ANWR, we could only increase US oil production by a maximum of 2-3 mbpd. That new production would come online slowly, and the additional flow would be hardly noticeable as it compensated for the loss in conventional oil production due to sheer depletion. If it lowered prices at all, it would be by a few pennies per gallon, at best.

Now I have no doubt that Sen. Hutchison understands this, but within the parameters of politics, she must state her case as strongly as possible and try to overcome the resistance to offshore drilling.

Nor do I have any doubt that the hearts of anti-drilling environmentalists are in the right place. Why continue down the doomed path of oil dependency when renewables appear to be right around the corner? Why would the good people of Florida want to court the disaster of oil spills, or look at oil rigs in the distance of their beautiful beaches?

Both sides of the issue, unfortunately, are wrong-headed, and would lead to poor policy. If the public were successfully convinced that we could drill our way out of our energy dilemma, it would stifle development of a renewable-powered infrastructure that will survive in a future of declining oil. Conversely, large oil spills from offshore drilling are a thing of the past, and if we do not drill our remaining reserves with all possible haste we will undoubtedly find ourselves without sufficient oil at an acceptable price within just a few years.

The IEA’s warning in February should remain foremost in our minds: If oil demand recovers in 2010, global spare capacity would fall to zero by 2013. And as the world’s largest nation dependent on imported oil, we could be in for a very difficult time. The last thing we should do is pull the plug on the majority of our energy supply, which is oil, before we have new forms of energy to replace it. To do so would have terrible consequences on the economy, and hamstring our capability to continue evolving to a new energy regime.

Our only real path to energy independence is to pursue all options, within acceptable emissions limits, and gradually phase out fossil fuels as we ramp up renewables and the electric infrastructure to support them. But while renewables remain less than two percent of our energy mix, we should be careful not to expect too much of them. We will need oil and natural gas for decades to come, and in time we will need to develop our offshore resources or face the prospect of shortages.

Our perspective:

Oil is a finite fossil resource. As our demand for energy continues to increase, we must turn to alternative energy resources to support this growing demand.

There is no silver bullet.

We must look to implement multiple resources, weaning from fossil and reaching for the sun, wind, earth and water.

God placed them here, right in front of our eyes, yet we refuse to see.

Let us know your thoughts?

You may leave a comment or email george@hbsadvantage.com