Bidens Infrastructure Plan and the Department of Interiors Forum on Oil and Gas Leasing | Petronerds Podcast


Welcome to the pet nerds. Podcast with your host. Tricia curtis ceo. Petro nerds and even bellamy. This show combines upstream and midstream expertise in rocky mountain showdown brought to you by digital wildcatters. Welcome back to the podcast. This is episode. Ten of the petronas podcasts. So easily pretty excited about this. I'm your host tricia. Curtis i'm the ceo of patrons and this is my co-host ethan. Bellamy the low tricia good to see you again. See you to. It's nice to actually be back in person together. I don't have the technical as may technical difficulties ahead last time. I don't have to argue with my father about our inability to get good video like we did last time. Yeah so it wasn't that bad. I mean we got shot on twitter. We got lots of shadows on twitter. Let's good it's because of the Mostly because of the audio let's dive in oil macro oil and gas on federal lands. Us exports the made in america tax plan infrastructure. It's april seventh. Twenty twenty one. This is episode ten. And we're going to dive right in. Let's start tricia with the us. Cutting its supply outlook well opec expense awesome great quite a great topic. So yeah we will start with. Us and we'll kind of dive into all this stuff. 'cause we do have. We have a lot of ground to cover. So the us actually a reduced the reduced outlook for for production. And i think it was vicky hall of the ceo of pioneer. I'm sorry we'll get to learn a second it was vicky hall. Who made some comments with regards to opec's what opec is doing and with what with Shale eloquent flat and she actually said so this is the hall of is the ceo of occidental petroleum and she actually was basically saying packet opec bosses done a great job and she was saying that the us were does not gonna see thirteen million barrels a day again I think she's said there the Too much investment in says would be required for the us to return to its peak of around thirteen million barrels per day so that that's her standpoint. She said this in this is a bloomberg article but she said this in riyadh in february's wall so she's echoed this a few times and then i think she also quoted saying they're trying to get back to a supply demand situation and she's talking about opec plus quote many of the countries worldwide needs sixty or seventy or eighty dollars to break even and so ultimately i think in two thousand twenty two will get to seventy dollars or better and the reason i want to bring this up because we thought we could circle around to this whole where prices are i right now where the industry seems to think prices are going. Seventy dollars is not unrealistic but also where we talked to opec plus last week in depth and those numbers and everything. And the one thing i just want to correct on here is that were were stuck right now at word range-bound at sixty dollars crude oil prices and Those fiscal break evens. Yes they technically need that to fiscal break. Even have achieved does do that when they want. Just because it's the fiscal break. Even they've got those prices in a few years so it it's not as relevant anymore. I don't think so to just say that. I mean seventy dollars more realistic than some of the prices. We were talking about last week but do agree with that. The big question is why anybody would be bullish over. Any extended period of time given up expert capacity. And that's the seventy price target is not that. That's not unrealistic right. We we were pushing. We're getting close those levels and it came back down. But i think that opec expert capacity and then what we're seeing now with the us as we talked about last week. Us sort of driving the growth engine for demand. All these concerns now. Obviously brazil's not doing well with the virus india's not doing what was the virus. The raw in europe is ben atrocious. So we're sort of that. Bright spot for demand. So let's say everything gets things. Start getting a little better. You still have all this burke fasi and just to the numbers because i don't know if we stated them correctly Clearly enough in the last podcast but it's opec plus said we're gonna do two million barrels a day. The math doesn't quite work. If you run these numbers they said in its may. It's apron june so remember. That bus meets every month so they can easily. They're not gonna probably change anything this next meeting. But you know in a couple of months. They could probably change course if they want to. They're gonna add three hundred fifty thousand barrels Dave ac one month's another three hundred fifty thousand barrels day back another month and then four hundred fifty thousand barrels a day if you do those numbers. That's not quite a million barrels a day and then during that time period also saudi arabia's gonna bring their million barrel they cut back so you're looking at a million or two million barrels a day plus for that for treating before sheeting exactly surgery. I think prices cooling-off do sorta disincentivize cheating a little bit right. This is the way and the saudi oil minister is on the record for his metaphors. Her husband we're testing the waters. You know this is. You know we're adding this. He's to They're sorta testing the waters. But i think the reason he keeps emphasizing that this because he wants to have the play. If things are going south really quickly he wants everybody to cut again so just everybody needs to keep that in mind that they have brought the barrels back yet. You know they're slowly bringing the back and we're range-bound at sixty so to think that you're for sure gonna see you know these very high oil prices. I just think we have to be a little bit cautious and the more and more you hear from the industry doesn't matter who you're talking to people with annoying. Gas industry are very very confident. The prices are going up. You know the the trajectory and that's just It's not if we didn't have all those barrels back. You know those were already on the market and these were the prices. I would say you could believe that. But i just think there's more production out there and there's a lot of production that wants to be produced at sixty plus then i think it's because most of the pundits were talking about are people who are long. Us and looking at the lack of us cashback in the low us recount and the bigger picture is well. The saudis have tap and. That's that's the point. I think was vicky hall of saying she using her position and where her vantage point of looking at the macro. And you can. We've seen people get in trouble without. we've seen. Mark papa from centennial resources. Get wrong