Freedom Democrats | Online community for Libertarian Democratsthe control of the average activist. A vast expansion of financial resources, dramatic reform of ballot… energy sources like “clean coal,” ethanol, or nuclear, the harder it is for more viable energy
Ethanol Demand Driving Expansion of US Corn Crop; USDA Projects 31% of US Corn for Ethanol in 2016Projected production and use of corn in the US. Click to enlarge. Source: USDA. Demand for ethanol will push US corn output to more than 14 billion bushels by 2016, 4.3 billion (30.7%) of which will be used to produce approximately 12 billion gallons of corn-based ethanol, according to the US Depart…
Articles of Interest 2-10-07633 Days until election day. Sorry for the delay, I got home and went straight to bed. No commentary today, I?ll catch up tomorrow. Saul Anuzis STATE STORIES http://www.detnews.com/apps/pbcs.dll/article?AID=/20070210/METRO/702100339/1022/POLITICS Saturday, February 10, 2007 State GOP tries to …
The Ethanol shuck
Forget ethanol; save corn for bourbon
(Detroit News)??A s a bourbon drinker and grandson of a moonshiner, I naturally perk up when talk turns to distilling corn.
Grandpa cooked corn into sour mash whiskey in a process nearly identical to the one used today to produce ethanol.
But while the feds chased Old Pap up hills and down hollers to stop him from running off a batch or two of home brew, the government this year will provide more than $7 billion in subsidies to encourage a massive expansion of ethanol production.
I think Jim Beam could do more good with that corn and money than the purveyors of E-85.
Ethanol is a fraud of an alternative fuel.
It?s too costly to make. It can?t be shipped economically. It offers only a minimal impact on the greenhouse gasses linked to global warming, while creating other types of dangerous air and water pollution. And it won?t break our addiction to foreign oil.
Even if every available acre of crop land in the United States were converted to growing corn, we?d still be about 20 percent short of what is needed for ethanol to replace gasoline.
Ethanol just ain?t going to happen here.
But don?t bother trying to explain that to the politicians. They?re too busy conning themselves and voters that spending truckloads of tax dollars to create an ethanol industry will free us from the oil sheiks and break the earth?s rising fever.
Ethanol bites consumers
If this were nothing more than a waste of taxpayer money, I?d remain indifferent. Taxpayer money gets wasted by the billions every day, and we still manage to get up in the morning.
But as often happens when politicians meddle in markets, the anointment of ethanol will cost consumers in the pocketbook.
Corn prices shot up 55 percent last fall and are expected to double this year as ethanol plants gobble up more of the crop.
If you want to know how that affects you, take a look at the ingredients label on almost anything in your food pantry. Chances are you?ll find corn syrup or another corn derivative on the list.
Already, riots have broken out in Mexico to protest the soaring price of tortillas. Corn flakes, too, cost more.
The weekly grocery bill will go up in equal measure with the output of ethanol.
If you?re a corn farmer, you?re loving this. Speculators have made corn ground hotter than Manhattan lofts.
But if you?re a beef or dairy farmer, things aren?t so swell. With more of the corn crop diverted for ethanol production, the cost of feed is climbing. As is the price of beef and pork.
The corn boom inevitably will be followed by a corn bust when ethanol is exposed for its impracticality.
Taxpayers will see their ?investment? in ethanol infrastructure evaporate.
Bourbon drinkers, however, may cash in. Something will have to be done with the glut of ethanol refineries.
Converting them to giant stills to make corn liquor would be a fine way to rescue this boondoggle from total ruin.
USDA: Ethanol to Drive Long-Term Expansion of US Corn Crop …http://www.cattlenetwork.com/content.asp?contentid=106180.
Nebraska Going for No. 2If the announced new plants and ethanol expansion projects are completed, the Renewable Fuels Association estimated that Nebraska?s ethanol production capacity would jump to 1.05 billion gallons a year. That would be more than the 887 …
K-Sea Transportation: Wall Street Analyst Forum Presentation TranscriptTRANSCRIPT SPONSOR K-Sea Transportation Partners L.P. (KSP) Wall Street Analyst Forum February 13, 2007 9:10 am ET Executives Gerry Scott - President of Wall Street Analyst Forum Tim Casey - President and CEO James Dowling - Chairman John Nicola - CFO Presentation Gerry Scott Good morning. I’m the P…
Bush?s Energy Obstacle: EthanolForbes - For nearly a month now, President Bush has been touting his new energy proposals, calling for a reduction in dependence on foreign oil, an expansion of domestic drilling for oil and natural gas, and a doubling of the Strategic Petroleum Reserve. All
Green Wombat: green policy. In a big boost for hybrid cars and ethanol producers, California Governor Arnold Schwarzenegger today… by blending ethanol, improving their production processes or buying emission credits from utilities… producers can blend more ethanol into gasoline, produce hydrogen for fuel cell cars or purchase credits… standard was floated by the green group Environmental Defense yesterday: An expansion of California’s… it to generate electricity - to provide a renewable energy source to produce ethanol. Over
Corn-Based ethanol expansion to Affect Overall Crop Production …http://www.wisconsinagconnection.com/story-national.php?Id=364&yr=2007.
New crops could fuel new wave of ethanolRobert Dinneen president of the Renewable Fuels Association host of the conference said cellulosic ethanol will revolutionize the industry. "Five years from now the ethanol industry will be unrecognizable from what it is today because of cellulosic ethanol " Dinneen said.
energy saturday update
Next month, the world will get a glimpse of what Big Oil can bring to the fast-growing alternative fuels movement when a new biodiesel plant here, backed by a major U.S. oil company, opens for business.
The plant, which can produce 20 million gallons a year of diesel fuel made from soybean oil, is among the largest of its kind in the nation and is expected to soon grow bigger. But what’s more notable is that it is partly owned by Chevron Corp., the San Ramon, Calif.-based oil giant.
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With the investment, Chevron has become one of the first major U.S. oil companies to move out of the laboratory with biofuels and into a factory that actually produces them, a path that biodiesel industry leaders hope its peers will follow.
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Chevron’s 22 percent stake in the $10 million plant, also financed by other institutional and private investors, is tiny compared with what it will spend to develop, say, a deepwater oil field in the Gulf of Mexico, which could run into billions of dollars. But the project, which looks like an oil refinery in miniature, represents a change in thinking at one of the world’s largest energy firms.
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“Over the last couple of years, our company has come to the point of view that there is more global demand for energy coming than we know how to meet the way we’ve always done things,” Rick Zalesky, Chevron’s vice president of biofuels and hydrogen, said during a recent tour of the Galveston plant. “So oil and gas will continue to be the major source, but is that enough? And we’ve concluded no.”
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The project will allow Chevron to gain experience producing biofuels on a broad scale, he said. In turn, the company will share technology and its refining expertise with an infant industry that is still wrestling with quality issues, he said.
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U.S. biodiesel production more than doubled last year to an estimated 225 million gallons. The industry has set a goal to replace 5 percent of the country’s petroleum diesel for on-road uses by 2015 ” equating to about 2 billion gallons, said Joe Jobe, CEO of the National Biodiesel Board, a trade group in Jefferson City, Mo.
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But the industry is depending on breakthroughs in crop research and farming to reach the goal, Jobe said. It will also need to use the nation’s oil and gas infrastructure to blend, transport and pump the fuel for widespread use, which is why he called Chevron’s endorsement of biodiesel a “good thing.”
