Energy Independence a Reality?

[franklin]

Vernal gets #5 on this "boomtown" list:

https://money.cnn.com/gallery/pf/2013/03/19/oil-boomtowns/index.html

They are going to have build a Dino theme park soon. Which begs the question, how much of a role does everybody think Utah ultimately would play in all this were we wisely to do what that original article projects?

That "big" U.S. Oil Sands project several months back that went before a judge was something like a mere 9,000bbl/day. Thought North Dakota might reach 400,000bbl/day in several more years. They're already at 800,000 or something. It would be amazing if they could get Utah up another 1,000,000bbl/day, and that could be sustainable for a few hundred years from what I hear.

On a side note, I hope Gov. Herbert doesn't give away our state resources to these companies without getting some good royalties for our school system. We could use it, especially down the road when Kennecott shuts down.

 

[One Brow]

How do we subsidize oil? The only thing I've found is paying them to extract old mine shaft methane gas because it's considered an air pollutant and we figure they can do it the cheapest. The only "subsidy" is making the product of their environmental cleanup profitable.

We don't give tax credits for for oil exploration any more? Or, are you being technical about a tax credit not being a subsidy?

 

[franklin]

We don't give tax credits for for oil exploration any more? Or, are you being technical about a tax credit not being a subsidy?

I don't know. I'm asking you. Also, is this a credit or is it an expense deduction the same as every other business in America expenses costs?

 

[babe]

A couple of interesting articles...

https://www.extremetech.com/extreme...a-nuclear-reactor-in-every-home-car-and-plane

https://www.extremetech.com/extreme...-or-how-small-science-will-defeat-big-science

David vs. Goliath

Pretty good links.

Cold Fusion is a reality, has been demonstrated or at least observed in many metals that pack hydrogen in the metal lattice, which is most metals. With the proximity of the "reactants" becoming essentially inter-atomic in scale when the only electron from hydrogen's "electron cloud" is , at low energy cost, a free proton, or in the case of deuterium, a free proton/neutron pair. Little is actually known about the nucleii of various metals in regard to "nuclear bonding", but it's clear that the huge energy barrier against bringing two nucleii together does have some holes in it in regard to approaching protons, neutrons, neutron/proton pairs.


(sent from my ranch, where the cows are scared of my lab)

 

[Beantown]

I don't know. I'm asking you. Also, is this a credit or is it an expense deduction the same as every other business in America expenses costs?

https://priceofoil.org/fossil-fuel-subsidies/

 

[Beantown]

In 2011 Oil subsidies were at 523 Billion, while renewable energy subsidies were at 88 Billion.

 

[babe]

I don't know. I'm asking you. Also, is this a credit or is it an expense deduction the same as every other business in America expenses costs?

I suppose in the case of OB this is a legit question, since it's the kind of question he asked you.

Businesses that don't write off research costs are looney-bin madhouses.

but I'm pretty sure he knows and accepts legit R/D costs as business expenses, and is referring to several legislated tax-favored specific development goals our congress has deemed worthy of their encouragement.

like the one you might use when you spend money getting a high-efficiency furnace.

 

[larryselbows]

I think we're getting dragged into the bushes with minutiae... Feel free to continue to discuss subsidies, but the point is that we need fossil fuels, there aren't any other practical options out there that can fulfill the world's energy needs.

 

[franklin]

Another useless link from Beantown. I'd look into this but it's almost 100% guaranteed to be more b.s. hype from the left trying to stir up onerous regulations pushed down on one industry and none of the others. I have no interest in picking and choosing losers is such a silly manner. Not to mention a convoluted tax code that we couldn't afford to regulate and no one could figure anyway.

We don't subsidize oil production. It's hype.

 

[babe]

I think we're getting dragged into the bushes with minutiae... Feel free to continue to discuss subsidies, but the point is that we need fossil fuels, there aren't any other practical options out there that can fulfill the world's energy needs.

too true. however, even though the cold fusion developments are getting the press, major governments and our military and space research agencies are taking it seriously. Newspapers largely owned by folks who also hold significant interests in the oil patch just are not going to give it the press.