because of his vantage point hussein harold hamm do the same thing with resources and they literally you know change course of their companies by getting the macro wrong so it's pretty important to get the macaroni right and i think if you're young if if you're thinking we're not gonna go above eleven million barrels per day were stock. That's we were thirteen million barrels per day. That's technically i think eastern. I both agree that technically we could easily go back to thirteen million barrels per day from a technical standpoint whether or not we will actually do that as another question but the other piece of this is that these i pulled up the recount again and last week you know we lost we were saying that the us recount at least for permian was on a steady trajectory to keep moving up right and it's honestly trajectory to basically two three hundred rigs work two hundred twenty rigs right now according to embarrass and as we must before they include lots of other. They include workover rigs and like all rigs. But i think it's important to look at the entire. Us because inverse data. So keep that in mind. You're talking about workover rigs you're talking to or disposal rigs everything that's being drilled. But we have five hundred one rigs running. So it's quite. I mean from where we were. We've recovered significantly now. We have over thousand rigs that are stacked so. That's another whole thing. So a lot of rigs are stacked but the permian and they are so many of these small operators. I mean painters your biggest company drilling twenty-one rigs we'll get to their purchasing just a minute. dissected fourteen Thirteen rigs and you've got two hundred twenty rigs running. You still have four hundred eleven rig stacked in the permian but the point is that you're growing up and then when you break down who these companies are there just so so many tiny companies when you bring that list down. You're not even looking at the top ten operators in you're starting to get to tap Chevron only has six running gb k. has four rigs running you just have a lot of tiny operators and those tiny operators are going to bring production on. Whether i mean it's not like they're not gonna just do dachshund. Just sit there. whatever i think. They're going to bring production line so the big boys may be a little more cautious in their approach they may be spending but these cumulative these tiny guys and you know we used to be able to when the permian was producing two million barrels per it was like half small guys half the guys switched. Now i just think the activity in the role of small players so important on the absolutely is remember that the majors left the permian. It was the independence the on unconventional there. Yeah so maybe we're seeing a little bit of a repeat their just one we've talked about the we've talked about the eagle before and i i. I are both pretty confident in texas production. Everything eagle ford's at forty one rigs and i just think it's important to watch and if somebody had asked us in on twitter to talk more about natural gas and we won't in this podcast but we certainly will because i think natural gas is gonna do great in effort and i think number eleven. Let in our next episode right. Yes we will talk about. We'll we'll we'll try and get sometimes truce's bring it goes even faster than her mouth which is hard to believe so so natural gas will get to you. I'm pretty bullish on eagle for oil and natural gas. I'm really bullish on the hanes. Ville i think the hanes just an absolute kill it so we will get to that and and if you're if you're following natural gas production it's recovered nearly to what we were pre covid levels and that's just the tendency of Need to find more things to argue about. Because i agree on hands with electric. Primetime villes. back baby yeah. I think he's and i think. Actually i think is underestimated. I think people are going to see these like we're we're gonna we're gonna start see people really crushing it and we haven't seen that many big players. I'm sure we'll find something to argue okay. Pioneer purchase purchased doubled plant right. Yes yes and the absolutely crushed production in two thousand twenty. When everybody else was laying rigs down they went aggressive and and group production massively. The consensus of energy finance twitter is that Let's just say they got a great deal for themselves. Six point for. I mean six point. Four billion is not a small number especially now may just as yet the snow small number will and if you look at their web so i mean this is slightly dated and i am working on updating this production data but i'm looking at all their wells for or dogging it's were were shy of at least in in in late fall of like october data. This was a have wells. I mean we're talking two hundred wells so it fits really nicely. So i think from each standpoint and whether at everything if it's nicely in really already Pioneer was the number one. They had ousted oxy. So they're the number one producer. They're definitely the biggest player in the permian basin by far now wish will. Maybe we will get tom law-free on to talk about his his analysis of the deal once the the market players have been positioned correctly. Because i i think. Definitely the contiguity of the acreage was was pretty solid. Some question about the evaluation bomber posted something about that and he was a little bit skeptical. Shall we say We'll see i mean. Certainly you know building. A big permian acreage position. I think tom would probably argue that. They pioneer really needed to do that for him. Tori purposes. I mean that's the thing is so. I don't be acre sized but we're talking like fifty thousand barrels a day production roughly in some sub three hundred wells so it's not production but it just seems the sticker price seems like a lot for that but they're big. I mean i think the other thing. I think people aren't realizing is that some companies have been able to go to the market Do okay i think. Pioneer has is doing the favored by the market. They're doing okay. They're in the same boat. I think chevron so i mean end though the biggest player in this play is going to be around forever and they are exclusively texas. So they're not in a bad position but they have made a lot of acquisitions lately. Who will there on the right side of the border and that may be a good segue into the next topic and yes well. Let's talk about federal lands. There was a there was a four hours. Zoom call held by the secretary of interior entitled interior public forum on the federal oil and gas program. And i started watching this This morning there were eighteen. Likes and i think thousand views on youtube