A Natural (Gas) Recovery

Reposted from Western Free Press

By Greg Conterio

The economy is bad.  Let’s be honest—despite the spin, with the media trying to convince us all that less than 2% annual GDP growth is a good-thing, and 7% unemployment represents “light at the end of the tunnel,” the economy is still bad.  I hear from my clients across a variety of industries, and they agree—it’s bleak.  Everyone is hurting.  The talk is whether this really is the “new normal.”  For the first time in my adult life, I hear people talking of an actual recovery in terms of “if” not “when.”

natural_gasWell, I’m not ready to give up so easily.  This may be the longest, worst, most depressed economic period since the 1930’s (…which was the last time we had a Progressive in office, but I digress…) but I don’t think this is the new normal. Not by a long-shot.

Suppose I were to tell you we might be sitting on the cusp of an economic surge of unprecedented proportion.  A surge modestly projected to increase annual GDP by half a trillion dollars or more in the next seven years.  Do you think that might create a few jobs?  Bump-up our standard of living a little bit?  Perhaps even pay-down some of our astronomical national debt, provided we can get those clowns in Washington to work within a rational spending allowance?  Of course, much is dependent upon those same clowns, and our ability to convince them who they really work for, but I’ll get back to that.

McKinsey & Company released a report this month titled Game Changers: Five opportunities for U.S. Growth and renewal.  You can download the complete report; it is well worth reading if you are interested in the potential future of our economy.

While other writers have ably dealt with the complete McKinsey report, such as the Wall Street JournalBusiness Insider, and Counsel on Foreign Relations, I would like to focus on the one sector from the report with the most potential impact, the one that I also see as something of a linchpin to unlocking the other sectors—that of course being the energy sector, with special focus on the emerging shale oil and natural gas opportunities.

Beginning in about 2005-2007, U.S. shale gas production began to climb dramatically as a result of technical advances in hydraulic fracturing and horizontal drilling.  Since 2007, annual gas production has grown by 50% per year, and with large new fields discovered recently in the Bakken, Marcellus, Utica and Morrison formations, the U.S. has more than 317 trillion (with a “T”) cubic feet of proved natural gas reserves.

While there have been equally encouraging discoveries in oil reserves, shale gas is particularly exciting and has huge economic potential to affect a number of different sectors.

Energy independence

The boom in natural gas production has forced prices down domestically, from $13/MMBtu (one million Btu, or British Thermal Units) to about $4/MMBtu, or about a 60% decrease.  This is already creating a drive to convert from oil to natural gas for industrial and residential andcommercial transportation energy needs.  Moving from oil to natural gas cannot happen overnight, and with the current administration’s hostility to both oil and coal, prices and domestic development of those resources can be expected to remain deliberately inflated for the foreseeable future.  But as natural gas development gains momentum, the prospect of exporting LNG or liquid natural gas creates the possibility of neutralizing the cost of continued oil imports.

Cross-sector economic growth

Becoming an exporter of LNG means renovating part of our transport industry, specifically converting under-utilized oil import terminals into export terminals for LNG.  According to the McKinsey report, the U.S. Department of Energy has already approved two such conversions, and is reviewing applications for 20 more.  This of course represents a “stimulus” and job creation for several years’ worth of construction, engineering, and infrastructure projects, and represents just one of the ancillary effects of the boom in natural gas.  Dramatically increased energy costs over the past several years have been a significant contributor to rising costs of goods and services across the board, whether it be transportation, electricity, heating, or nearly anything you care to name.  The cost and relative abundance of energy is one of the keys to unlocking economic growth in all sectors, which is why McKinsey’s report shows the potential impact of energy, and particularly shale gas, as far outstripping the other game-changing sectors.  It is the one sector that impacts ALL others.  Put another way, it is the one game-changing sector that can significantly hamstring all the others if it were taken out of the picture.