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Promoted as a solution Alternative fuels such as ethanol and biodiesel have been around for decades, but recently they have been promoted as a way to reduce America’s dependence on foreign oil, keep U.S. farmers busy and address climate-change concerns.
But there are doubts that alternative fuels will ever represent more than a small fraction of U.S. fuel consumption. Even so, energy companies are placing some small bets on biofuels. Houston’s Marathon Oil and Brazil’s state-owned oil company Petrobras are investing in ethanol plants, BP is partnering with chemical giant DuPont to develop biofuels, while others such as Exxon Mobil are funding research through universities.
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The team behind the Galveston biodiesel plant said they intend to have a piece of the industry in the U.S. and abroad.
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The group is already laying plans to expand the facility. By this fall, the plant is supposed to be able to to churn out 60 million gallons of biodiesel a year, said Bill Spence, president and CEO of BioSelect Fuels, the Houston company that will operate the plant. He hopes to expand again to 110 million gallons a year by 2008.
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Cheaper fuel sources But to be successful long-term, Spence said, it is crucial that the plant migrate from making biodiesel from food crops such as soybean and palm oil, which are expensive and contain a low oil content, to nonfood crops with higher energy potential that are cheaper to buy, such as castor beans or Chinese tallow trees.
He is also confident Texas environmental regulators will come around on biodiesel. Last year, state officials nearly banned biodiesel from being sold in some of the populous areas of Texas, including Houston. They said there was conflicting science about whether the fuel produced more of a smog-forming tailpipe emission known as nitrogen oxide than petroleum diesel. In the end they gave the industry until the end of 2007 to make its case.
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Ultimately, Chevron’s investment in Galveston may provide a useful model for the oil industry’s role in biofuels. But Zalesky said the company, no matter how big it is, knows not to wander too far from what it does best. “Growing the crop,” he said. “I don’t ever see us doing that.”
Chron
Pipeline giant will put assets in master limited partnership
By TOM FOWLER (Houston Chronicle)
Pipeline giant El Paso Corp. is looking to fuel its growth plans by putting up to $500 million of its assets into a master limited partnership, a kind of business with huge tax benefits and low capital costs.
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The company won’t yet say what portions of its 55,500 miles of interstate pipelines will end up in the partnership when it is created later this year, but during an analyst conference Wednesday CEO Doug Foshee said it will choose assets that are unlikely to be affected by changing government regulations.
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“In 2007, we are making the largest commitment to pipeline growth capital in the history of our company,” Foshee said, referring to a $610 million budget for new projects and $400 million for maintenance.
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The company said it also plans to spend $1.7 billion on its exploration and production business and is aiming for earnings per share in 2007 of between 82 cents and 98 cents.
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On Wednesday, El Paso also said it expected to report a fourth-quarter 2006 loss of 25 cents per share and net income of 64 cents per share for fiscal year 2006. Audited results will be released Feb. 27.
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Shares of El Paso closed up 21 cents on Wednesday at $15.19.
Master limited partnerships are publicly traded companies that do not pay either state or federal corporate income taxes. They usually have a general partner that runs the business ” which is often owned by a parent company that created the master limited partnership ” and many limited partners that provide capital but have no role in management.
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The general and limited partners are paid quarterly dividends, which is why master limited partnerships are often formed around businesses with steady and predictable income, such as pipelines.
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In the past, such partnerships weren’t viewed as growth vehicles, said Joseph Cunningham, co-head of RBC Capital Markets’ U.S. energy group in Houston. But that changed in 1997 when two former Enron executives, Rich Kinder and Bill Morgan, bought Enron Liquids Pipeline and turned it into what is today Kinder Morgan Energy Partners.
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By taking advantage of the lower cost of capital that master limited partnerships enjoy, Kinder Morgan grew from about $300 million in value to $35 billion in just 10 years.
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Dozens of companies have followed suit, including many in Houston. This includes Enterprise Products Partners, Plains All American Pipelines and, more recently, Targa Resources.
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Several ways to benefit
El Paso would benefit from forming a master limited partnership in several ways, Cunningham said.
First, the $500 million initial public offering would give it cash to use on anything from capital projects to debt reduction without adding leverage to the company or diluting its equity.
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Second, it could give El Paso a way to get Wall Street to recognize higher values for some of its assets, Cunningham said. For example, a 25 percent stake in one of El Paso’s pipelines could be placed in the partnership which, if it went public for $500 million, would likely lead analysts to value the 75 percent of the pipeline still under El Paso’s corporate umbrella at $1.5 billion.
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“They could do this with a number of assets that they believe are undervalued,” Cunningham said.
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Funding growth cheaply The master limited partnership also gives the company a way to fund growth less expensively, using the partnership’s balance sheet but still funneling income back to El Paso through the general partner.
The master limited partnership is also a ready buyer for El Paso assets should the company want to raise money without losing control of an asset.
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While El Paso’s entry into the master limited partnership game is relatively late compared with other large pipeline operators, the company’s executive team is already well acquainted with the business model.
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Chief Financial Officer Mark Leland was previously chief operating officer with GulfTerra Energy Partners, a master limited partnership controlled by El Paso that merged with Enterprise Products Partners in 2004 in a transaction valued at $2.9 billion.
Chron
Unos tres mil establecimientos con tanques de combustibles, en su gran mayor??a estaciones de servicio, quedaron desabastecidos a ra??z de un error inform??tico. El problema surgi?? porque estas entidades desaparecieron del registro que la p??gina de Internet de la Secretar??a de Energ??a publica con los establecimientos habilitados para ser provistos, situaci??n que deriv?? en que las petroleras les suspendieran el suministro. As?? lo inform?? la Federaci??n de Empresarios de Combustibles (FECRA), que explic?? que la Secretar??a de Energ??a multa la provisi??n de naftas y gasoil a instalaciones que no est??n incluidas en una n??mina. Por ello, al ver que los establecimientos no estaban en la n??mina del sitio web, las petroleras les suspendieran el aprovisionamiento de combustible hasta que regularizaran su situaci??n. Los afectados notificaron del problema al director Nacional de Refinaci??n y Comercializaci??n de FECRA, Vicente Serra, quien aconsej?? a los operadores que enviaran una copia de las auditor??as de tanques y superficie v??a fax a las petroleras para que estas destraben los pedidos retenidos. Asimismo, el funcionario indic?? a los expendedores perjudicados, que se comuniquen con ese organismo para que sean incorporados nuevamente dentro del mencionado registro.