suggesting that for something that is so impactful to so many people in the industry that hasn't really been socialized yet. And i think it's important for anybody who's operating on federal lands whether it's service companies or anybody who's got permits. I think it's important for you to watch. Maybe at least two or three hours of this but what did you think about the well. There's a lot to unpack. There was a whole lot on. Api earthjustice tribes were oil and gas tribes against oil and gas. It was it was quite the menagerie. I mean i was. I was actually so. I was watching last night. And i'm i'm texting ethan. Sending a voice clips. I'm texting texting chuck aids as well end. I i mean i was very i was kinda lit by because i think that the So the agenda just so to clarify from eaton's perspective. It's over three hours. I have not finished. I will because i i'm i'm diving into on a very deep level but it sort of it starts out with you know deb hall and gives these opening remarks and she does remark surgery. Two guests Acting secretary of interior. She gives opening remarks then. She's not present for the rest of it and she is pretty. I mean it's it's not very bias is is for relatively open to talk about you. Know oil and gas is gonna be with us for a long time and this is this. Is the public form. Federal oil and gas. I'm for on federal Program just kind of weird title but anyway so you have the though three women that are within the department of interior and important important to state for context that holland that we are operating under executive order. One four zero zero eight. Which was biden's tackling the climate crisis at home and abroad that so we've referenced that executive order and this kind of gets back to you when people talking about where prices and when i'm talking with clients aren't talking to lots of folks in the industry. I asked a lot about the regulatory perspective. In why i feel as probably as negative as i feel about this The this administration's stance on oil and gas. And how it just. I don't think it bodes well for the industry and we hadn't heard much right. We nothing had really happened in the last several months end. Supposedly the bureau of land management is now allowed to actually do so they can permit a because a sixty day moratorium from order number three nine five from acting secretary of interior at the time that That is now over with and they re this was that or was a few times as well. So that's over with boat if you talk to operators it seems like he'll technically permits. But they're not actually doing that in any aggressive fashion so it just seemed things like your stock so this happened on march twenty fifth and they basically said. There's a comment period. So they do this big form and then they say there's a public hurried so you have until april fifteen to get your comments. And that's that they not be long. They want them to be briefing. They want any in all comments a bibliography. It's april fifteenth so two weeks. They've given yeah through federal guests. It was it was pretty short. So the people in this forum. I mean this is. It's really important to listen to think about and you can just call me. You know if you really wanna know the lowdown how this actually went down but it's you have The person representant giving the presentation. that's nevada culver with be a limb and then you have amanda lesson and she's that's the bureau of ocean energy management. And so you get these two presentations which actually excellent. They were great overviews. They gave you the facts. I mean a couple of big highlights from i think from federal federal in guest leasing is just understanding of how producing end where end in the amount and some of the big takeaways are because api had come back in and made a comment that 'cause Somebody within the form had said that did kind of accused. The industry of stockpiling permits on the industry had a ton of permit so that we didn't need to worry about that regardless and they show a permit the permit slowly going up but they do show that twenty nineteen and twenty twenty had slowed down a little bit. The royalty the minimum royalty. There was set forever ago to a point. Four percents. which is. That's not yeah. It's not egregious but it's not unfair either. I mean that's it's not a. It's not horrible rotary. But i think they were laying out a lot of these things that were set in the past and should be revised upwards so assuming they would like much higher royalties if they. I'm that'll be interesting. In the context of that discussion is the one stop. Oil and gas leasing are would be surprised if royalty rates aren't higher. Yeah i would be surprise. Well i think it's a guarantee that cause the incentive you know. I'm not certainly these all these women on this thing. I don't think they're nestle. Their personal agenda is to to end this but the mountains they referenced. The executive order on climate change. Because this is why they're doing it. I mean this executive order on climate change literally within it which we talked about before was suspending your suspending all leasing on federal land for for this evaluation period. So all this stuff. That's happening right now. In this form is part of this evaluation period and so they start with the facts and explaining all day so even if you listen to the first thirty minutes you would get a lot of information on just how the programs work but the really good thing was the data the numbers which even though we're talking about flying he was basically saying it's sort of irrelevant from a dollar perspective or before you get into that. The other thing is bonding which they would suggest to low. So when i read out of the gate the two variables the if you're looking to lease on federal land will probably go up. We'll be the royalty rate and the bonding requirements. Right and that's part. I mean as part of the infrastructure plan which. Don't worry we were definitely gonna talk about the Plan as part of that you know in the in the two weeks was last week. When by naturally i talked about it. He talked about the abandoning. You know giving money for the abandoned while program in an plugging those wells. So this is all sorta ties together and gets a little complex and confusing because they did actually within this farm as well when they kept talking about federal and they were like. Hey we are talking about federal land. But we're not precluding they literally said we're not precluding what we could do with private land. And i was like okay. Well that's not your jurisdiction are might be overreach but it sounds to me like they are going to use the studies in everything from this to maybe