Category Archives: Oil Industry

Mayor Patterson: Benicia needs to plan for the declining role of oil and gas

An E-Alert from Mayor Elizabeth Patterson
[Editor: Mayor Patterson has been falsely accused of wanting to run Valero Refinery out of town.  A careful reading of her position shows that she wants the City to plan jointly with Valero and economic advisers for a stable future as we face into the predicted and inevitable decline in carbon-intensive industries.  Other California cities are planning ahead.  Patterson urges Benicia to do the same.  See below.  – R.S.]

New state laws’ and policies’ impacts on Benicia’s future

By Mayor Elizabeth Patterson, Benicia, California, October 2, 2018
Elizabeth Patterson, Benicia Mayor 2007 - present
Elizabeth Patterson, Benicia Mayor 2007 – present

Does the city monitor economic trends to forecast the future revenue necessary to operate city services of public safety, road maintenance, safe drinking water, parks and recreation, library and community services?  To some extent, yes.  To the extent that there is an understanding of shifting economic activity such as declining role of oil and gas, no.  We have not done an in depth analysis of the impact of state policies and the law to achieve carbon neutrality by 2045.

Brown is calling for the entire California economy to become carbon-neutral by 2045. That would mean deploying a combination of new technologies to vastly reduce the release of carbon dioxide and other greenhouse gases, plus the widespread implementation of methods to capture the rest, so that the state’s net release of emissions already altering the climate in devastating ways would be zero.  [from KQED, Sept. 24, 2018]

What are the opportunities for the city to benefit from this carbon-neutral goal?  Should there be a working group with the city, Valero Refinery, economists and planners to think about 20 years from now?

What are other cities and counties doing to achieve carbon-neutrality?  Will we be on the leading edge or play catch up?  I will continue to advocate for thinking beyond tomorrow and seizing opportunities for Benicia’s economy to evolve for the future so that we continue to have what I think is the best small town in California.

Below is an article about what San Luis Obispo is doing to meet the challenge of carbon-neutrality by 2045.

Elizabeth Patterson, Mayor, City of Benicia


SLO wants to be carbon neutral by 2035, ahead of California

The Tribune, sanluisobispo.com, by Nick Wilson, September 25, 2018 03:06 PM

The City Council wants San Luis Obispo to be carbon-neutral by 2035, an ambitious target that’s 10 years earlier than Gov. Jerry Brown’s statewide goal of 2045.

The council last week directed staff to move forward with a climate action plan that could mean new building codes and ramping up citywide electrical vehicle charging stations, among several other initiatives.

Carbon neutrality, or net-zero energy, is the concept of reducing as much carbon dioxide and other greenhouse gases from the atmosphere as possible, with the overall goal to achieve a zero carbon footprint. It is achieved largely by replacing fossil fuel energy sources that emit greenhouse gases with renewables like solar and wind.

Greenhouse gases are emitted from cars, homes and businesses, as well as from livestock, among other sources.

An example of an electric vehicle charging station designed by Recargo, a Los Angeles-area company that’s planning to build four new DC fast-chargers in San Luis Obispo.

“This is aggressive,” said Councilwoman Andy Pease. “It’s a really big goal. I think we can do it. But I think it should be a goal within our Climate Action Plan development.”

The specifics of the city’s Net Zero 2035 commitment haven’t been formulated yet, pending the Climate Action Plan update next year.

But efforts undertaken by the city already have reduced greenhouse gas emissions in the city by 10 percent since 2005, with a goal of reaching a 15 percent reduction by 2020.

Ideas to further reduce greenhouse gas emissions, based on California Energy Commission recommendations, include:

▪ Reducing solid waste (including making sure people recycle and reuse items they consume, and compost food scraps), eliminating the need for landfills;

▪ Using carbon-free electricity, while transitioning from fossil-fuel based appliances and technologies (such as phasing out internal combustion-based vehicles in place of electric ones, and ratcheting down natural gas-fired furnaces or water heaters in favor of high-efficiency heat pump models that run on clean electricity, for example);

▪ Creating new laws around building codes to ensure efficient, clean energy uses rather than natural gas ones (pending legal and practical study of that possibility to be reconsidered by the council in 2019);

▪ Finding ways to attain carbon sequestration, meaning strategies to manage city forests that convert carbon dioxide into nutritional benefits for tree growth, and other means;

▪ Encouraging efficient use of water and cars (walking and biking whenever possible, versus driving, for example).

Despite its commitment, the council will wait until its Climate Action Plan Update next year to formally decide on the 2035 goal, but it’s united in trying to implement policy to set that timeline in motion, which council members acknowledge is ambitious.

The council was divided on whether to adopt a formal resolution to set the 2035 Net Zero target – immediately creating a formal policy directive to work from, rather than waiting to formalize that goal after more research on how it would affect city residents, builders, existing policy, land use and other considerations.

Mayor Heidi Harmon argued in favor of adopting a resolution, saying that a formal, “bold” statement targeting a 2035 Net Zero goal could make it harder for a potentially new council, after this November’s election, to roll back that policy.