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Source: El Clar??n
El precio del crudo de Texas registr?? hoy un leve incremento, pero suficiente para terminar la semana en Nueva York por encima de US$61 d??lares, el valor m??s alto desde el 22 de diciembre pasado. El ??ltimo informe de reservas en Estados Unidos, que reflej?? un fuerte descenso en las relativas a combustibles de calefacci??n y en existencias de gasolina, ha sido uno de los factores que m??s ha contribuido al repunte de los precios.Al cierre de la sesi??n regular en el parqu?? de la Bolsa Mercantil de Nueva York (NYMEX), los contratos de Petr??leo Intermedio de Texas (WTI) para entrega en abril sumaban 19 centavos y quedaban a 61,14 d??lares/barril (159 litros).El precio de este tipo de crudo toc?? durante la sesi??n US$61,80, pero no logr?? prolongar el avance hacia los US$62 y con ello fren?? algo la corriente alcista.Los contratos de gasolina para entrega en marzo terminaron a US$1,7631 el gal??n (3,78 litros), un valor similar al del jueves.El gas??leo de calefacci??n para ese mismo mes a??adi?? alrededor de 2 centavos y concluy?? a 1,7505 d??lares/gal??n.Los contratos de gas natural para marzo se encarecieron en unos 3 centavos y cerraron a US$7,75 por mil pies c??bicos.Los datos de existencias almacenadas en la pasada semana, que el Departamento de Energ??a (DOE) dio a conocer el jueves, parecen haber definido por el momento el nivel de precios del crudo y de los combustibles, a la vista de las cortas variaciones con que finalizaron hoy.Los operadores confirmaron el jueves lo que hab??an estado esperando en semanas anteriores: que el incremento en demanda de combustibles de calefacci??n, a causa de temperaturas muy fr??as en gran parte de EE.UU., mermar??a con fuerza las existencias de gas??leo y tambi??n de gas natural.
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Source: El Mercurio
La empresa india afirma que con la propuesta del Ejecutivo, el proyecto es inviable. El Gobierno asegura que la compa????a ganar?? US$ 46 millones anuales. El lunes se reanudan las negociaciones.
El Gobierno y la empresa india Jindal Steel & Power Limited alargaron hasta el lunes su pulseta por el precio del gas que el pa??s vender?? a la compa????a para el proyecto sider??rgico del Mut??n.
A trav??s del ministro de Hacienda, Luis Alberto Arce, el Ejecutivo reiter?? su oferta de cobrar $us 4,20 el mill??n de Unidades T??rmicas Brit??nicas (BTU, por sus siglas en ingl??s) por el gas que se utilizar?? en la reducci??n del hierro y de $us 2,10 por el hidrocarburo para la termoel??ctrica que proveer?? de energ??a al complejo sider??rgico.
Arce asegur?? que con los precios ofrecidos y teniendo en cuenta una cotizaci??n m??nima del hierro, Jindal tendr??a una ganancia anual de $us 46 millones por los pr??ximos 40 a??os.
El vicepresidente ?lvaro Garc??a sostuvo que el proyecto se llevar?? adelante ??sin subvencionar la rentabilidad de la producci??n??.
En la tarde, el vicepresidente de la empresa, Vikrant Gujral, hab??a se??alado que con la oferta del Ejecutivo, el proyecto es financieramente inviable. A??adi?? que la empresa demanda un precio que se ajuste a la Ley 3058.
En este marco, la compa????a est?? dispuesta a pagar $us 2,10 por mill??n de BTU por todo el gas, tanto para reducci??n del hierro como para la termoel??ctrica, que demandar?? el proyecto.
Gujral precis?? que la empresa envi?? todos los documentos requeridos por el Gobierno. Remarc?? la importancia de que el Ejecutivo considere una disminuci??n en el precio del gas, argumentando, entre otros, que la explotaci??n del hierro se realizar?? lejos de un puerto mar??timo.
El Ministro de Hacienda, por su parte, emplaz?? a Jindal a que demuestre por escrito la inviabilidad y las p??rdidas referidas.
Sobre el precio del gas, afirm?? que el Ejecutivo no puede renunciar a las mejoras logradas en la negociaci??n con los pa??ses vecinos, pues esto representar??a afectar los ingresos del pa??s.
Si bien el costo del hidrocarburo es el principal tema de discusi??n, otro de los puntos pendientes es el tributo minero que tendr?? que pagar la empresa.
Gujral expres?? que cualquier tributo debe gravar a todas las empresas por igual, a prop??sito de las modificaciones que alista el Gobierno al Impuesto Complementario de la Miner??a (ICM), que incorpora al??cuotas para el hierro y sus productos derivados.
Al respecto, Arce indic?? que ??si hoy una sola empresa explota determinado producto y paga un determinado impuesto, ma??ana, cuando venga otra empresa tambi??n deber?? pagar ese tributo (??). Por tanto, para nosotros ese argumento no es v??lido??. Denunci?? que Jindal solicit?? que la al??cuota que se le cobre se mantenga invariable durante los 40 a??os en que explotar?? el Mut??n.
Con todo, el Ejecutivo aguardar??, a solicitud de la empresa, hasta el lunes a las 15.00 para conocer una respuesta final.
Los c??vicos de Puerto Su??rez ratificaron el inicio de medidas desde el 1 de marzo si es que hasta el 28 no se firma el contrato.
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Source: La Raz??n
Nicaragua recibir?? hoy un despacho de m??s de 60 mil barriles de combustible venezolano y 200 mil cocinas industriales, anunci?? Francisco L??pez, directivo de Petr??leos de Nicaragua. A bordo del barco Perla del Caribe, autoridades del Gobierno nicarag??ense recibir??n los derivados venezolanos en el puerto de Corinto.
El anuncio coincidi?? ayer con la visita a Caracas del presidente sandinista Daniel Ortega, quien abord?? con el presidente Ch??vez y el canciller Nicol??s Maduro, una serie de acuerdos de cooperaci??n.
L??pez precis?? que el cargamento venezolano consiste en 50 mil barriles de diesel, 10 mil de gasolina y unos 6 mil de gas licuado, as?? como 200 mil cocinas equipadas con gas.
“Esto viene a aliviar (la demanda) y a detener la deforestaci??n”, dijo, al recordar que los campesinos nicarag??enses utilizan le??a para cocinar. Anunci?? que en marzo Pdvsa enviar?? otros 6 mil barriles de GLP y que al finalizar el a??o Nicaragua podr??a recibir hasta 10 millones de barriles de derivados, lo que obliga al pa??s a buscar alternativas de almacenamiento.
Su capacidad instalada es de 70 mil barriles de combustible, pero podr??a aumentar a 370 mil barriles en los pr??ximos dos meses, utilizando infraestructura de filiales de Petronic.
Parte del combustible que llegar?? hoy se usar?? para poner a funcionar 32 plantas el??ctricas venezolanas y otra se vender?? a transportistas privados que operan autobuses en la capital.
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Source: El Universal
Ecuador est?? decidida a minimizar el costo de las importaciones de derivados que ha venido haciendo -y que en 2006 super?? los 1.700 millones de d??lares-, pese a ser un pa??s productor de petr??leo.
La primera medida del gobierno de Rafael Correa en esa direcci??n, fue la firma en enero de un acuerdo de intercambio de crudo ecuatoriano por derivados procesados por Pdvsa, seg??n el cual el primer cargamento de 220 mil barriles de diesel arrib?? ayer al puerto de Balao, en la localidad de Esmeraldas, y se espera que otros dos buques con vol??menes similares lleguen a ese pa??s durante el mes de marzo.
El segundo paso, iniciado tambi??n ayer, fue la propuesta a ocho petroleras de Latinoam??rica -Petrobr??s de Brasil, Ancap de Uruguay, Enarsa de Argentina, Petroper??, Enap de Chile, Ecopetrol de Colombia, Petroecuador y Pdvsa- de construir una refiner??a de 300 mil barriles diarios en la localidad de Manta para poder as?? declarar la suficiencia energ??tica de ese pa??s.