influence stuff. That's going to happen on private land so big takeaways. This is a really great slide in charge That the one of the first woman gave and this is the woman on from the blm and it was. It was that the statistics for twenty twenty Was that over three point. Four six billion in revenues came in just from federal and this doesn't include offshore and this is two point three billion in royalties so again if rates to go up. That's increase ninety two point nine million in bonus bids and twenty three million in rentals. And i do believe. There's other additional money that i know that bonus bid their reference that there were outside money or additional money could get so. I don't think that's a cap infra. Sure if that was twenty twenty. I think we could historically see more in two thousand nineteen. Their estimates were That it contributed that federal land for oil and gas contributed seventy one point five billion in estimated economic activity. So that's not a small number. It's a decent amount and supported Three eighteen thousand jobs also not a small number so that's pretty big from just a federal lands perspective the bureau of ocean energy management. And they don't put up particularly on the slide but they noted. They say that they do explain that. Bureau senator management. It's basically gulf of mexico production. That's the majority of production that we're talking about. It's about a million barrels. Today they say that fifteen percent of production. That's the numbers they were using at the time. for twenty twenty and that so for. Oc s for office of getting this road Yes thank you outta continental shelf. That's over three billion revenue just from those leases alone so they didn't break the numbers down but it's a lot of money i mean and they produce a lot of gas so the point is and this does this. Money goes to a lot of different entities so they will have to either increase the If they're gonna stop leasing Generating new business than this is going to be existing leases existing permits which no matter how they slice a is going to is gonna probably slow down but the the great thing was the first trump people that came on the first group of people was actually from was from the tribal lands. So you had three different tribal entities. Speaking and i will not boxes but that one was from was from alaska. one was from colorado and new mexico and the other one was. She was on the east coast right. She was on choosing the potomac. I believe she was in. Dc so you have three tribal land folks. They didn't agree. They obviously had they had one guy who was very anti oil and gas in explaining all the spills and everything was taking place in. I'm not discrediting that. I'm sure they're out concerns there. The woman alaska. She gave a lot of numbers and stats. That were pretty damning She was very bullish on oil. And gas and Defended the industry and cited that twenty. Five percent of the activity in alaska is based on oil and gas. And so she was. Definitely a proponent. And i think she also said that the native population there has been dealing with climate change for one hundred years and doesn't see a problem doing that. It was even saying problem. Promised that they. She was saying that they've been dealing with climate change for decades and they've adapted to it and they understand it well because they live there she also pointed out that the just some of the things that they were concerned about was that their rural population all these people literally use generator diesel generators. And she invited them to come out there. And we're just like you better be prepared to come to pass anchorage and you better be prepared to stay week here. 'cause you need to take a day to fly here you need to take a day to adjust and then you need to actually see you need to see the stuff that no one goes to seize worthies people in rural alaska actually For our audience out there anyone would like to sponsor the petra nerds team to go out to alaska for a week. I would be very happy to take you up on that. So i would. I would kill to do a to do podcasts. And people absolutely. I'll go to the roughest place a breast a there. Hundreds of us tribes. And i had the pleasure of more marketing into some of those tribes financial management in the past and I was taught that there is no such thing as a unified opinion on anything among those tribes of all the hundreds of tribes. You get hundreds of opinions. So don't make the mistake of thinking that there's a monolithic view. And i just thought it was good so fond. Sharp was the she was the president of the national. Congress of american indians mario Nco was a board of directors for its dna. Care c. a. r. e. and then nicole guerrino or romeo. She was the one who referencing from alaska. And she's executive vice president and general counsel for the last good federation made us and i just heard discussion was interesting because he also pointed out to the corporation so within alaska because they do have so many travel entities within alaska and they also have native corporations that they legally according to all the rulemaking subs. We've done they legally have to have a seat at the table. And those are oil companies. So these are alaskan native oil companies to have a seat at the table. And i thought it was interesting when they were asking so when the department of interior was asking them you know what are some best practices and not just best practices. What does some things we can do to to help with this. And they all of them said the dialogue all of them were saying they wanted better dialogue and communication and that they didn't give enough advanced combs through the messy system the web system to be notified and these people are nodding their heads like that. I thought well crap that sucks you have to be on it to be seeing me stuff posting and then they have to comment back so and the stuff that we had referenced before an order number three nine five that was mentioned because department of interior at the time had listed indian tribal lands in indian lands on that suspension of delegated authority which they had no legal claim to actually do that which was a joy. Screw yeah sounds like it was a scope and they referenced. This these folks were saying. Hey you put us on that. And they didn't say hey that's was not like they just said there was a lot of confusion because confusion about trying to do something illegal and they also referenced the same thing we did which was the consultation that other basically it. It went against their sovereignty and it violated a previous agreement. That was just how they because they basically did not consult tribal leaders lands when they