“I think this is so important, and I know how tough culture shift is,” Harmon said. “But this is one of the main reasons I got elected was to be a champion on climate and have real, actionable things that we’re doing.”

But Councilwoman Carlyn Christianson said that an “action plan” will better inform the council before it signs off on a 2035 policy.

“There are large numbers of people who emotionally react one way or another on these issues,” Christianson said. “We need to know exactly what we’re talking about, and we kind of don’t (without further staff research).”

    GOP Tax Law Bails Out Fracking Companies Buried in Debt

    Repost from DeSmogBlog
    [Editor: See also the Pacific Standard report, Inside The Tax Bill’s $25 Billion Oil Company Bonanza.  – RS]

    GOP Tax Law Bails Out Fracking Companies Buried in Debt

    By Justin Mikulka • Thursday, April 26, 2018 – 08:44

    A Scrabble board spells out 'Bankruptcy' overlaid on an unconventional oil and gas rigEOG Resources is one of the top companies in the fracking industry, and thanks to the new tax bill passed by Republicans and President Donald Trump at the end of last year, EOG had an exceptionally strong year compared to 2016.

    In 2017, the company reported a net income of $2.6 billion. The previous year? A loss of $1.1 billion. That financial turnaround seems very impressive until you realize that $2.2 billion, or about 85 percent, of its 2017 income was the result of the new tax law. Without that gift from the GOP and Trump, EOG would have lost approximately $700 million between those two years. Instead they are $1.5 billion ahead of the game.

    With numbers like these, it is easy to see how the Tax Cuts and Jobs Act of 2017 was a much-needed lifeline for the money-losing fracking industryEOG is routinely touted as one of the best shale oil and gas companies. Yet the company still lost $700 million in the past two years. Or at least it would have if not for the tax bill.

    This is the same company that an analyst at the investment advice website Seeking Alpha says is “generally considered one of the best unconventional upstream oil and gas players in the business, and its financials back it up.” If those are the best financials in your industry, your industry has a big problem.

    An interesting side note is that EOG stands for Enron Oil and Gas, which was spun off as its own company from Enron — the company notorious for one of the great energy Ponzi schemes of the 20th century. Today, an Enron spinoff company is being held up as the most fiscally sound in the shale oil industry.

    And Seeking Alpha is now pushing EOG as a good investment and wondering when “the equities market will wake up and smell this opportunity” despite EOG still being over $6 billion in debt. Without the tax overhaul it would be much harder to make this argument.

    There is one prominent person in the shale industry warning against rosy forecasts for shale oil, and that is Mark Papa, head of independent oil company Centennial Resource Development. Papa’s last job? CEO of EOG Resources.

    Continental Resources is another of the shale companies being heralded as a good investment in 2018. Continental is run by Harold Hamm who was an advisor to the Trump campaign and has taken the title of “Shale King” that once belonged to Aubrey McClendon. Hamm’s net worth is estimated at over $13 billion.

    Thanks to the new tax law, Continental took home an extra $700 million because its effective tax rate for 2017 was negative 406 percent.


    Continental Resources 2017 Annual 10-K Filing

    And Continental needed that money (although Hamm certainly doesn’t). In 2007 Continental had $165 million in debt and paid $13 million a year in interest on that debt. In 2016 its debt had ballooned to $6.5 billion and the annual interest payments rose to $321 million. The GOP tax law essentially pays off two years of Continental’s interest payments, allowing this failing business model to continue because Continental has not been generating enough income to pay even the annual interest on its debt.

    While the company he leads is drowning in $6.5 billion of debt, Harold Hamm is personally worth twice that amount. He’ll be fine. He was easily able to afford one of the most expensive divorce settlements ever.

    These are just two examples of shale companies receiving an immediate financial lifeline from the GOP tax bill. These companies also will benefit from lowered tax rates in future years. However, this one-time handout simply masks the reality that the shale revolution looks a lot like a Ponzi scheme enriching CEOs and Wall Street financiers by producing oil and gas with borrowed money that is unlikely to be paid back in the future.

    And Hamm and the Wall Street financiers have no incentive to do anything differently. Sure bankrupt energy companies destroy worker pensions, wipe out investors equity, layoff thousands of workers — but if we use the coal industry as an example — CEOs will still get bonuses after driving their companies into bankruptcy.

    Tax Bill Especially Beneficial to Oil Companies

    The benefits of the new tax bill are certainly not unique to oil and gas companies. Utility companies did even better and the big Wall Street banks who are financing the cash-burning shale industry also are awash in new profits thanks to the GOPtax overhaul.

    However, due to the nature of how oil and gas companies book profits and losses — and the epic money-losing streak the shale industry created over the past few years — these companies benefited more than most.

    To be clear — this bill which was signed at the end of 2017 was applied to the deferred tax liabilities that were already on the books — thus erasing a large chunk of the liabilities for these companies that had built up while the industry kept borrowing to drill more and ultimately lose more money. Simply a bailout of reckless financial behavior by any other name.

    And it wasn’t just the companies primarily working in shale that benefited. ExxonMobil raked in a $6 billion benefit from the new tax law, which even CNN Money referred to as a “gift.”

