Energy and Taxes

America needs American energy.

Natural gas and oil provide 65 percent of America's energy needs.

When the sun doesn’t shine, and the wind isn’t blowing, natural gas keeps the lights on.

American natural gas provides roughly 85 percent of America's natural gas needs; most of the rest comes from Canada.

Oil is a different story; America only provides 35 percent of US needs - but the more it can provide, the less Americans must pay for oil from foreign nations (foreign economies).

Independent producers, that’s us, and thousands of other small family and locally owned business, are hard working Americans, striving to farm home grown energy. Independents are essential to providing American natural gas and oil. These independents develop 90 percent of American wells, produce 82 percent of American natural gas and produce 68 percent of American oil.

Over the past several years independents have been reinvesting 150 percent of US cash flow back into new US production. Independents get their capital three ways - from selling their natural gas and oil, from obtaining credit and from investors willing to invest capital in high risk ventures.

The dramatic swings in prices of natural gas and oil are challenges that the independents recognize and respond to, like any good business they adapt and overcome. Projects that were economic ventures at $10 are in a holding pattern at $5. The credit crunch obviously limits access to capital. Investors are cautious, banks are even more cautious. This reality is already constricting activity (and available supply). The Obama Administration's signals to the energy industry are scary. They cut into the core of a uniquely American industry that has been serving the nation since the 1880’s.

The Obama Administration tax proposals will radically shift investment incentives for development of American natural gas and oil - changing policies that have been in place since 1913 in some cases. Let's be clear - it will mean less American natural gas and oil, it will mean more quality job losses and it will result in increased costs for basic public utilities, for everyone.

These results run counter to the Obama Administration's own agenda of cleaner energy and less foreign oil dependency. The proposed changes are unjustified to energy tax policy and we oppose them vehemently. We STILL need to develop rational national energy strategies - strategies that rely on American energy first, including American natural gas and American oil.

Over our careers here, our discoveries, principally in Ohio, are 80% natural gas and 20% oil. Energy produced through the hard work of Ohioans in support industries too numerous to note here, from Ohio farms and lands, sold in Ohio, and in most cases consumed in Ohio. Ohio is experiencing a steady decline in production in recent years, and so for Ohioans, the financial burdens will be particularly costly, funding for new wells will be more scarce, production declines will accelerate as fewer wells are drilled to replace depleting reserves. Ohioans will be forced to purchase more and more energy resources from other states and other markets, with an assuredly increased cost.

The wrong policy shift, at the wrong time, and bad for Ohio.

Ohio needs Ohio’s energy.

ExxonMobil does not drill or operate wells in Ohio, Ohioans do. The Ohio oil and gas industry is driven by small, locally and family owned independent businesses, not Big Oil. Please help your friends and colleagues understand this clearly, demand that our representatives explain to us what the realized cost of the loss of jobs, activity, and home grown Ohio energy will mean to us, and why it is a sacrifice worth making at this time when the American economy needs plentiful energy to help claw back to relevancy.

Conservation is at the foundation of the energy business - it simply is. Conservation is also an obvious component to the solution of the energy problem. The natural gas and oil industry is a quintessential American industry, as American as apple pie and baseball. Small family and locally owned businesses, in your communities, your neighbors. Unfortunately, carpet bombing an ultimate American industry, which will affect the American way of life in a plethora of ways, to follow the idealistic idea that it will save the world, is simply wrong.

For more information on the plight and perspectives of the American Independent, visit www.ipaa.org.

US Forest Service and Solar Panels, what would you do?

We are proponents of wind, solar, and other alternative energy generation and capture methods to supplement conventional sources. America needs to cultivate a diverse portfolio of energy supplies, for national security and the recovery and maintenance of our economy. America is now feeling the sting of decades of funding cuts to basic research and technology development. America's current reality is that there are few alternative energy options that are technologically and economically viable, and we have to take issue with bad math to support unrefined technology to justify decisions, particularly spending public dollars.