But cold fusion is going to be coming out of the bushes and into practical application nevertheless.

And even so, we will be using carbon fuels for centuries as well. but back into the scrub brush. . . ..within a hundred years the government will be giving you a tax credit FOR releasing carbon into our atmosphere because of panic reactions to an oncoming ice age.

 

[One Brow]

I don't know. I'm asking you. Also, is this a credit or is it an expense deduction the same as every other business in America expenses costs?

It's actual tax credits. I'm not sure if they are in addition to or instead of expense deductions. I heard on NPR they are one of the items in the President's new proposals.

 

[One Brow]

Another useless link from Beantown. I'd look into this but it's almost 100% guaranteed to be more b.s. hype from the left trying to stir up onerous regulations pushed down on one industry and none of the others. I have no interest in picking and choosing losers is such a silly manner. Not to mention a convoluted tax code that we couldn't afford to regulate and no one could figure anyway.

We don't subsidize oil production. It's hype.

https://en.wikipedia.org/wiki/Energy_subsidies

The value of industry-specific subsidies in 2006 was estimated by the Texas State Comptroller to be just $3.06 billion - a fraction of the amount claimed by the Environmental Law Institute. The balance of federal subsides, which the comptroller valued at $7.4 billion, came from shared credits and deductions, and oil defense (spending on the SPR, energy infrastructure security, etc.).

I don't think the Texas State Comptroller is engaging in liberal hype, and that's $3 billion the oil industry doesn't need.

However, in the same article:

A 2010 study by Global Subsidies Initiative compared global relative subsidies of different energy sources. Results show that fossil fuels receive 0.8 US cents per kWh of energy they produce (although it should be noted that the estimate of fossil fuel subsidies applies only to consumer subsidies and only within non-OECD countries), nuclear energy receives 1.7 cents / kWh, renewable energy (excluding hydroelectricity) receives 5.0 cents / kWh and biofuels receive 5.1 cents / kWh in subsidies.

So, it is probably fair to say we subsidize oil and coal less than other types of energies.

 

[larryselbows]

https://en.wikipedia.org/wiki/Energy_subsidies



I don't think the Texas State Comptroller is engaging in liberal hype, and that's $3 billion the oil industry doesn't need.

However, in the same article:



So, it is probably fair to say we subsidize oil and coal less than other types of energies.

lol, how much time did you spend researching so that you could say "I TOLD YOU SO!!" on Jazzfanz?

 

[franklin]

I don't think the Texas State Comptroller is engaging in liberal hype, and that's $3 billion the oil industry doesn't need.

That's a wide blanket you're casting so I looked into this a little more. $1bln of the $3.6bln in that report (not $3.06 that wiki says) is "available only to independent producers who produce fewer than 1,000 barrels per day and any related royalty owners; the deduction is 15 percent of gross income for oil, gas and oil shale."

That's an expense deduction and not a subsidy, and goes to very small producers who aren't likely to be wildly profitable like the major integrated companies are.

Another $1.1bln:

The Expensing of Exploration and Development Costs Credit allows investors in oil or gas exploration and development to “expense” (to deduct from their corporate or individual income tax) intangible drilling costs (IDCs). IDCs include wages, the costs of using machinery for grading and drilling and the cost of unsalvageable materials in constructing wells.

Again, this isn't a subsidy but typical expensing. The question is at what rate these companies amortize their deduction, with those in favor of higher taxation claiming the expensing is happening at an accelerated rate (pushing tax liability a couple years down the road).

The Alternative Fuel Production Credit, implemented in 1980, applies to oil produced from shale and tar sands and natural gas produced from geopressured brine, Devonian shale, coal seams or biomass. In 2005, the Energy Production Act added some facilities that produce coke and coke gas to the production credit. In 2006, the credit was worth about $7.05 per barrel of oil-equivalent fuels. The credit has helped promote unconventional gas production and, after 2005, synthetic fuels produced from chemically altered coal. 11 Prior to the Energy Production Act, OMB estimated that the oil and gas industry would receive $890 million from this tax credit in 2006.