issued that order and that was something all these tribal groups were saying within this meeting. Was you have to consult us. If you're going to do something to consult us. I again think this is very interesting this conversation. That's taking place and some of the things that the the woman from alaska was coming because she said look were in support of of initiatives on climate change. We are not in support of getting of transitioning tomorrow and of doing this in a rapid fashion because we use we produce and we use oil and gas and we don't see a the ability to switch off of it tomorrow and that was just their her statement on this this just to underline. It leaves us in an interesting position. Which is that on the one hand. They want to have a rapid transition away from fossil fuels but on the other hand. They want to make sure that they incorporate travel consultation and You can't have it both ways. Yeah i think it's i think it's a little hard when you You know you have to respect if these tribal lands are these tribal leaders want to want to rapidly transition and they want to put solar and wind in green tekken geothermal. What if they want to do all that. There may be options for geothermal such but they wanna do that. That's up to them those great but that's their economic revenue drivers and i'm and they i think it was pointed out and there's a lot of mineral rights in a lot of money from oil and gas that goes to tribal lands and that's why all of them I don't know if that that that gentleman had mentioned but the other two women basically commented that guess industry is very important for their as a revenue stream. So they can i to me i some is they made it pretty clear that they're not getting rid of oil and gas anytime soon. If you came this out far into the future and you assume that there are some owners restrictions on private lands you can see a future for oil and gas where you have an extraordinary concentration of production on travel lands yen. It could make it to where you could make it to where they're more open to doing business with opera for operators that bringing operators incentivizing them to come in because they have an opening. It's no different than than the us being downward eleven million barrels per day in opec being able seed market share. I mean if you're seeing everybody hurting if you're have the i mean if you're in the us to basin are you have your the fort berthold reservation. This could be an opportunity for you to say. Hey we're open for business come to us. And that may or may not were and best practices and everything certainly has to be done but it just something you think about. This could be a actually a positive from an guest point on native lands. Should they want it so nothing that i welcome. I don't know who listens. I don't know exactly who listens. I know we're getting gaining an emt community base of of listeners But folks disagree or want to jump on talk about stuff. I am more than willing to have folks on podcasts Especially on issues like this. So they deform continues and i finished. The season has finished but formed us continue with the industry experts on you have somebody from. Api talking that individual did explain that he. He seemed a little defensive The was not stockpiling permits. And that's not quite how it works. I would actually say that. Some players industry have stockpiled permits because they intelligent players because they knew that biden. Mike clamp down on them. Efg is one of those companies. But the industry's a whole. I don't think. I personally do not think did a good job at all stockpiling permits which they actually should have done. And that's legal. There's no. I don't see how that could be an issue. But they do point that so it's interesting that they say we are not impacting existing permits yet they reference but the industry has stockpiled the bunch so wouldn't matter anyways That that type of talking and everything does make me a little bit nervous. And then so you had the The industry panel. Which i didn't think was very good. I wish they would have had an operator. I wish they would've had somebody outside of api. I didn't think it was a. I did not think it was a very good representation of the industry as a whole and then the second or the foam that we both watch Earthjustice came out swinging. Pretty hard All of the environmental folks from the environmental group was earthjustice and The arctic ocean conservatory and the nrdc. They were all anti surprised inland. They're all anti only gas and they were all for no more drilling at all ever again on federal land immediately putting a stop to all new leasing everything i i don't know if they went as far as saying you know taking away the permits but they urge of justice called the new mexico permian basin a climate bomb So you know there's that and that was very clear where they stood on this issue here. Putin clapping in the background. You know it was just so so we'll see was a it was an interesting There's a lot of passion in that one. Yeah right so let's get onto the case of what actually is infrastructure and talk about the make america great again tax plan. No it's not called that. It's called the made in america tax plan. That came out today. That would cut thirty five billion dollars of oil and gas Let's call them. Tax preferences include intangible drilling costs Depletion expense The publicly traded partnership tax code. Which would have some interesting implications for enterprise magellan etc transfer. So what's your grand- take on the the tax plan in what it would mean for the only guests sector okay. So that's the big question. Is this more of question of this more drilling question of what is what is infrastructure. Which i think we can probably the. There's too broad. I think two things that are going on with us and we're actually touch on some of the power stuff as well. I think china was referenced. Lot so biden gave another speech today if you saw it and he was talking about the you know he's basically trying to sell this infrastructure plan so there's two things happening. This is both in infrastructure. Plan that is going to spend a lot of additional tax dollars so this is an a two trillion dollar infrastructure plan apparently spread over ten years. Which personally for all the stuff that they want to include especially the decarbonising of the grid. I don't think that's enough money because most of the math on the decarbonation for the grid just for transmission alone is in the trillions itself. So i don't think that's gonna work but so it's to to do this. And then the problem is now. It's it's a it's called the infrastructure plan but there's a whole tax changes