    Industry Will Use Bailout to Borrow and Drill More 

    In discussing the trade deficit President Trump recently tweeted the following:

    Coming from a man whose career includes multiple bankruptcies, this shouldn’t be surprising. The shale oil industry definitely has a kindred spirit in the White House.

    What happens when you give free money to gamblers on an epic losing streak? In the shale industry, they double down.

    ExxonMobil has promised to use the billions it gained from the tax bill to … drill and frack more shale oil. Which is likely to result in further discounts of Permian Shale oil, which will lower the price of oil and put more pressure on the heavily leveraged shale companies.

    While the mainstream media is pushing the industry message that shale companies now are focused on profits instead of just production volume, record U.S. oil production and predictions for even greater increases would appear to reveal the lie in that promise. Just as most sharks must swim to stay alive, shale companies must drill to preserve CEO bonuses, which are often tied to oil production, not profits. So, they drill. Even when that means losing money on nearly every barrel of oil they pump.

    A graphic from the Wall Street Journal reveals just how much money the shale industry has been losing compared to traditional oil — all while CEOs such as Harold Hamm were amassing billions in personal wealth. The shale oil industry generated free cash flow pumping oil for one brief period in the last seven years. Hamm has done a bit better personally during that time frame.

    Shortly after President Trump signed the new tax bill, he took another vacation to Mar-a-Lago where he reportedly told those in attendance: “You all just got a lot richer.”

    A rare moment of honesty from the President. And while he wasn’t speaking specifically to shale oil CEOs — it’s safe to say they got the message loud and clear.


    Follow the DeSmog investigative series: Finances of Fracking: Shale Industry Drills More Debt Than Profit

      INSIDE THE TAX BILL’S $25 BILLION OIL COMPANY BONANZA

      Repost from Pacific Standard
      [Editor: Valero Energy’s windfall of DIRECT ONE-TIME 2017 TAX SAVINGS from the Trump tax law was $1.9 BILLION, according to Valero’s 4th quarter 2017 SEC filing .  See chart below. See also Valero’s Feb 2018 press release and Valero’s detailed SEC 2017 Year End Fiscal Report.  – RS]

      A Pacific Standard analysis shows the oil and gas industry is among the tax bill’s greatest financial beneficiaries.

      By Antonia Juhasz, Mar 27, 2018
      President Donald Trump pitches his Tax Cuts and Jobs Act at the Andeavor oil refinery in North Dakota in September of 2017.
      President Donald Trump pitches his Tax Cuts and Jobs Act at the Andeavor oil refinery in North Dakota on September 6th, 2017. (Photo: WhiteHouse.gov)

      Last month, during a retreat in West Virginia, congressional Republicans set out their 2018 party goals. Their primary objective is to hold onto their majorities in the House of Representatives and the Senate, and the key mechanism for doing so is to ride the coattails of the Tax Cuts and Jobs Act. “The tax bill is part of a bigger theme that we’re going to call The Great American comeback,” said Representative Steve Stivers (R-Ohio), chairman of the National Republican Congressional Committee. “If we stay focused on selling the tax reform package, I think we’re going to hold the House and things are going to be OK for us.”

      More than 50 percent of the tax bill’s benefits will go to the wealthiest 5 percent of Americans, and more than 25 percent to the wealthiest 1 percent, according to the Institute on Taxation and Economic Policy. As Businessweek put it, “President Donald Trump and Republicans sold their $1.5 trillion tax cut as a boon for workers, but it’s becoming clear just two months after the bill passed that the truly big winners will be corporations and their shareholders.”

      Pacific Standard‘s original analysis finds that it is the oil and gas industry, including companies that backed the presidency of Trump and whose former executives and current boosters now populate it, that are among the tax bill’s largest and most long-lasting financial beneficiaries.

      Just 17 American oil and gas companies reported a combined total of $25 billion in direct one-time benefits from the 2017 Tax Cuts and Jobs Act. Many of the companies will also receive millions of dollars in income tax refunds this year. Looking forward, the Tax Act then reduces all corporate annual tax bills by a minimum of 40 percent every year in perpetuity, while adding new benefits that function as government subsidies for the oil and gas industry. The companies’ activities in the United States are made less expensive, thereby encouraging a further expansion of oil and gas operations.

      Pacific Standard reviewed the Annual 10K and Fourth Quarter Reports filed with the U.S. Securities and Exchange Commission for 2017 by 17 U.S. oil companies, looking at the largest companies in production, refining, and pipelines that also clearly specified the impacts of the Tax Act in their results. Private companies, such as Koch Industries, which undoubtedly benefit from the legislation, could not be included because they are not required to make these financial reports publicly available.

      $25 BILLION IN OIL COMPANY TAX SAVINGS

      Screen Shot 2018-03-25 at 6.19.30 PM
      (Chart: Antonia Juhasz/Pacific Standard)  …CLICK TO ENLARGE

      Continue reading INSIDE THE TAX BILL’S $25 BILLION OIL COMPANY BONANZA