This is a subsidy, and at minimum should definitely go away after oil reaches a specific price/bbl. However, we have to realize that if this credit is leading to higher domestic production then we aren't actually paying the entire $890mm as we import less oil and create US jobs that pay it back in income taxes, etc.


One tax break I think should go away is the foreign tax deduction. They used to be royalties until the Saudi's cuddled up to the US firms and changed royalties to taxes so these companies could get a deduction here that our other multi-nationals don't enjoy.

So, it is probably fair to say we subsidize oil and coal less than other types of energies.

Doesn't look true:

Wind led the various renewables with a more than 10-fold increase in subsidy from $476 million to $4,986 million.
Solar subsidies increased by more than a factor of 6 from $179 million to $1,134 million and led the electricity sector subsidies on a unit of production basis.

https://www.instituteforenergyresea...ubsidies-for-renewables-increase-186-percent/

Not to mention the billions in state and municipality subsidies in addition to the federal ones.

 

[One Brow]

lol, how much time did you spend researching so that you could say "I TOLD YOU SO!!" on Jazzfanz?

It was the second link on Google.

 

[One Brow]

That's an expense deduction and not a subsidy, and goes to very small producers who aren't likely to be wildly profitable like the major integrated companies are.

Are you saying it's a good thing to subsidize small business owners when they are less profitable?

Again, this isn't a subsidy but typical expensing. The question is at what rate these companies amortize their deduction, with those in favor of higher taxation claiming the expensing is happening at an accelerated rate (pushing tax liability a couple years down the road).

Removed in an edit. The source is the comptroller's report, linked below. Notice that very report has a separate section for this $1.1 billion versus the $35 billion it describes as available to any corporation. It's inaccurate to say this is typical expensing, when the source makes it clear this is not.

Doesn't look true:

What, 0.8 doesn't look like less than 5.0, or are you saying those subsidies you mentioned weren't built into that 5.0? Did you just misread me?

More on the comtroller's report:
https://www.window.state.tx.us/specialrpt/energy/subsidies/

The Expensing of Exploration and Development Costs Credit allows investors in oil or gas exploration and development to “expense” (to deduct from their corporate or individual income tax) intangible drilling costs (IDCs).

Maybe this is a misstatement, I don't know. However, my understanding is that normally you make deductions from revenue, not from the tax. Would you agree deduction from the tax instead from revenue affords more value (basically, this would be the same as a tax credit, right), in effect giving something not available to any general business expense?

 

[franklin]

That's an expense deduction and not a subsidy, and goes to very small producers who aren't likely to be wildly profitable like the major integrated companies are.

Are you saying it's a good thing to subsidize small business owners when they are less profitable?

I've bolded the answer to your question which was contained within the quote you were questioning.

As far as taxes go, I fully support tailoring our tax code to match the activity in question. Strip wells provide a large part of our energy output (I read 25% earlier today but don't remember where) and create hundreds of thousands of high paying jobs. If accelerated expensing is required for all these jobs to get created then so be it. If you want to challenge the need for accelerated expensing in this scenario then make your case and let's vote on it.

Removed in an edit. The source is the comptroller's report, linked below. Notice that very report has a separate section for this $1.1 billion versus the $35 billion it describes as available to any corporation. It's inaccurate to say this is typical expensing, when the source makes it clear this is not.

Sorry for not being clear. All my quotes except the last one that included a link were from this report. You didn't question the $35bln special accelerated expensing that was stated as a deduction (not subsidy) available to all industries so I didn't mention it. Someone estimated in 1996 that 13% of the deduction possibly went to the oil industry but this could not be verified. Is there a reason you don't think this standard expensing should be included in GAAP? I have no problems getting rid of it for all if it doesn't make sense. I do find it ludicrous to target oil real estate only, but would be open to something like a manufacturing targeted acceleration if it could be shown as a net benefit to the country.

What, 0.8 doesn't look like less than 5.0, or are you saying those subsidies you mentioned weren't built into that 5.0? Did you just misread me?