with it so now there's tax plan and so that's what actually some of the questions on from from twitter were the made in america tax plan And this is an as you know making It is interesting. The is making america better. Not making america great is making america. Better which is just like just took a pivot on on trump's talking points juice marketing. So biden talk today. And i do think it's really important to clarify this stuff on china because this is driving me a little bit bananas and i had a book upstairs which meant to bring down search on china but so this this is bloomberg in. They're saying you know biden pitches infrastructure plan as vital keep china and he referenced china avant so he's basically saying look china's eating our lunch their head of us on infrastructure the head of us on five g they build all these airports in the cnbc. Put the numbers for look at all the airports they build and look building more coal plants than we are so they don't put that up there. How many new coal plants. You gotta realize that china. It's it's different. It's not if you're not comparing apples to apples when you're comparing the us and china and certainly they have robust infrastructure that they have Built out they had built out a lot of stuff. But the primary impetus for building out. A lot of this stuff is to have jobs right. It is literally. Let's go build a we have to hit a gdp growth targets. So they have their five year plan. They set their gpo target. And then they have to hit it and the way in which they do that is. Let's go build roads. Let's go build coal plants. Let's let's build infrastructure. Let's build electric vehicle charging stations and really do your research and watch some of the shows seriously everybody in a couple of the grand tour where they do this and top gear as well and they go to china and it's empty. I mean they're gas stations. That have never been used and charging stations that have been used because nobody's driving on these roads and there are even in the i referenced this before but the energy transition podcast which does a really great job on their china episode Worth buying just the episode because it really talks about how so much of the service empty. We talked about this with coal with all coal fired. Power plants and power generation. Is that so much of them are built and not fully used. But they're built to hit. Mexico's pats peak capacity right. So a lot of that's built on the job creation so comparing china in terms of hey they do all this stuff and this is and we need to compete with that. It's not fair is not the same at all and all of the stuff that they build is sixty five. Their power generation is sixty five percent coal. So don't pat them on the back too much because it's built on the back of coal and apparently that's not what the administration is trying to do. So that's what is built on. It's not built on. They don't have a superior grid that's that's built on all this this green tech and we pointed out in the previous podcast. I mean the reason in which they do is because they have all this coal. The other problem i have with this comparing it to china is that he biden talks a lot about the the different. The democracy is a you know we're history is going to judge whether democracy wins and that you know that criticizes us as a democracy because we cannot We can't get it together. We can't just build this stuff. Well you know there's a reason that we have You know we have institutions and we do have checks and balances and you know. He's he's the problem that's happening with this infrastructure. Bill these tax right now is it. Doesn't they're getting pushback from the other side right. The republicans the democrats are not disagreeing on this and this is not rocket science. Okay this is. I think this honestly is basic economics and basic politics. This isn't like crazy left or crazy right in the infrastructure plan. And this is where we're going to get to defending infrastructure. And i would love your thoughts on this but typically infrastructure. We do think of roads and bridges and highways. that's not. I'm not being really bias in that in this infrastructure bill. This is broadened getting high speed internet to rural america. I'm from rural america. That's awesome bring high speed internet role. Trust me my nieces and nephews would love it but then it goes further and it gets into healthcare for at home care for the elderly and things and actually care for a What schools and care for all kinds of different at homecare. Sorry i'm screwing up on. That point is that's not that's not infrastructure that is A social welfare social services and so putting the infrastructure bill is. That's bullshit so take it out and put it in a separate bill and call it what it is. And that's really what i think. The republicans are honestly saying that's not infrastructure most of it is infrastructure but it's putting the social stuff and so they are trying to be more broad and inclusive and saying they want to. You know there's tons of stuff in your list. Let's let's be fair and say that every time there's a massive bill and everybody puts their entire wishlist in it. Republicans democrats everything and it would be by some out or what but the point is is that you're calling for they're calling for a whole new tax system or tax plan this infrastructure bill. This is going to cause problems. I don't care who would be in office in which parties they're gonna fight on it but the point is that when you're putting in social costs like the these healthcare things or just don't care that's not a typical thing we think of infrastructure and that you're asking taxpayers in a form whether you're changing the tax codes and everything you're asking them to pay for it and i think that is That's complicated so that is also something that we typically see in in more european and more I'm not criticizing this either but it is. It tends to be slightly more socialist or more democratic. When you're you're spending money on those things and everyone's paying for it A according to the new oxford american dictionary infrastructure the basic physical and organizational structures and facilities needed for the operation of a society or enterprise. Physical physical yes sir structure and i think i mean he talked about it and he ten soup biden tends to be talking more about the infrastructure. Stuff changing outlet pipes. You know actually. My pipes were changed in denver already. But you know changing everybody's lead pipe so lots of stuff in there is definitely one hundred percent infrastructure that i think a lot of people are in support of it. Just some of these other points. And i have not i. It is