La participaci??n de algunas de estas empresas prev?? concretarse mediante la formaci??n de una empresa mixta multinacional. La inversi??n total estimada para el proyecto es de 4 mil millones de d??lares, dijo Correa.
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Menos carga
Seg??n estima Correa, el acuerdo de suministro consolidado con Venezuela ayer en Balao derivar?? en un ahorro de entre 50 y 80 millones de d??lares al a??o, inform?? la agencia AFP.
Se estima que por cada mill??n de barriles de crudo ecuatoriano que reciba Pdvsa, el pa??s del altiplano obtendr?? unos 660 mil barriles de diesel. Ecuador produce 530 mil barriles al d??a de crudo, pero se ve en la necesidad de importar unos 55 mil b/d de derivados, pues s??lo tiene tres refiner??as (Esmeraldas, La Libertad y Shushufindi) que en conjunto no alcanzan a 200 mil b/d de capacidad instalada.
Al ritmo en que comenzaron a hacerse los despachos -dos cargamentos mensuales de 220 mil barriles cada uno-, esta provisi??n se traduce en menos de 8 mil barriles por d??a de diesel, aunque el acuerdo firmado en enero estipula un volumen superior. Cabr??a esperar entonces que ambos pa??ses acelerar??n el ritmo de las entregas en el transcurso del a??o.
El diesel venezolano ingresar?? a la red de poliductos de Ecuador para satisfacer la demanda interna, aunque una parte se destinar?? a las termoel??ctricas, que aportan 60% de la energ??a que requiere Ecuador, mientras se repara la central de Paute, una de las principales del pa??s.
El canje Ecuador-Venezuela se extender?? hasta que Quito lo considere necesario para cubrir la demanda interna y mientras se construye la refiner??a de Manta y se rehabilita la principal central procesadora del pa??s, posiblemente con inversi??n venezolana.
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Source: El Universal
Las empresas japonesas Marubeni y Mitsui firmaron un contrato con Petr??leos de Venezuela que prev?? la compra durante 15 a??os de parte de su producci??n de crudo -entre 20 mil y 30 mil barriles al d??a-, pagando anticipadamente 3.500 millones de d??lares, dijo AFP.
El monto ser?? cancelado por las niponas bajo la modalidad de pr??stamo y contar?? con el apoyo financiero del Banco Japon??s de Cooperaci??n Internacional (p??blico). Las compa????as tendr??n cada a??o “un derecho exclusivo de negociaci??n de las condiciones de compra” del crudo y de otros productos vendidos por Pdvsa.
Este monto se suma a los 1.000 millones de d??lares en l??nea de cr??dito que acaba de otorgarle el banco franc??s BNP Paribas a Pdvsa, as?? como a la emisi??n de 3.500 millones de d??lares adicionales que prepara la estatal en el mercado interno (bonos emitidos en d??lares, pero cancelables en bol??vares) y que, aseguraron directivos de la compa????a, se ejecutar?? sin falta en el transcurso de este a??o.
Trascendi?? que el pr??stamo ofrecido por las compa????as japonesas se hab??a venido negociando en los ??ltimos dos a??os con Pdvsa, sin mucho ??xito. Luego de su otorgamiento, sin embargo, no se descarta que sea cancelado en el corto plazo.
De un ??ndice deuda/patrimonio que logr?? reducirse a apenas 9% al cierre de 2004, de acuerdo con los estados financieros de la estatal, este a??o la compa????a prev?? volver a contraer deuda, mas sin necesidad de recurrir al mercado norteamericano.
Eudomario Carruyo, director de Finanzas de Pdvsa, se??al?? semanas atr??s que la l??nea de cr??dito solicitada a PNB Paribas se usar?? para inyectarle flujo de caja a la compa????a. D??as despu??s, el presidente de la petrolera, Rafael Ram??rez, explic?? que el financiamiento se usar??a de “caja de guerra”, es decir, que se dispondr??a de ??l s??lo en caso de que fuera necesario.
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Poco aval
Tras la entrega de sus balances financieros auditados de 2004, Pdvsa se retir?? formalmente del registro de la Securities and Exchange Commission (SEC) de Estados Unidos, que le hab??a servido de aval de cr??dito en operaciones de deuda anteriores.
Su filial en EEUU, Citgo Petroleum Corporation, que tambi??n hab??a contra??do deuda p??blica, se retir?? de la misma manera, tras consignar la informaci??n contable correspondiente al ejercicio 2005.
Pdvsa entreg?? a diversos proyectos de desarrollo social -fideicomisos, misiones y otros-m??s de 10 mil millones de d??lares el a??o pasado, suma que aunada al aporte fiscal hizo que 69% de los ingresos brutos nacionales de la petrolera, resultantes de sus exportaciones de crudo y derivados, terminara en manos del Ejecutivo.
Los ingresos totales de la compa????a en el pa??s fueron de 55.073 millones de d??lares, los costos y gastos sumaron $14.213 millones y las inversiones se elevaron a $5.940 millones en 2006.
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Source: El Universal
by John Viljoen
Billionaire Warren Buffett’s Berkshire Hathaway Inc. rejected calls to sell shares of PetroChina Co., whose parent operates in Sudan, a nation accused by the U.S. Congress of genocide.
Shedding the stock, which has gained 24 percent over the past year, wouldn’t ?have a beneficial effect on Sudanese behavior,” Berkshire said in a statement. The actions of the Chinese government or parent company China National Petroleum Corp. can’t be attributed to PetroChina, the company said.
?Subsidiaries have no ability to control the policies of their parent,” according to the unsigned statement, posted on Berkshire’s Web site. ?Berkshire agrees that conditions in that country are deplorable and sympathizes with people who want to remedy them.”
Campaigners such as the Sudan Divestment Task Force, based in Washington, are trying to sway universities, investment companies and state pension plans to pull their money out of companies that do business that directly benefits the Sudanese government. Militias backed by the government have killed more than 200,000 people, according to United Nations estimates.
Buffett, who in June said he would give 85 percent of his wealth to charity, has made at least $2.3 billion for Berkshire by investing in PetroChina, which is China’s biggest state- controlled oil company. China National Petroleum led development of the first oil field in Sudan and owns a stake in crude oil reserves and a pipeline.
California
Berkshire said its statement responded to ?communications from the media, shareholders and others” about its PetroChina investment.
The Sudan divestment group said on its Web site that it has targeted Berkshire Hathaway and Teachers Insurance & Annuity Association, among others, with campaigns to force them to shed Sudan-related investments. FMR Corp.’s Fidelity Investments is being pressured by activists based in Massachusetts, according to the Fidelity Out of Sudan Web site.
California Governor Arnold Schwarzenegger in September signed a bill that bans the state’s two public pension funds from investing in companies that do business with the Sudanese government. The California Public Employees’ Retirement System, the largest U.S. public pension fund, and the California State Teachers’ Retirement System, the second-biggest, together control $350 billion in assets.
New Jersey and Illinois have taken similar steps. Fund managers including Northern Trust Corp. and State Street Global Advisors have created Sudan-screened funds to help Illinois meet its goals, according to a Sudan Divestment Task Force report. The report says 33 universities, including Harvard and Yale, restrict Sudan-related investments.
Berkshire’s Stake
Beijing-based PetroChina is now the world’s third-largest oil and gas company by market value, behind Irving, Texas-based Exxon Mobil Corp. and Moscow-based OAO Gazprom.
