For decades, Mexico’s energy policy has largely boiled down to exporting oil for cash to fund state spending. Now the new government is negotiating with rival political parties to curb that practice and instead use state monopoly Petróleos Mexicanos to a different end: cheaper energy, said Pemex CEO Emilio Lozoya.
In an interview with The Wall Street Journal, the 38-year-old chief said the administration of President Enrique Peña Nieto was striving to overhaul tax and energy laws this year that Mr. Lozoya said would result in cheaper energy for consumers and companies that could drive a more competitive economy.
There’s also shale, too:
Mexico may hold the world’s fourth-biggest reserves of shale gas, according to the U.S. government. But Pemex has drilled only a few wells and not produced any gas. “Mexico ought to be producing more of its own gas, and eventually exporting it,” Mr. Lozoya, a lawyer and economist who got his master’s degree in public policy at Harvard said. “Clearly the geology that you have in some parts of the U.S. extends into Mexican territory. So it’s a matter of just investing and getting it done.”
Here in the USA, the government is holding up the Keystone pipeline, bans itself from off-shore drilling, and Obama pours money on “green” failures like Solyndra and other duds. Case in point:
President Barack Obama used his fifth State of the Union address to extol the virtue and job-creating power of federal investment in solar, wind and advanced battery development. Maybe he should have consulted his Department of Energy first.
In a scathing report issued Wednesday, the department’s Office of Inspector General said LG Chem Michigan Inc. misused most of $150 million in federal grants to build its battery cell manufacturing plant in Holland. The company used taxpayer dollars to pay employees to volunteer at local nonprofits, play games and watch movies.
Obama does not see how high-technology, industrialized economies run, grow, and thrive on cheap energy.
All in? Sixteen of the world’s top 20 most polluted cities are in China. The New York Times reported just a couple weeks ago that Beijing’s air quality ranked a “crazy bad” 755 on a scale of 0 to 500.
The country has been building a new coal plant almost every week and plans 363 more, and China now emits almost twice as much CO2 as the U.S.
Mexico has a long way to go to a de-nationalization of the oil industry sector, which would solve many of its problems. The US, however, is set on taking the wrong path.
Let me save you some time: There is nothing in there that will inform your opinion of Mitt Romney.
How do I know? Because I saw many of the exact same documents months ago, after requesting them from a Bain Capital investor. What I quickly learned was that there was little of interest, except perhaps for private equity geeks who want to know exactly how much Bain paid for a particular company back in 2006. Sure I would have loved the pageviews, but not at the expense of tricking readers into clicking on something of so little value.
Let’s go over what Gawker believes it found:
“Mitt Romney’s $250 million fortune is largely a black hole: Aside from the meager and vague disclosures he has filed under federal and Massachusetts laws, and the two years of partial tax returns (one filed and another provisional) he has released, there is almost no data on precisely what his vast holdings consist of, or what vehicles he has used to escape taxes on his income.”
There actually is plenty of data on Romney’s Bain-related holdings. For example, Bain’s own website lists most of its active private equity portfolio companies. Then there are third-party databases operated by such organizations as Dow Jones, Thomson Reuters and CapitalIQ — each one of which includes searchable lists of past Bain Capital deals (often with detailed financial information). And, finally, Bain isn’t really in the business of doing tiny purchases of unknown family businesses. When it buys something, there is almost always a press release and/or media coverage. Perhaps Gawker hasn’t yet discovered the magic of Lexis-Nexis. Maybe it should sign up for the daily Term Sheet email.
“Today, we are publishing more than 950 pages of internal audits, financial statements, and private investor letters for 21 cryptically named entities in which Romney had invested… Many of them are offshore funds based in the Cayman Islands.”
I get it. “Cayman Islands” is supposed to be code for tax avoidance or shady dealings. But the reality is that most private equity firms form Cayman-domiciled funds to accommodate investors based outside of the United States (particularly when those funds also are making some non-U.S. investments). One private equity fund formation attorney I spoke with says that the Caymans structure usually doesn’t have real tax benefit for the non-U.S. investors, but that they nonetheless feel more comfortable. He added that, for most U.S. private equity executives, the Cayman structure has little to zero impact in terms of personal taxes.
Gawker Media has been going through a big corporate revamp over the past year or so. The ultimate parent company has never been in the U.S.: it used to be Blogwire in Hungary, but now Blogwire Hungary has become a subsidiary of a Cayman Islands entity called Gawker Media Group Inc, which also owns various U.S. operations like Gawker Media LLC, Gawker Entertainment LLC, Gawker Technology LLC, and Gawker Sales LLC.