A cynic may point out that the only reason natural gas is booming right now it that the current administration didn’t anticipate the industry’s sudden rise, and thus did not react quickly enough to dampen it with regulation the way it has done with coal and oil.  I would argue however that trying to do so now would cause such economic harm, as well as cost so many jobs, that even this administration could not withstand the resulting outcry.  The genie is already out of the bottle, so to speak.  But as the McKinsey report points out, it remains keenly in the best interest of the gas industry to continue to develop safe, clean, and responsible methods of recovery.  Certain political cohorts—and we all know who they are!—have already demonstrated their willingness to go to completely dishonest lengths to vilify techniques like hydraulic fracturing, so it’s easy to imagine what they would do if they didn’t have to make things up.  Still, without interference from the government, or hysterical propaganda from the environmental movement, natural gas is a good reason to believe in a brighter economic future.

Prop 204 a giveaway to the construction industry

By Graydon Holt

You have to hand it to the construction industry companies in Arizona that builds roads and public transit. They found a clever way to grab millions in taxpayer money every year without answering to the state legislators elected to spend public funds.

Vote No on 204

Vote NO on 204!

Proposition 204 is their route to riches. The Proposition would raise at least $1 billion a year by installing a one-cent permanent increase in the state sales tax rate. About $100 million a year would go to the construction industry. The proposition supporters claim that funds for education are somehow linked to jobs, meaning construction jobs.

This is a stretch beyond recognition. Voters all over Arizona must be scratching their heads and asking what in the world roads and light rail have to do with improving student performance in the classroom.The answer, of course, is nothing. Proposition 204 supporters say only that their tax and spend scheme will help the state economy. Well-built and maintained roads and transit certainly help Arizona’s economy. But they should not be linked to education spending.

The construction industry got this sweetheart deal by pledging to help pay for the Proposition 204 campaign. A $100 million a year subsidy paid by taxpayers is a good deal in exchange for a campaign contribution. Voters should cancel the deal and vote no on Proposition 204.

Read other posts by Graydon Holt at Western Free Press

Prop 204 is a grab bag of earmarks and pork projects

By Graydon Holt

It is time to tell the truth and label Proposition 204 the greatest earmark-spending scheme in the history of the state.

We all know that earmarks are end runs around the taxpayers.

Earmark professionals populate legislatures from coast to coast and have long made a comfortable home in the United States Congress. They stash money for their pals and pet projects in huge pieces of legislation knowing that hardly anyone will notice.

After years of abuse, the earmark pros were so fully exposed and embarrassed in Washington; they beat a retreat and pulled back. The full light of day ended the process, at least for now.

Proposition 204 is a shameless use of the earmark technique.

It takes about $1 billion a year in sales tax money and spreads it around to the education bureaucracy and special interests that have nothing to do with education. High on the list is the road construction industry that helped pay for the Proposition 204 campaign.

To lock it down, the proposition says the legislature would have no say in how the education money is spent. So much for the citizens who pay the sales tax. Their elected representatives would be shut out.

This is an earmark to beat all earmarks. Voters won’t fall for it. They will vote no on Proposition 204 on Election Day.

Read other posts by Graydon Holt at Western Free Press

Prop 204 campaign hiding behind the children

By Graydon Holt

The most offensive thing about Proposition 204 is the cynical ploy to hide behind young children to feather the nest of special interests. Never underestimate the gall of people who want to get their hands on the taxpayers’ money.

The know-it-alls who came up with Proposition 204 are pulling the oldest trick in the book. Trick the voters. Spin a myth that cruel legislators are shortchanging schools, devise a scheme to grab a cool $1 billion a year that the state legislature can’t touch, spread the money around to your friends in the education bureaucracy, and then pretend that all the money will help students and teachers.

Truth be told, the Proposition 204 proponents are control freaks. They don’t like the idea that elected representatives in the legislature spend our sales tax money. Talk about standing our democratic system on its head. What they really don’t like are the legislators the people select.

They should run their own candidates if they don’t like the ones currently in office. That’s how the system works. Get in the game.

Most of all, stop running ads filled with students and scenes of schools. You are using the children. You really want to control the money and decide who gets it – your cronies and pet projects.

Voters are too smart to fall for this scheme. They will reject Proposition 204 on November 6.

Read other posts by Graydon Holt at Western Free Press

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