Berkshire, PetroChina’s biggest overseas investor with a 1.1 percent stake, bought the stock for less than HK$1.70 in April 2003. Since then, the shares gained more than fivefold. Omaha, Nebraska-based Berkshire stock has increased 49 percent.
PetroChina shares fell 0.1 percent to HK$9.47 in Hong Kong. Berkshire shares fell 0.5 percent today to $106,800.
Buffett, 76, over four decades transformed Berkshire from a failing textile manufacturer into a $165 billion holding company by buying out-of-favor stocks and companies whose business and management he deemed superior. He became the world’s second- richest man, behind Microsoft Corp. Chairman Bill Gates.
Petrodar
?I have to agree with Warren Buffett,” said Gordon Kwan, Hong Kong-based China oil and gas research director at CLSA Ltd., referring to the distinction Berkshire drew between PetroChina and its parent company.
China National Petroleum owns 41 percent of Khartoum-based Petrodar Operating Co., while Malaysia’s state-owned Petroliam Nasional Bhd. owns 40 percent, according to Petrodar’s Web site. The venture opened a 1,400-kilometer (870-mile) pipeline last April to carry 200,000 barrels of oil a day from fields in the Melut Basin to Port Sudan on the Red Sea.
In addition to arguing that PetroChina is not responsible for the actions of its parent company, the Berkshire statement questions the value of getting China National Petroleum to pull out of Sudan. The stake the Chinese hold would be sold ?almost certainly at a bargain price and almost certainly to the Sudanese government.” That would increase the government’s oil revenue.
Even if Berkshire opposed an action by PetroChina, the investment firm doesn’t believe it should ?automatically divest shares of an investee because it disagrees with a specific activity of that investee,” the statement said.
`No Records’
Mao Zefeng, PetroChina’s Hong Kong-based spokesman, and Liu Weijiang, head of China National Petroleum’s international department in Beijing, weren’t available to comment. Most Chinese businesses are shut for the Lunar New Year holiday.
Chinese investment in Sudanese oil production and pipelines, mainly through China National Petroleum, has accelerated the country’s crude output to more than 500,000 barrels a day in six years.
China National Petroleum pledged $1 million to Sudan’s welfare ministry, China’s state-run Xinhua News Agency reported Feb. 1. The company signed an agreement with the African country’s energy ministry to spend $900,000 training Sudanese oil professionals, the news agency said. China National Petroleum has given more than $30 million to charity in Sudan since it began operations there in 1995, Xinhua said.
Darfur Conflict
The killing in Darfur has attracted growing opposition among activists in the U.S. and elsewhere. Nicholas Kristof, a New York Times columnist who has publicized the Darfur atrocities, wrote this month that activists are right to try to pressure the Sudan government by targeting Fidelity’s and Berkshire’s investments.
Guidelines by groups such as the Darfur Divestment Task Force protect the people of Sudan by distinguishing between companies that do business with the government, helping create funds for weapons purchases, and those engaged in activities that benefit the people of the country, according to Kristof.
The conflict in Darfur, a region the size of France, began in February 2003 when rebels demanding a greater share of Sudan’s political power and oil wealth began attacking the government.
The government responded by supporting militias known as the Janjaweed to target villagers suspected of backing the rebels, according to rights groups such as New York-based Human Rights Watch.
Repeating Mistakes
Chinese companies in Africa are making the same mistakes that international companies such as BP Plc and Royal Dutch Shell Plc made in the past, said Kevin Rosser, head of oil and gas at Control Risks Group.
?The propensity of Chinese companies to overlook human rights is as much a reflection of their inexperience in operating abroad as it is of any state control or direction,” Rosser said in a phone interview from London today.
?The more they are exposed to pressure, where PetroChina has to take account of what shareholders say, or the pressure put on big shareholders like Berkshire Hathaway, the more they’re likely to conclude that transparent, sustainable business practices in host countries and respect for human rights actually improves the long term viability of the business,” he said.
BLOOMERG
by Jim Polson
National Grid Plc’s planned $7.3 billion takeover of New York-based natural-gas distributor KeySpan Corp., should be rejected unless KeySpan sells its largest power plant and the buyer agrees to other consumer protections, state regulatory staff said.
The divestiture may prevent market manipulation and is reasonable because London-based Grid promised not to acquire New York power plants when it bought upstate electricity distributor Niagara Mohawk in 2002, the state’s chief regulatory economist and two others said in a recent filing with the New York Public Service Commission, which must approve the purchase.
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The takeover, announced a year ago, would combine National Grid’s U.S. operations with the gas and electricity business of KeySpan, the biggest gas supplier in the Northeast and the main power-producer for Long Island. Because National Grid plans to finance the entire purchase with debt it may be unable to keep a promise to restrain rates for 10 years, staff said.
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?Grid’s ownership of KeySpan, as envisioned by the proposed transaction, creates an unusually high number of future risks and uncertainties for New York ratepayers and utility investors,” the three staff said in testimony. National Grid already wants ?excessively high profits” by earning a return on the $2.7 billion premium promised KeySpan shareholders, they said.
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Terms acceptable to New York may force National Grid to withdraw its offer, the officials said.
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Confident National Grid
?The issues that the staff has raised can be addressed and resolved,” National Grid spokeswoman Jackie Barry said today in an interview. ?This merger will deliver significant benefits to customers.
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National Grid will file a detailed response to the staff’s comments by March 7, she said. The commission’s schedule calls for hearings before an administrative law judge next month, with his recommendation due around June 15.
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The testimony was filed by Thomas Coonan, a utility supervisor for natural-gas rates at the New York Department of Public Service, Warren E. Myers, the state’s chief of regulatory economics and John D. Stewart, an accounting section chief in the Department of Public Service. Debt at London-based Grid would rise $11.4 billion to finance the purchase, an amount that threatens its credit rating unless the state agrees to ?unreasonably high rates” for gas customers, according to the testimony.
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KeySpan must be required to sell its 2,310-megawatt Ravenswood power plant in the New York City borough of Queens as a condition for the takeover, and National Grid must agree to further divestitures if there’s evidence it has gained the ability to push up power prices, staff said.
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FERC Approved Deal
The position is at odds with that of the Federal Energy Regulatory Commission, which approved the takeover Oct. 19, declaring ?the combination of their electric generation resources is not likely to harm competition in any relevant market.”
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Federal Regulators also found no harm to competition from the biggest U.S. utility takeover ever proposed, Exelon Corp.’s $17.8 billion purchase of Public Service Enterprise Group Inc., owner of New Jersey’s largest utility. That deal collapsed in September when the companies refused to meet demands by New Jersey regulators concerned that the combined company could push up power prices.
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Niagara Mohawk
National Grid won the New York commission’s approval to buy Niagara Mohawk in part by agreeing to restrain rates for 10 years and is making a similar offer at KeySpan.
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?The quality of Niagara Mohawk’s electric service has deteriorated since it merged with Grid,” the staff said.
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The commission should require the company improve service at Niagara Mohawk and agree to terms that will avoid a service decline to KeySpan customers in New York City and on Long Island, the staff said. Shares of Keyspan fell 15 cents to $41.06 in New York Stock Exchange trading. Shares of National Grid have risen 31 percent, to 782.5 pence in London, since the first reports it had had agreed to buy KeySpan. BLOOMBERG
by Dan Lonkevich and Edward Klump
Kohlberg Kravis Roberts & Co. is poised to buy Texas utility owner TXU Corp. in the biggest-ever leveraged buyout.