I suppose we would have to decide on what a subsidy is first and add them all up. The solar credits are no doubt a direct subsidy. I don't know how the windmill tax stuff works.

Maybe this is a misstatement, I don't know. However, my understanding is that normally you make deductions from revenue, not from the tax. Would you agree deduction from the tax instead from revenue affords more value (basically, this would be the same as a tax credit, right), in effect giving something not available to any general business expense?

I'm unsure. Further on it says "The credit enables oil and gas producers to immediately write off as an expense these costs from income taxes rather than amortize them (spread the deductions out) over the productive life of the property.", which makes it sound like it they would expense it from net income (or deduct from revenue). I can read this either way. Your way and it is a subsidy that should be changed to a proper writeoff, IMO. No argument from me there.

 

[One Brow]

If accelerated expensing is required ...

Perhaps this is my naivte, but what sorts of industries are prevented from using accelerated expensing? If you buy a $2 million machine today, there's a law making it illegal to claim that entire amount against your net income this year? I can understand that if you choose spread out the costs of the purchase over several years, there might be limitations on that structure, but what you are suggesting seems bizarre.

I'm out of my depth here, though.

 

[franklin]

Perhaps this is my naivte, but what sorts of industries are prevented from using accelerated expensing? If you buy a $2 million machine today, there's a law making it illegal to claim that entire amount against your net income this year? I can understand that if you choose spread out the costs of the purchase over several years, there might be limitations on that structure, but what you are suggesting seems bizarre.

I'm out of my depth here, though.

It's depreciation. When a company buys an asset they write off the cost in proportion to its value decline. The depreciation rate is dependent on longetivity. I've heard real estate is depreciated on a 50 year schedule. Conversely, the Obama stimulus bill allowed companies to depreciate large truck purchases in 1 or 2 years. I don't know mining tax accounting at all, but there's an issue of hitting a gusher and placing, say, a $4,000,000,000 asset on the books in advance of realizing any gain (from sale or operations) but have only invested $400,000. In theory, that $4,000,000,000 could be taxed even though the well has not produced enough cash to even pay the tax bill. This, of course, would create an environment where the largest producers could feed off the hard work of small operators as they're required to fire sale just to pay the taxes. So we allow these small strip well operators to write off everything now and pay a much higher tax the following years as the oil is pumped out but the intangible expense deduction is already used up (or carried forward if expenses are in excess of gains in the first year).

Maybe nightmare39xx can come in here and explain this better.

 

[One Brow]

It's depreciation. When a company buys an asset they write off the cost in proportion to its value decline. The depreciation rate is dependent on longetivity. I've heard real estate is depreciated on a 50 year schedule. Conversely, the Obama stimulus bill allowed companies to depreciate large truck purchases in 1 or 2 years. I don't know mining tax accounting at all, but there's an issue of hitting a gusher and placing, say, a $4,000,000,000 asset on the books in advance of realizing any gain (from sale or operations) but have only invested $400,000. In theory, that $4,000,000,000 could be taxed even though the well has not produced enough cash to even pay the tax bill. This, of course, would create an environment where the largest producers could feed off the hard work of small operators as they're required to fire sale just to pay the taxes. So we allow these small strip well operators to write off everything now and pay a much higher tax the following years as the oil is pumped out but the intangible expense deduction is already used up (or carried forward if expenses are in excess of gains in the first year).

Maybe nightmare39xx can come in here and explain this better.

I would have thought assets might be subject to property taxes, or more likely capital gains taxes upon sale, but income taxes?

Again, in my naive understanding: this small prospector spends, say $300K/year on creating wells. This year he manages to hit the $4M (asset-value) gusher, which pumped out oil sold for (after pumping expenses) $200K. Are you saying that in any other industry, he gets taxed for making a $3.9M profit, instead of writing off a $100K loss, but since this is oil, that doesn't happen? It would seem to me the real problem is that other industries do get taxed that way. If as an individual, I patent a product, and that patent has an estimated value of $30K, I don't start paying taxes until I start selling rights or I sell the patent outright, to my understanding.