on my jets. Get deeper into it. But the point is like the. I'm really having trouble selling this. So the democratic thing is saying well china you know china can do things they can just pass the infrastructure that can just go build it and they're building all these batteries. I am going to clarify again that their batteries are not the best in the business. There's a reason why tesla is in china. And that's because they're the batteries that china makes are not the best. They are not the most efficient battery so not the cleanest and they process. And i think the washington post said had commented on this. Some folks on twitter had to that you know the process the majority of the bolt and a lot of the process a massive amount of the lithium and all these components both in in the chip sector Really in the battery sector and the processing of these medals and these minerals is environmentally intensive it typically has radioactive material with it and they have to take that off of it. We don't do a lot of that in the western world. They tend to do it there because they don't have the environmental standards and so when we are putting themselves on what we're really giving it to. It's a compliment to them. When biden saying the stuff to them one year. Doing all this stuff. And you're eating our lunch you doings. They're doing it with no environmental standards and they're doing it with sixty five percent coal so i just don't think it's fair to to liken is it's not the same thing and we do have rules instructors and we do have ruled law which they don't That we don't just shove things through and so saying we should shove this through That's not how democracy works in the us in this debate that we're having in this back and forth that that's what's going to happen and that's not necessarily a bad thing okay. It's april seventh. Russian troops are massing on the ukrainian. Border wait we don't wanna get into the taxes. Hold on we have to. We have to go back one second and get into this Okay so there wasn't a question on replacing of the taxing so within the tax bill. We are talking about replacing the subsidies for fossil fuels with incentives for clean energy production. And i'm just gonna read this. It's important but so they talk about. Climate change is already impacting. Homes were having devastating storms wildfires et cetera. But they say today. The tax code contribute to climate change. So they're saying the tax code today is contributing to climate change by providing significant tax preferences and subsidies for the for the oil and gas industry. And i'm reading this from. This is the made in america tax plans so this is the tax plan on the back of this infrastructure plan. The president's tax plan would remove subsidies for fossil fuel companies while providing incentives to reposition the united states as the global leader in clean energy into ensure that our infrastructure is resilient to storms floods fires and rising sea levels targeted investments. In clean resilient energy future would also shops for american workers and address our industries. How exactly interesting. How exactly they're gonna do all that. And and the types of spending. I mean there's a lot of things you could do with that or could be included. They also say this is where i do. Have to pick a bone as being. I have a background in economics. And i've spent a lot of time studying. Various things including china estimates quote estimates from the treasury department department's office of tax analysis Okay estimates from the treasury department's office of tax analysis suggests that eliminating the subsidies for fossil fuel companies would increase government tax receipts by over thirty five billion in the coming decade. With a lot of money. I get that. And here's the kicker the main impact would be on oil and gas company profits right. That makes sense. If you're going to take away all the subsidy so we get that. Research suggests little impact on gasoline or energy prices for us companies little impact on our energy. Security i just don't know how you can. Impact company profits but not impact at all energy security or production in the us. I just. it's amazing how that goes. They do cite study. I will be chasing up that study. You can bet your ass It's a twenty eighteen study. And i just find that ridiculous so you obviously cannot change a company's profitability without changing its wack and without changing available capital to reinvest in the marketplace at cetera. So we know that is full mardi seeing it. So you're seeing that we've seen changing in profitability. I mean prices going negative and the actions of the industry. And you've seen the property and folk spending less than the fact that they have to spend more on she and they have to spend more on all these things. They're not putting it in. So milwaukee milwaukee but one thing we should say about that though ten billion dollars excuse me ten years thirty five billion dollars three and a half billion dollars a year. That's not a lot of money in the grand scheme of things. And i do think the way. They wrote that emphasized the big number of course of ten years. And when you plough that through the amount of You know consumption that we have in the us every day. It probably doesn't amount to a huge number But it's still economically matters and of course if your business your anytime the market interferes and you distort the market and let's say a company either exists or doesn't exist on the back of intangible drilling costs or depletion and if all of a sudden you become profitable have to pay tax. That could shift a bunch of marginal producers out out of profitability of out of existence. Yeah and i think it's i just think it's important to kinda circle this back. Because the actual the alumna bureau of ocean energy management if you're producing you know we're we're talking on bass numbers about seven billion a year you know. That's that's more than this right. So you're gonna trim you're basically saying hey we're gonna we're gonna stop the oil and gas leasing and we're gonna trim that now. They said they're going definitely stop. But either it's going there curtailing it to some degree. I have a very strong opinion on that. So that's over seven billion. That's a lot of money and then you're saying okay. We'll get thirty five billion over ten years in the subsidies and to your point that you just made on your shifting this. I not impact the energy security. It's absolutely ridiculous. We you know so much of the gulf of mexico. Loan is producing a million barrels today. And that and an alaskan all this contributes massively to domestic energy supply and intern in many ways in energy. Security