Thursday, February 26, 2009

P44. Pick Points

Half-a-dozen or so stories of interest.

Well the new Administration now has a new budget, and there are significant changes for the fossil fuel industries. Oil and gas “preferences” will be eliminated for a total of $31.5 billion by 2019, and, as I noted earlier, there is the hope for carbon credit income of around another $80 billion. This is not a single shot proposal
It also recommended repealing the enhanced oil recovery credit, the marginal well tax credit, the expensing of tangible drilling costs, the deduction for tertiary injectants, and the passive loss exception for working interests in oil and gas properties.
The proposals have not gone un-noticed and there is the anticipated set of reactions. There is a difficult balance to be achieved between encouraging new production and extracting justifiable revenue. Unfortunately, relative to other industries the fossil fuel industries have one awkward catch attached to them. If we don’t have the fuel, we don’t have a resurgent economy. And, paraphrasing the remarks of the Saudi Oil Minister, “we cannot abandon the energy supplies from an old fuel, before we have achieved the supplies from the new.” And we are a long way from getting that amount of energy from sun and wind. So while we can take some money from the old, and give it to the new I sure hope someone has the balance properly evaluated. West Virginia, on the other hand, is just simplifying their tax structure While taxes have a habit, in the end, of being paid by the consumers, in Russia the government has just allowed the oil companies to increase charges, at a time that production costs are falling. The rationale falls back on the need for revenue if one is to continue investing in new fields.
The decision of the new Administration to reject Yucca Mountain as a nuclear waste repository is now final. Both the President and Energy Secretary Chu are opposed and the funding has been removed from the budget. Which is an interesting time for a company to propose processing Italian nuclear waste in Utah. Currently the case is before a federal judge in Salt Lake. However if any of this waste is shipped through Missouri it will now cost a new set of fees.

The Philippines have mandated a percentage of ethanol in their gasoline, and now are looking for ways to produce the ethanol. Cassava is the new feed crop and plans are moving ahead, against local opposition, to install some 20 plants by 2011. China has found that it is cheaper to produce ethanol from cassava than from corn or wheat where it can be grown.

Up in Canada the Ontario government is encouraging investment in solar and wind energies through the Green Energy and Green Economy Act . The concern is that to have a significant impact on need, the scale of new farms must be large, and there are still some technical issues to be resolved. There is a map of existing wind farms in Canada. In California utilities are taking a more pro-active role in encouraging solar, looking to fund 250 MW of construction over the next 5 years. The plan is to use eSolar solar thermal technology, using small tracking mirrors to focus the sunlight. Meanwhile Kender Energy is promoting a solar thermal system that heats helium as the energy transfer fluid.

In Indonesia investment is going ahead to develop a number of Geothermal Energy projects. In Georgia home owners can take the 30% credit promised in the stimulus package and add $2,000 from the state to help pay for ground source heat pumps (or geothermal heat pumps as they are called there) . It is hoped that this will allow the investment to be recouped in about 4 years., with drops in heating and cooling bills predicted to be up to 50%. (This implies an installation cost of around $20,000).

There is some suggestion that a floor has been found for oil prices, though no sooner had that been posted, then the price dropped on news of Japanese fiscal problems. Meanwhile the low price is giving Iraq some concern, since they need the revenue and are anxious to bring partners in to produce more oil.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.

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