The news release from the US Forest Service is woefully devoid of information (http://www.fs.fed.us/r9/wayne/press_releases/contract_awarded_solarpanels.html), here it is:

"Nelsonville, Ohio (March 13, 2009) – The U.S. Forest Service has awarded a $398,000 contract to the Ohio-based D.J. Group from Beverly, Ohio. The contractor, a Service Disabled Veteran Owned Small Business is being hired to purchase and install more than 250 additional solar panels to the roof top of the Wayne National Forest Headquarters building, bringing the total to over 300 solar panels.The funding for the contract is coming from the American Recovery and Reinvestment Act of 2009. It’s estimated four jobs will be created by the Wayne National Forest six-month project that gives business to Ohio’s growing solar industry. The Wayne began its Solar Energy Program in 2007, by installing a 20-panel solar system. Last year, the Forest added 30 more panels to bring the total to 50. The current system is generating 7% of the facilities energy needs. Once the new expansion is completed later this summer, up to fifty-percent of the Wayne National Forest headquarters building will be powered by the sun."

Past references in the news to this project have included little additional information, until this morning.

The Columbus Dispatch published and article in the Business Section called "Solar Power Bolts Forward" (http://www.dispatch.com/live/content/business/stories/2009/03/31/moresolar.ART_ART_03-31-09_C10_MFDDBNP.html) which included some additional and interesting information.

The US Forest Service is outfitting a building with solar panels for $398,000 that will reduce the annual electric bill by (up to) half. The article states that the past twelve month's electric bill was $31,000. It also states that the project will pay for itself in 10 to 15 years.

That can't possibly be so.

Simply using last year's expense, and the quoted forecast, basic math show us that "payout" is between 25 and 40 years. The only way to make this expense payout somewhere within the reasonably lifespan of the solar panels, is to dramatically increase the cost of electricity, and soon. Here in Ohio, electricity means coal. About 90% of our electricity comes from coal (by the way, Ohio is one of the nations leading consumers of electricity).

Lets look at this. The total annual bill is $31,000. We don't know how much electricity that is, but using the Energy Information Administration (http://www.eia.doe.gov/) data in Ohio electricity costs about ten cents per Kilowatt hour, we can estimate that the US Forest Service Wayne National Forest Headquarters uses about 310,000 Kilowatt hours of electricity per year. For a point of reference, the best solar panel generated electricity runs around fifty cents per Kilowatt hour. Ohio is not Arizona or Hawaii, unfortunately we have clouds from time to time...

It will take about 126 tons of coal (one ton of coal will generate 2,460 Kilowatt hours) to generate the power for the HQ. Now coal costs about $30 per ton, so that is $3,780 worth of raw fuel to provide $31,000 of electricity for the HQ.

The DOE says coal fired power plants release two pounds of CO2 per Kilowatt hour. HQ currently is responsible for 620,000 pounds of CO2 "pollution", 310 tons.

We have two issues here. A financial problem, and an environmental pollution problem.

Financials. The US Forest Service says their $398,000 expenditure will payout in 10-15 years. Let's use their disclosed electric cost for lack of actual data. $31,000, and let's assume they can cut that in half with the solar panels, $15,500 per year. We are not going to considering time/value of money or future price fluctuations for electricity, we simple divide - 398,000/15,500 = ~25 years. We can tweak the financial model, but we doubt we can tweak it to get a 10 year payout. That would require, again ignoring the value of money, annual maintenance and replacement costs, and the balance of the electric bill which (at least half) , their annual electric bill would need to soar from $31,000 per year to nearly $80,000 per year, right away, and for the next ten years (forget about any maintenance service costs) to get an annual electric bill of $39,800 "saved" for ten years!

On the CO2 "pollution" side of the equation. They currently are responsible for spewing 310 tons of CO2 into the atmosphere per year. Again we are halvsies, so the solar panels will replace 155 tons of CO2 emissions. Did you know that you (or they) could buy offsetting CO2 credits for between $2 and $15 per ton? So for no more than $2,325 per year they can offset the CO2.

We suggest putting the $398,000 in a savings account and using the interest to offset the CO2 and the account will never run out, EVER, in fact it will probably GROW.

Why is almost a half a million dollars being spent on this project? 2 net jobs for the year? Another future property maintenance liability? In the most basic sense there is no justification, financial or environmental (for this site specific case).

We propose that America's efforts are better spent practicing conservation (reduce consumption!), to ramp up research funding, and work diligently to keep the flow of affordable energy moving so that we can climb out of this economic hole stronger than before.

Increasing the cost of energy to make stale technology viable is wasteful, and bad policy, and at this strained economic time, a potential death knell for our high quality of life.