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.

State Resources

Would you believe the State of Ohio doesn't know and can't tell you who many acres we own, or even where it all is? Neither can they tell you specifically what minerals interests that we own.

This isn't really that strange or uncommon in fact. Often fractional property interests are conveyed and through time is widely distributed in tiny pieces.

Furthermore, each state agency who owns property, basically manages that property itself. All the property, that means their mineral interests as well. Certainly the Department of Transportation can assess and evaluate it's own mineral estate interests, right? And I am a doctor, let me write you a prescription. If you had an expert in the family you would ask, right? How often do you think the the Ohio Division of Geological Survey is asked about mineral resources from other state agencies? The Survey is home to the experts within state government and they are rarely, if ever consulted, on mineral (geologic) resources.

Nor can they tell you the total value of the property they are managing (particularly the mineral estate). And by value, we mean tangible value to the citizens of Ohio. A value that considers all potential revenue generating resources. This is not to say just because we know the value of something that we are somehow obligated to exploit it. It is like your home, you kind of like to know its value, so you know how much equity you have in it. Whether you chose to access that equity, well, that is a separate and distinct question.

What we are really talking about here is oil and natural gas, although the same applies to any potential resource (coal, peat, limestone, gravel, etc.). With respect to these mineral interests we don't know what the value is, and state government are not the people to make those assessments. Reserve analysis can be excruciatingly simple, or excruciatingly complex (the product price has a huge impact on reserves - what will prices be in five years? Who knows?).

We applaud Ohio lawmakers for beginning to recognize that they are responsible for the management of the resources of the state. While the serenity and beauty of our natural areas, parks, preserves, lakes, etc seems boundless, we should temper a protective attitude with some reality. These areas have been farmed, timbered, dumped on, used, and abused since the colonization and industrialization of Ohio, so as beautiful as they are, pristine they are not. These areas are covered with trails, access roads, nature centers, cabins, and hotels, all of which have a significant and lasting footprint on the parks, not to mention the pollutants generated by the operations of the parks so that Ohio's can drive to and in, to hunt, fish, hike, and play (with smog spewing cars, boats, 4-wheelers, snowmobiles, etc).

We suggest that the oil, gas, and mineral interests of the parks, owned by the citizens of the state of Ohio, are also resources, potentially valuable resources. We believe the regulatory agencies in place can effectively manage wells on state lands as they manage the currently 50,000 producing wells that exist here today. The real risks are minimal, and the payoff enormous.

The economic impact of the energy extraction activities in the state is real and significant. Opening state lands and waters to development will create a significant economic impact, in jobs, in royalty revenue, all to produce a energy resource produced here, and used here, that reduce costly imports for the citizens of Ohio.

The states of Michigan and Pennsylvania have an excellent nomination system, by which parties who are qualified to assess value and are ready to assume the risk nominate properties that they are interested in. Once or twice a year the state holds an auction, for nominated properties which meet some criteria, and for which a minimum bid is established and we see what the market bares.

Don't believe the naysayers, the State lands contain significant energy resources, which like any other resource, should be managed. Make state lands, parks, natural areas, fee properties in any agency, available for reasonable resource development. It makes sense that these resource be managed by a central agency. Ohio needs Ohio’s energy, and we need, more than ever, every job we can keep or create here and every dollar we can save and keep within Ohio.