The board of Dallas-based TXU is set to vote on the proposal this weekend, said a person familiar with the deal who declined to be named because the talks were private. Texas Pacific Group may be part of the acquisition, according to the Wall Street Journal, citing unidentified people. The possible TXU sale was previously reported by CNBC.
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The purchase price is not yet final, the person said. Shares of TXU surged as high as $70 in after-hours trading, valuing the company at about $32 billion. With TXU’s $16 billion in debt, the transaction may be worth more than $48 billion. Blackstone Group LP’s purchase this month of Equity Office Properties Trust for $39 billion, including debt, was the largest previous buyout.
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?An acquisition by KKR will be a blow to TXU’s credit quality because leverage would increase substantially,” said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. ?Leveraged buyouts of utilities have been relatively rare.”
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TXU shares have jumped sixfold since 2002, when failed expansions overseas helped push the company near bankruptcy. Chief Executive Officer C. John Wilder, 48, returned the company to a focus on electric generation and distribution in the Dallas region since taking over in February 2004. The company’s credit is rated Ba1 by Moody’s, one level below investment grade.
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TXU spokeswoman Lisa Singleton didn’t respond to requests for comment. Molly Morse, a KKR spokeswoman, and Owen Blicksilver, a representative for Texas Pacific, declined to comment.
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State Approval
Any sale of TXU, the largest power producer in Texas with more than 18,300 megawatts, would need the approval of the Texas Public Utility Commission. The company is also the largest electricity retailer in the state, selling power to more than 2.2 million homes and businesses.
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?It’s important to remember that we have had two private equity buyers turned down by state utility commissions,” said Tom Burnett, director of research at Wall Street Access in New York, who tracks acquisitions. ?A lot of these state agencies frown on the extra leverage placed on these assets by the private-equity groups.”
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Arizona state officials in December 2004 rejected the sale of UniSource Energy Corp., owner of the state’s second-biggest utility, to a partnership backed by New York-based Kohlberg Kravis, J.P. Morgan Partners LLC and Wachovia Capital Partners.
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Oregon in March 2005 rejected a purchase of Portland General Electric by Fort Worth, Texas-based Texas Pacific.
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?Regulators frown upon leveraged buyouts because it increases the riskiness of the utility and their ability to service their customers,” Egan said.
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Credit Risk
Credit-default swaps based on $10 million of TXU’s bonds rose $770 to $84,380 as of 4:30 p.m. today in New York, according to London-based CMA Datavision. It was the first increase since Feb. 14. A rise in the cost of the contracts, used to speculate on a company’s ability to repay debt, signals deterioration in the perception of credit quality.
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Closely held buyout firms such as KKR use a mix of cash from investors plus their own funds and debt secured on the target they buy to finance their deals. They typically seek to expand companies or improve performance before selling them within five years to other funds or investors in initial public offerings.
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Buyout Boom
The largest LBO before Equity Office was the $33 billion purchase in November of hospital chain HCA Inc. by Bain Capital LLC, Kohlberg Kravis, Merrill Lynch & Co. and HCA co-founder Thomas F. Frist Jr. That topped the $31.3 billion that Kohlberg Kravis paid in 1989 for RJR Nabisco Inc.
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Private-equity firms announced a record of more than $700 billion in takeovers last year and almost $50 billion so far this year, Bloomberg data show. Investors, seeking returns that exceed stocks and bonds, poured $432 billion into buyout funds last year, also a record, according to London-based Private Equity Intelligence Ltd.
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KKR has raised $16.1 billion for a new U.S. buyout fund and expects to reach its cap of $16.6 billion, a person familiar with the matter said Jan. 11.
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?They’re taking a very big political bet,” said David Dreman, who helps manage $22 billion at Dreman Value Management including TXU shares. ?If things go well for TXU they’re going to put on seven to nine coal-fired plants. KKR must have a degree of certainty they can get it done. There could be major upside.”
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Coal Plant Controversy
TXU has stirred controversy in Texas in the past year with its plan to build as many as 11 coal-fired generators at a cost of $10 billion. Environmentalists, the mayors of Houston and Dallas and some state lawmakers have said the plants will make the state’s air pollution problems unmanageable.
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The company’s biggest rival in the race to build new generation in Texas is NRG Energy Inc., which bought a Texas power company called Texas Genco from a group of buyout firms including Texas Pacific and Kohlberg Kravis in 2005 for $5.8 billion.
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CNBC reported the possible acquisition after exchanges closed. TXU shares had gained $2.38, or 4.1 percent, to $60.02 in New York Stock Exchange composite trading, the biggest one- day gain in more than nine months. They jumped another $10 in extended trading.
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Deregulation
Texas deregulated its power industry in 2002. Wholesale electric generation in the state also is competitive, along with retail sales of power. The transmission and distribution or ?wires” business remains regulated. TXU has all three operations.
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General Electric Co. and a unit of Australia’s Macquarie Bank Ltd. competed a year ago to buy a stake in TXU’s wires business for $5 billion or more, the Wall Street Journal reported in February 2006, citing people familiar with the situation.
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A private equity transaction involving TXU might work because the company is in Texas, said Barry Abramson, who helps manage about $28 billion in assets, including TXU shares, at Gamco Investors in Rye, New York.
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?Maybe the right assets going to the private equity group could be acceptable,” Abramson said, adding that the regulated portion might eventually end up with another company.
BLOOMBERG
The minority stakes held by Yukos in Rosneft and Gazprom Neft will be offered at a discount in the first auctions of the bankrupt oil firm’s assets next month, sources close to the creditors’ committee said Wednesday, Interfax reported.
read more | digg story
by Daan van der Schriek
The minority stakes held by Yukos in Rosneft and Gazprom Neft will be offered at a discount in the first auctions of the bankrupt oil firm’s assets next month, sources close to the creditors’ committee said Wednesday, Interfax reported.
Rosneft and Gazprom will likely scoop up the stakes in Rosneft and Gazprom Neft, respectively, analysts said. While Yukos’ 9.44 percent stake in Rosneft was valued at $7.33 billion as of Oct. 1, 2006, the starting price at the auction would be set at $6.87 billion, “a 6.7 percent discount to the valuation price and an even more impressive 25.6 percent discount to current market value for the stake,” Alfa Bank wrote in a note to investors Wednesday.
Yukos’ stake in Gazprom Neft was valued at $4.25 billion while the starting price at the auction is expected to be $4 billion ” a 6.3 percent discount on the valuation price and a 4.3 percent discount on current market value, Alfa Bank wrote.
Nikolai Lashkevich, spokesman for Yukos’ court-appointed receiver, Eduard Rebgun, said he could not confirm which assets will be sold off first, or at what starting prices, before an official announcement by the creditors’ committee. Such an announcement would probably come by the end of the week, Lashkevich said. He said earlier Wednesday that it would be published in Rossiiskaya Gazeta on Thursday, The Associated Press reported.
While the quoted starting prices for the Rosneft and Gazprom Neft stakes would be low compared with current market valuations, they are only starting prices and might go up during the auction, said Olga Danilenko, an analyst with Deutsche UFG.