Then there’s this little tidbit of information; something regarding obscene profits, untaxed revenue, and side-stepping the IRS…
The Hungarian companies get all of Gawker’s international income, which flows in from 13 different salespeople in ten different countries and which, since it’s international income flowing to a Hungarian company owned by a Cayman Islands parent, is basically pure profit which never comes close to being taxed in the U.S. The result is a company where 130 U.S. employees eat up the lion’s share of the U.S. revenues, resulting in little if any taxable income, while the international income, the franchise value of the brands, and the value of the technology all stays permanently overseas, untouched by the IRS.
As Rusty says, “This is weapons-grade hypocrisy…” but what else can you expect?
State Grid Corp. of China said Tuesday it agreed to buy seven high-voltage electricity transmission assets in Brazil from Spanish construction firm Actividades de Construccion y Servicios SA ACS.MC -2.06% and its subsidiaries for 2.04 billion real ($1 billion), including debt.
The acquisition marks State Grid’s second investment in Brazil and its fourth major investment overseas, and is the most recent in a string of deals in which a European company has looked to exit an investment amid the debt troubles facing the continent.
State Grid’s latest deal involves seven electricity-transmission assets spanning eight states in Brazil, with a total length of about 2,792 kilometers. A majority of the assets to be acquired are currently in operation, with the remainder expected to begin commercial operation by the end of this year, the company said in a statement.
This continues the trend where China expands its reach in our hemisphere; this time, however, China is not acquiring a raw materials company.
Last night I was having a quiet evening at home when the doorbell rang. An earnest young woman was gathering signatures for a petition against fracking. To the best of my knowledge there is no fracking in Princeton (and if there was, I would probably support it), so I told her I wasn’t interested.
She insisted that I sign, since the petition was “against the fracking companies in Pennsylvania sending their radioactive waste to New Jersey.” Again I declined, again she persisted. I wished her a good evening and shut the door. She yelled something to the effect of “the evil must be stopped,” and moved on.
The Armendriz video (which appears to have been taken off YouTube late late night) was shot around the same time he was preparing the action against Range. Here’s the highlights of what he said.
The Romans used to conquer little villages in the Mediterranean. They’d go into a little Turkish town somewhere, they’d find the first five guys they saw and they would crucify them. And then you know that town was really easy to manage for the next few years.
And so you make examples out of people who are in this case not compliant with the law. Find people who are not compliant with the law, and you hit them as hard as you can and you make examples out of them, and there is a deterrent effect there. And, companies that are smart see that, they don’t want to play that game, and they decide at that point that it’s time to clean up.
And, that won’t happen unless you have somebody out there making examples of people. So you go out, you look at an industry, you find people violating the law, you go aggressively after them. And we do have some pretty effective enforcement tools. Compliance can get very high, very, very quickly.
That’s what these companies respond to is both their public image but also financial pressure. So you put some financial pressure on a company, you get other people in that industry to clean up very quickly.
The former professor at Southern Methodist University is a diehard environmentalist, having grown up in El Paso near a copper smelter that reportedly belched arsenic-laced clouds into the air. (Here’s a profile of him in the Dallas Observer.) Texas Monthly called him one of the 25 most powerful Texans, while the Houston Chronicle said he’s “the most feared environmentalist in the state.”
Nevermind that he couldn’t prove jack against Range. For a year and a half EPA bickered over the issue, both with Range and with the Texas Railroad Commission, which regulates oil and gas drilling and did its own scientific study of Range’s wells and found no evidence that they polluted anything. In recent months a federal judge slapped the EPA, decreeing that the agency was required to actually do some scientific investigation of wells before penalizing the companies that drilled them. Finally in March the EPA withdrew its emergency order and a federal court dismissed the EPA’s case
The video has been pulled but you can watch a snippet at a Fox News report,
found the YouTube with Almendariz’s statements here,
It is important to grasp why this kind of excessive zeal is the rule rather than the exception from federal regulators, and always will be. Armendariz is wholly typical of the regulator mentality, and we won’t prevent future “crucifixions” until we make fundamental changes to revive the rule of law and restore some kind of democratic accountability to the administrative state.
President Obama recently touted algae as a potential source of energy, and now the Environmental Protection Agency has invested in converting spinach into an energy source.
The EPA awarded a $90,000 grant over the weekend to Vanderbilt University students “who designed a biohybrid solar panel that substitutes a protein from spinach for expensive silicon wafers that are energy intensive to produce, and is capable of producing electricity.”