i mean we just we have it here. We have the benefit of producing. Have creating those jobs where it's been every finding it here in creating those jobs was Of keeping the money here not saying elsewhere. And i think it was noted actually within one of those department here presentations that there was a great and we will all be showing this and some of my work in putting it lincoln twitter. Those was a really good chart that did show. The i think it was ano- national industry association and they represent both offshore wind an officer oil and they were talking about the emissions. Or maybe this was api. I might be getting this wrong but the juicy emissions on a scale and the gulf of mexico was actually really low on ghg emissions and part of domestic production tends to be lower because they do include the full cycle eventually importing. It and i thought that was important. Also was making me think about you know. They industry keeps getting this pressure for full cycle emissions. And i'm just wondering when we're going to start talking about full cycle missions on that lithium cobalt and everything that we're getting from china. 'cause i'm pretty damn sure that when sixty five percents scolded the life cycle of that you know. That battery just doesn't seem as clean so we will have to make those batteries here if it's if it's going to be about emissions but that is my opinion and the other thing is on these companies so we're gonna if we're going to put these companies out of business in the us. And i made this comment abroad. But this is no different than bp selling their assets to another company a chinese russian company. That's gonna go do it. This is not. I mean so you were basically saying hey. Tribal lands are probably do are in a good position to increase production. But so we're we're going to reduce it in the us your incentive to produce in the us we are going to have to. That kudo is going to be produced somewhere else. And so we are going to produce an abroad. And i think the narrative gets a little stock because we talked about when people define the energy transition and increasingly i think it's the accelerated energy transition and in that in view of the vantage point of this accelerate energy transition that demand is just continually declining oil and gas so we don't need it and therefore prices are low demand is the cleaning prices are low and there's lots of this crew on it it functions very well in this theory of this accelerate energy transition. And so it's not a problem but the reality is is that you know prices may be relatively stable. They may be ran fifty to sixty bucks other companies and other industry or other players around the world are probably going to produce it so we're literally just not producing in the. Us is going to be produced elsewhere. And then we're gonna probably imported. And particularly i think in the next few years the given our demand trajectory in post covid. It's it's teeing up to be a robust demand. Growth at least for the us is true. So it's april seventh. We're gonna close soon. But i wanna i wanna note for episode eleven. We'll circle back and see if anything came from the ukrainian russian tensions building and whether that has Any implications globally for Other actors testing the united states resolve for example chinese and the tea in taiwan the iranians there was a a mine of iranian tanker by probably the israelis so lots of tensions building up that could have impacts on oil. And that's not. I think obviously it's not currently be Being reflected in prices so we'll see if traders when add this sort of risk premium to it. I don't think you know when we look back and see when the last time the russians did this and you know when they were kind of pushing the stuff in two thousand fourteen with crimea The truly didn't do much to push back so and you. We saw all the stuff that china did over during covid we saw how aggressive this wolf warrior. Diplomacy became an how aggressive you know. Literally what they're telling us even after the overtaking hong kong and baseless saying don't criticize us. I mean some very very serious off. From from overtaking hong kong from pushing into the east china sea from pushing into you know the the spat with india in the in the himalayan mountains through treatment of which might threaten the us olympic participation. Yeah i mean this is a serious like the self that china has done even just during covid. Because everybody's been very busy and you tend to do. I mean this is what autocratic authoritarian dictators do earn folks like putin and so it makes sense to me that i. I've been kinda waiting for russia to do something because you know you do it when everybody's busy in their focused on what they're doing so they should have honestly done it six months ago but it makes sense now that hey everybody's busy and the just recovering from covid. So why don't we just stepping 'cause honestly who's gonna push back everybody's they're gonna eventually have to do something to stop them. I don't really think it's that negative. You know we tend always think wars bad for earth him unless it's going to impact production. I don't at least right now. I don't think it's a production. Actually risks Uptick really didn't do much than you know. Yeah so i mean to read it. I think it's something really really important to watch. It's also really important for this administration because foreign policy at. We've i've noted this before policy just one of those things that it looks easier on paper. When you're coming into office you thank. You can be different than your predecessors but on honestly if you look at like you can look at very left presidents for right presidents. They tend to congealed when it comes into foreign policy. They don't necessarily make bass lee different decisions and and by next hasn't he is a huge pickle with iran and china. Though i mean it's not it's not looking good And just it is important for listeners. For people to be aware of what china's doing of how their energy is produced an end. Really aware of. I don't think it's fair to to use china as an example when you want to and then reform them when you don't and i certainly don't think it's fair to be saying that there is better than our democracy over here will next week. We'll come back to a global geopolitics and possibly will address one of my friends. Hr hunts wives on on. Twitter will address the question about rennes correct spreads. Potentially if we can get up to speed on that yet. Thank you for joining us again. I'm ethan bellamy. Co host of the petra nerds. Podcast this is my lovely host. Tricia curtis the ceo of patrons will see next time.

Coming up next