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Rosneft and Gazprom are the most serious bidders and the likely winners of the respective stakes, MDM Bank analyst Nadya Kazakova said.
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A spokesman for Gazprom declined to comment Wednesday, while no one at Rosneft could be reached.
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Alfa Bank on Wednesday assessed developments as positive for Rosneft, “which is likely to be the front-runner at the auction for its shares and hence could substantially benefit from the discrepancy between the stakes’ market value and the auction price.”
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The bank assessed the news as neutral for Gazprom, which has less discount from which to benefit.
Yukos assets to be auctioned off include oil production units Tomskneft and Samaraneftegaz, five refineries, 1,100 gasoline stations and a 49 percent stake in Slovakian pipeline operator Transpetrol.
Rosneft this week sent its strongest signal yet that it hoped to acquire Tomskneft and Samaraneftegaz. When asked whether Rosneft was planning to bid for the two units, Rosneft vice president Sergei Kudryashov said Monday: “We know better than anyone else how to run Samaraneftegaz and Tomskneft.”
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Rebgun last month valued Yukos’ remaining assets at more than $22 billion. The company owes $27 billion to its creditors, mainly the Federal Tax Service and Rosneft.
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The former general director of Samaraneftegaz, Pavel Anisimov, admitted in a Samara court Wednesday that he had taken part in tax evasion at the production unit, Gazeta Samara reported.
The Moscow Times
Ethanol Expansion Will Increase Production Over HalfWith the current push for less reliance on foreign oil, as well as less dependency on non-renewable fuel sources, ethanol expansion as an additive in gasoline and diesel fuel has seen tremendous manufacturing growth in recent years. …
Biodiesel Becoming Competitive with Ethanol
Hemscott.com reports that biodiesel may become the new alternative energy leader due to worries over the high corn prices to produce ethanol. Some are also worried about ethanol?s smog emissions and over supply despite the many facility expansion plans. Biodiesel production is still a fraction of what ethanol production is in the U.S., but investors are interested in it because it works with existing infrastructure and it can be used in a vehicle that takes regular diesel.
Researchers to study ethanol expansion effectsISU researchers will evaluate the costs and benefits of to rural communities as part of a $676722 biofuels research grant.
Biodiesel Becoming Competitive with EthanolHemscott.com reports that biodiesel may become the new alternative energy leader due to worries over the high corn prices to produce ethanol. Some are also worried about ethanol s smog emissions and over supply despite the many facility expansion plans. Biodiesel production is still a fraction of what ethanol production is in the U.S., but investors are interested in it because it works with existing infrastructure and it can be used in a vehicle that takes regular diesel.
Ethanol Demand Driving Expansion of US Corn Crop; USDA Projects 31% of US Corn for Ethanol in 2016Green Car Congress: Projected production and use of corn in the US. Click to enlarge. Source: USDA. Demand for ethanol will push US corn output to more than 14 billion bushels by 2016, 4.3 billion of which will be used to produce…
USDA Helping With Rural Development
USDA?s Rural Development department has been involved in assisting rural communities in a number of project areas over the years. One of them is the area of renewable energy and energy efficiency.
At the recent Cattle Industry Convention, I met with and interviewed Allan Johnson, USDA Rural Development, Senior Advisor. The conversation turned to renewable energy right away since ethanol was a big topic of discussion among livestock producers attending the meeting. Allan talks about the ways USDA has assisted rural communities in this area, like funding feasibility studies.
He didn?t have the statistics at hand, but I obtained some from USDA that include the following:
More than $428.1 million in renewable energy and energy efficient ventures, including $304.9 million in Value-Added and Business Ventures involving wind power, anaerobic digesters, solar, ethanol plants, direct combustion and fuel pellet systems and other bioenergy and energy efficiency related systems. And $58.2 million in Biomass research and development grants and $119 million in renewable Electric Utility upgrades and expansions.
You can listen to my interview with Allen here: 
Allan Johnson Interview (6 min MP3)
The Hill: Midwestern members reopen fault lines over $2.3B rail loanThe Hill’s Elana Schor takes a look at the final stages of the DM & E loan process in Midwestern members reopen fault lines over $2.3B rail loan: The final skirmish is beginning this week in a long congressional battle that has exposed rifts over fiscal conservatism, geographical bias and …
Biodiesel Becoming Competitive with EthanolHemscott.com reports that biodiesel may become the new alternative energy leader due to worries over the high corn prices to produce ethanol. Some are also worried about ethanol s smog emissions and over supply despite the many facility expansion
Conventional Ethanol vs. Cellulosic Ethanol. Conventional ethanol is produced using grains like corn and wheat or soybeans. The most important and widely used ingredient for conventional ethanol is corn or sugarcane, and it is processed either through… lucrative fuel-cropping. The supply of raw material is also more abundant than corn-based ethanol production. The use of fertilizers and watering essential for corn for ethanol production is also… ethanol would be more viable given the cost of producing traditional feedstocks like corn. Brazil
What Is The Real Cost Of corn ethanol?Add cost of transporting, storing and blending Corn Ethanol. $0.28. Added cost of making gasoline that can be blended with corn ethanol … But the real price we pay for corn ethanol is much higher than the one we see at the filling …
Ethanol Demand Driving Expansion of US Corn Crop; USDA Projects 31% of US Corn for Ethanol in 2016Green Car Congress: Projected production and use of corn in the US. Click to enlarge. Source: USDA. Demand for ethanol will push US corn output to more than 14 billion bushels by 2016, 4.3 billion of which will be used to produce…
Feed People or Feed Their Cars?Modulator: Ethanol production is not a free lunch on the way to reducing oil consumption. In fact, it is just the opposite. A much more costly lunch:The jump in corn prices is already affecting the cost of food. The most notable example: in Mexico, which gets much of its corn from the United States, the price …
Honda Civic GX owners rejoice! Corncob technology may extend your driving range - AutoblogGreenbe recycled from ethanol or other corn-processing plants. Second-generation briquettes also hold
Analysts Differ On Expectations For Corn, Ethanol Use …KANSAS CITY (Dow Jones)?While some analysts believe the US Agriculture Department may have been too conservative in its long-term projections for corn use and ethanol production, others say the government figures may not be far off the …
ADM & Deere Executives Support Cellulosic Ethanol - Wisconsin Ag ConnectionADM Deere Executives Support Cellulosic EthanolWisconsin Ag Connection, - 19 minutes agoRobert W. Lane, Deere CEO, said, We’re interested in cellulosic ethanol, very definitely. Corn-based ethanol is only one form of energy
Pressure Rising Over Biofuels, plus Algae-to-Biodiesel DevelopmentsWith the incredibly rapid rate of construction of new plants, and the great deal of uncertainty (unlikelihood?) that politicians will heed Lester Brown?s warnings, would someone please light a fire under these …
Transcript of Johanns Remarks to Washington International Trade Association
SECRETARY MIKE JOHANNS: Well, thank you very much, Audrae [Erickson]. And ladies and gentlemen, thank you. It?s good to be with all of you to talk a little bit about the Farm Bill and maybe share with you some thinking about the proposals that we put out just very recently.
Let me just start and say that these proposals offer a comprehensive program that I believe will put American agriculture on a very strong, competitive footing, not only for today but for years to come. I?m going to continue making this claim until somebody challenges me, but I believe that this is the most extensive set of proposals that any administration has put forward on the Farm Bill since Franklin Roosevelt put proposals before Congress about 70 years ago.
