On 6/2/2011 7:10 PM, Lew Hodgett wrote:
....

$750K is a sixeable nut where ever you are but it still pales when
compared to the oil industry subsidy that is North of $24 BILLION with
a "B".

OK, so first you compare the full nationwide petroleumto a single,
relatively small group of rural electric co-ops on a one-to-one basis of
absolute dollars...

The $24 Billion subsidy is one of the primary reasons for a renewable
energy subsidy you want to keep bringing to the table.

Then, you claim that the oil depletion allowance (the bulk of the
"subsidy" folks are ranting about these days) somehow has something
central to do w/ central station coal and nuclear generation rates.(1)

Lastly, the subsidies for green energy have virtually nothing to do w/
the comparative balance between oil and gas but almost everything to do
w/ a mostly political agenda couched in "save the planet" terms.


What does the average retail customer pay for power ($/KWH) on an
annual basis including the 25% increase?
I see rates that vary from $0.10/KWH to as much as $0.17/KWH ...

Despite the combined efforts of the cooperating co-ops that form the
pool of which we are one of 29 local RECs to acquire cost-effective
generation our retail rates are still towards the upper end of the range
you have outlined above. This is primarily owing to the fact we are
very rural and therefore the transmission costs are quite high owing to
the large number of miles of line we have installed and maintain.
Rather than an urban utility of many loads(meters)/mile, we measure in
miles/meter.

This is yet another example of the hidden tax of the cost of rural
services that is generally unrecognized by the folks who eat the food
and wear the fiber and other products we produce for them.

(1) As a sidebar on depletion credit...

Depletion, like depreciation, allows for the recovery of
capital investment over time. Percentage depletion is used
for most mineral resources including oil and natural gas. It
is a tax deduction calculated by applying the allowable
percentage to the gross income from a property. For oil
and natural gas the allowable percentage is 15 percent.

A part of the tax code since 1926, percentage depletion has
changed over time. Current tax law limits the use of percentage
depletion of oil and gas in several ways.

First, the percentage depletion allowance may only be taken by
independent producers and royalty owners and not by integrated oil
companies.

Second, depletion may only be claimed up to specific daily American
production levels of 1,000 barrels of oil or 6,000 mcf of natural
gas.

Third, the deduction is limited to 65% of net taxable income.

Fourth, the net income limitation requires percentage depletion to be
calculated on a property-by-property basis.

Over 85 percent of America’s oil wells are marginal wells –
producing less than 15 barrels per day. About 75 percent of American
natural gas wells are marginal wells.

Marginal wells are unique to the United States; other countries shut
down these small operations. Once shut down, they will never be
opened again – it is too costly. Even keeping them operating is
expensive – they must be periodically reworked, their produced water
(around 9 of every 10 barrels produced) must be disposed properly,
the electricity costs to run their pumps must be paid. The depletion
credit is instrumental in providing sufficient ROI to continue to
produce from these wells and for continued exploration and wildcatting.

Even at current high prices during the period between the previous peak
and the recent resurgence it was very apparent in how much local "oil
patch" activity followed those swings. It didn't take long for the
rework rigs to get parked again when prices went back to the $80 range.
The folks in DC (and to a lesser extent even in Topeka) simply don't
seem to follow that significant economic activity occurs only when there
is a better return in any given area than there would be by doing
something different.

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