The team of engineering students — Eric Dilbone, Phil Ingram, Trevan Locke, Paul McDonald and Jason Ogg — “also won the Marketplace Innovation Award from Paladin Capital, a private equity firm, and the Student Choice Award, a special nod from their peers in competition,” according to Vanderbilt.
The idea is that “a miniature bio-cell can produce minute electricity from Photosystem I (PSI), the protein in plant chloroplasts that converts light to electrochemical energy.”
We’re not talking megawatts here:
They won the grant despite “nagging doubts about how the slight power from the panel would convince the judges,” one Vanderbilt professor explained.
Heck, when my son was little, Santa gave him a potato clock for Christmas. I wonder how much I could get from the EPA if a canister of Pringle’s could pass for a “biohybrid solar panel”.
Back on the crony energy/Solyndra front (you do remember Solyndra, don’t you?), as the time Solyndra went upside down the defenders of green energy downplayed it by saying it was just one loan out of $35 billion, and investments sometimes go bad, right? What’s the big deal. The Obama Administration has now released a dry report saying that total taxpayer losses from bad loans in the program may reach $2.7 billion, which starts to look like real money, even if the figure is a low-ball estimate, which is likely is. The Wall Street Journal comments on the issue today.
Only in Washington is $2.7 billion in losses considered performing “well.” But the bigger problem is that the Allison report addresses none of the main issues. Because Mr. Allison’s brief was to examine only current loans, the report failed to investigate the bankruptcies of Solyndra or Beacon Power, an energy-storage company. So apart from its biggest failures, the program is a success.
It’s nice that he’s discovered the importance of domestic energy development, but his rhetoric overlooks his own policies over the past two years. Yesterday on the Senate floor Minority Leader Sen. Mitch McConnell (R-Ky.) blasted the president for comments he made in Brazil “when the President told the Brazilian president that the United States hopes to be a major customer in the market for oil that Brazilian businesses plan to extract from new oil finds off the Brazilian coast.”
Congress should test the president’s seriousness on energy development and put a bill on his desk that puts the breaks on the EPA and opens natural gas and oil fields.
Here are the three biggest myths from President Obama’s remarks this afternoon:
“We can’t escape the fact that we control only 2% of the world’s oil.” This is a common refrain among anti-drilling Democrats and environmentalists, and it’s repeated enough that many people accept it as true. In reality, it’s 100% false. The number comes from a highly conservative estimate from the Energy Information Administration totaling America’s proven reserves where we are already drilling. It does not include the 10 billion barrels available in the Arctic National Wildlife Refuge. It does not include most of the 86 billion barrels available offshore in the Outer Continental Shelf, most of which President Obama has placed under an executive drilling ban. And it does not include the 800 billion barrels of oil we have locked in shale in Wyoming, Utah, and Colorado. Those shale resources alone are actually three times larger than the proven reserves of Saudi Arabia, so the claim that the U.S. only has 2% of the world’s oil is clearly false.
“Industry holds leases on tens of millions of acres both offshore and on land where they aren’t producing a thing.” President Obama adds to this whopper by saying he wants to “encourage companies to produce [on] the leases they hold.” While this sounds like a common sense fix, it’s actually just blind rhetoric reserved only for people with a shocking ignorance of drilling. You can read more about this here and here, but it basically boils down to this: A lease is for exploration and production, not just production, and because oil is not equally distributed across the globe, one parcel of leased acreage may not hold any oil. Moreover, due to the circuitous and needlessly complicated permitting process, it can take years for companies who own a lease to complete their exploration activities. To get to the production phase, it could take as long as ten years. Ironically, President Obama wants to tax companies for not producing on their leases, even if the federal government’s refusal to grant permits is the reason why those companies are not drilling.
“Last year…our oil production reached its highest level in 7 years.” This is pure spin. President Obama is deliberately trying to take credit for actions unrelated to his policies. The increased level of production is due to the actions of previous administrations and production in the Dakotas where most drilling is occurring on private land. By contrast, the Energy Information Administration projects that there will be a decline in production of 220,000 barrels of domestic oil per day in 2011, and in 2012 America will produce 150 million fewer barrels in the Gulf of Mexico, all because of President Obama’s policies to discourage or ban domestic drilling. In addition, President Obama’s drilling moratorium (and subsequent refusal to issue drilling permits) has forced at least 7 rigs to leave the Gulf and sign contracts in other countries, taking much needed jobs and revenue with them.
As gas prices skyrocket, Americans are reminded every day that the federal government’s refusal to allow responsible domestic drilling can have an incredibly destructive economic impact. Instead of trying to fix this problem, the Obama administration has worked every day to make sure that America produces less oil and has to rely more on OPEC for our energy needs.