In drafting these proposals, we made transparency and inclusive attitudes the guideposts of what we were doing. We have made an extraordinary effort to reach out to the farmers and ranchers whose lives and livelihoods are directly affected by the policies that are set here in Washington.
Over two years, as Audrae mentioned, we held 52 Farm Bill Forums in 48 of our states ” I attended 21 of them myself ” where we gathered comments from some 4,000 farmers and ranchers and stakeholders at these events.
We used basically the same format, and that was: we would publicize that we?d be in a location at a given time, and then we would just tell people in attendance ” and we had very large crowds ” ?The microphone is open. Talk to us about farm policy.? And talk they did.
Those comments contained plenty of common sense and what I like to refer to as ?prairie wisdom,? and pointed us in some new directions.
After we heard from the folks on the ground, we had to take a hard look at some of our assumptions. We also had experts inside and outside the USDA to analyze past policies and sliced and diced all the economic data the USDA?s crack team of professionals could supply to us.
One of the reasons Congress takes up a new Farm Bill every five years is: it gives everyone a chance to take a very critical look at the policies that are in place and ask the question: Are they working, or is change warranted?
So in preparing for the ?07 Farm Bill, we have certainly done that. But I think we have also taken a broader, a much deeper look at the future of American agriculture, and how we might position ourselves to succeed not only in this domestic marketplace but in the international marketplace as well.
In doing so, we have taken both international trade considerations and changing domestic and international market conditions into account. Over the five years that the 2000 Farm Bill has been in place, export markets have grown more and more important to American agriculture. Food and agricultural exports reached a record level of $68 billion last year, and we project another record this year in 2007; we?re projecting a number of $77 billion in exports.
The value of these exports is now equal to about one-quarter of our total U.S. farm cash receipts. Exports from our farms and ranches have an impact beyond the farm economy. In 2004 we calculated that every dollar of export activity generated $1.48 in supporting economic activity. In all, some 825,000 jobs were generated from agricultural exports that year; 388,000 on farms and another 437,000 jobs because, you see, somebody must do the assembling, the processing, and then distribute those products for export.
American farmers and ranchers know that foreign trade does matter. They know the international marketplace is their best prospect for finding new market opportunities. Already 80 percent ” 80 percent ” of U.S. cotton goes into the export market. So does 50 percent of our rice go into the export market.
Export rates also run high for high-value products like almonds at 70 percent, sunflower oil at 60 percent, and grapefruits at 40 percent. The mix of products that we send overseas has changed over time, as you might expect. And today it?s about evenly divided between our bulk products like grains and our higher-value products like meats and fruits and vegetables, dairy products, and other processed foods.
Now this is a diverse line-up, and it means U.S. producers need broad access to a wide array of export markets. And in coming years as American agriculture continues its impressive productivity gains, it will certainly need more access to markets in the developing world where we know 95 percent of the world?s growth in population will take place.
That?s why a successful conclusion to the Doha Round of trade talks is critically important. However, it?s necessary for a successful conclusion that the U.S. receives a fair shake in the Doha Development Round, and we are working very hard to make this Round successful.
Lowering tariffs and removing non-trade barriers will both give American producers, whether in agriculture, services, or manufacturing, the chance to compete on a level playing field. So yes, trade was certainly on our minds as we sat down to prepare the Farm Bill proposals. But our first consideration, our first consideration, was crafting sound farm policy for the United States and affecting reforms of our current programs wherever there were compelling reasons to do so.
This means taking a more market-oriented approach that is predictable and balanced, one that provides farmers and ranchers with the safety net, yet reduces the distortion of market signals. I believe that good farm policy, quite simply, is good trade policy. Overall our proposals would reduce spending on farm programs by $10 billion below actual expenditures under the 2002 Farm Bill to date, upholding the President?s plan to eliminate the deficit in the United States within the next five years.
Importantly, our proposals will shift support away from production-distorting policies to conservation, to rural development, and into other areas.
Now, I will tell you, we have been very pleased by the generally positive reaction our proposals have received so far, especially from Congress and members of the public. But I would have to say the international response is difficult to explain. Other countries seem to be underestimating the far-reaching nature of the reforms that we are putting forward.
In fact, we are recommending several very significant reforms to our current system of support payments for the commodity crops. We propose revising our marketing assistance loans to reduce what some have criticized as the market-distorting effects of the current loan program.
What we heard from many farmers at our Farm Bill Forums was that while they liked the structure of our current programs, there were a number of areas where they felt we come up short. One of those was in the counter-cyclical payments we make to our program crop producers. Under our previous system, some farmers told us that they were getting aid in years when the yields and the income levels were the highest. But they said that they were shut out in years where their yields were poor or where they couldn?t plant any crop because of weather conditions. And they asked us to try to figure that out.
So we are proposing to tie our counter-cyclical payments to revenues other than crop prices. This will make this program more effective in aiding farmers in years when yields are depressed but crop prices are strong. Basing these payments on revenues will make this a more rational and a more market-oriented program that will function as a safety net for hard times, as it was originally intended to do.
We will also expand our direct payments program over the life of the Farm Bill by about $5.5 billion. Because these payments are based on historical acreage and they are not tied to current prices or to production, they do not influence a farmer?s decision on what to produce.
To make our direct payments more fully consistent with the WTO green box criteria, we also propose eliminating the current restrictions on planting certain specialty crops, fruits and vegetables, and wild rice, on land that is covered by the program. To further boost our specialty crops which now generate sales that equal our program crops, we will provide $3.25 billion to buy fruit and vegetables for our nutrition assistance in school lunch programs. We will also increase funding for trade assistance programs that help specialty crops overcome the non-tariff sanitary and phytosanitary barriers that can block their access to export markets.
The most dramatic funding change we have proposed for the new Farm Bill is in the area of our conservation programs. We heard many complaints from farmers and ranchers about the complexity of our current line-up of programs in this area. We had to concede, they had a point. Sometimes we even confused ourselves by these programs. So we have offered in our proposal a plan to consolidate and to simplify all of our existing programs to make them easier for a farmer to participate in.
And second, we are proposing an increase in funding in these areas, an additional $7.8 billion over the life of this Farm Bill. These conservation programs will offer new incentives to farmers.
One proposal I?m very excited about, because it comes from farmers themselves, is the conservation enhanced payment option ” literally the option to replace commodity support payments with an enhanced direct payment for conservation efforts. With this proposal, farmers can look out over the life of this Farm Bill and decide whether or not they are likely to benefit from the counter-cyclical program or the marketing loan program. If they look out there and say, ?I?m not likely to benefit from that, but there are some things that I want to do in the conservation arena on my farm,? we will enroll them into the program, the conservation program, for the life of the Farm Bill, and we?ll increase their direct payment by 10 percent.
This Administration is committed to supporting agriculture while continuing to reform policies that are no longer compatible with a competitive global marketplace. We believe both our conservation and direct payment programs will qualify for green box ” or most favorable treatment ” by the WTO in its system of categorizing agricultural support payments.
To me, one of the most exciting things about the package we put together is the dramatic expansion it proposes for our commitment in developing renewable energy.
We call for $1.6 billion in new funding over the next 10 years to speed the development and production of renewable fuels. We are right now in the middle of a boom in the construction of new ethanol and bi
