This analysis looks behind the scenes at how the ban on offshore drilling was lifted and what that had to do with the ultimate prize for big oil, the American Power Act. It focuses on the current administration. That in no way implies that the problem originated in January 2009. The out sized and destructive influence of the oil monopoly has been with us for since the 1870's.
Banning Offshore Drilling
In 1969 a Unocal oil rig off the coast of Santa Barbara, California began leaking oil. The extent of the leak, damage to wildlife, and the shoreline caused considerable outrage. The state of California banned offshore drilling shortly after the leak. In 1980, Congress banned offshore drilling in most federally controlled waters. President George H.W. Bush reluctantly banned off shore drilling in 1990 for California, Florida, Oregon and Washington and in the North Atlantic.
Lifting that ban has been a top priority for oil companies in the United States. In 2006, the U.S. House of Representatives voted to lift the ban on offshore drilling for 85% of the nation's shoreline. The Senate failed to cooperate. Just before leaving office, President George W. Bush lifted the executive order banning offshore drilling and challenged Congress to complete the process with legislation. No action was taken.
It took a Democratic President to change the decade's long policy. On March 31, President Obama lifted the ban on offshore drilling covering 85% of the nation's shoreline. The Gulf of Mexico coastline, location of the BP catastrophe, had not been included in the original ban.
Obama's Very Bad Timing
The president had the worst timing imaginable for this announcement. Just 22 days later, BP's Deepwater Horizon rig off the Louisiana coast failed miserably and has been leaking ever since. Obama's remarks at the March 31 announcement came back to haunt him even though the offshore drilling by BP and the others in the Gulf of Mexico had been in place for years.
Obama stressed that great care would be taken to protect the environment.
"So today we’re announcing the expansion of offshore oil and gas exploration, but in ways that balance the need to harness domestic energy resources and the need to protect America’s natural resources. Under the leadership of Secretary Salazar, we’ll employ new technologies that reduce the impact of oil exploration. We’ll protect areas that are vital to tourism, the environment, and our national security. And we’ll be guided not by political ideology, but by scientific evidence." Pres. Barack Obama, March 31
It didn't take long after the BP disaster to see how safe the environment would be under the guidance of Salazar's Department of the Interior. The failed BP site had been lightly regulated, a direct cause of the massive leak. From April 20th to the present, at least 27 deepwater offshore leases were granted by the federal government. Like BP's failed site, these approvals were granted with special dispensations to avoid full environmental impact statements.
While he didn't grant BP's failed drilling permit, Obama and his administration approved others with the same lax considerations for safety and the environment.
Why Lift the Offshore Ban? Why the Flood of Offshore Leases?
Lifting the ban on offshore drilling was a calculated risk to get the Kerry-Lieberman American Power Act passed in the Senate. The bill is a plan to replace previous environmental legislation referred to as "Cap and Trade," aimed at reducing carbon emissions. In order to get new programs for carbon alternatives, including nuclear power, we're told that the administration had to give-in to offshore drilling requests, particularly at deepwater depths, grater than 5,000 feet.
An environmental group headed by a former Obama for American campaign official summed up the deal:
"Joshua S. Freed, who directs the Clean Energy Initiative at the centrist think tank Third Way, said such horse-trading is essential for the passage of a compromise bill now being drafted by Senators John F. Kerry (D-Mass.), Lindsey O. Graham (R-S.C.) and Joseph I. Lieberman (I-Conn.)." Washington Post, Apr 1
The ban was lifted and the flood of new leases was granted as part of a deal to pass a replacement for "cap and trade" legislation.
The "American Power Act" will be discussed in more detail at the end of the article. It is a largely meaningless effort, a tale told by idiots, signifying nothing more than a public relation effort to cover up the real goal of the bill. It's the energy equivalent of health care reform and the new financial reform legislation: industry friendly in the extreme without addressing the underlying needs of energy conservation and alternative fuels.
Why Leave BP in Charge?
The administration has been up close and personal with the engineers from BP and it's contractors as they failed time after time to get anything much done to fix the situation. They've watched as the leak spewed enough oil into the gulf to pose a threat to the Florida Straits and the Atlantic coastline. Yet, BP remains in charge of the operation.
The answer to this question is less apparent than the previous question. Obama's number one priority is to see that the leak is stopped and to avoid turning the Gulf of Mexico into a dead zone. The administration may leave BP in charge until there's a high probability solution, at which point they'd take over the fix the problem. This keeps the heat on BP and allows the administration to save the day at the last minute. That's not a bad strategy.
In this specific case, there's no reason to think that the catastrophe was allowed to unfold to please corporate donors. Getting tagged with killing the Caribbean is too high a price for any politician.
However, it is important to understand why these oil giants have the power to get high risk off shore leases approved, even after the April 22 leak.
Big Oil, Big Money
The graphs from OpenSecrets.org show the power of Big Oil's political operation. It's significant that lobbying expenditures in 2009 hit an all time high of nearly $200 million. Why did they spend over three times their 1998 through 2007 average?
BP's direct donations to the Obama campaign were $71,000, hardly enough to buy the type of influence we're seeing. However, their $140 million in lobbying was spread across Republican and key Democratic candidates for the House and Senate, a hedge against any pro environmental programs that might emerge from the White House.
The hundreds of millions of dollars spent over the past years culminated in the current process of trashing the cap and trade bill and replacing it with American Power Act. It was this process that resulted in the deal to lift the ban on off shore drilling and get the new deepwater drilling leases.
The American Power Act - Fiddling while Rome burns
The rhetoric surrounding this act is remarkable. Senator John Kerry (D-MA) said, The American Power Act will finally change our nation's energy policy from a national weakness into a national strength. It's time to act." Kerry, co-sponsor Connecticut's Joe Lieberman, and supporters claim that the act, "would establish a carbon cap that aims to reduce U.S. greenhouse-gas emissions to 17% below 2005 levels by 2020, and ultimately 80% below those levels by mid century."
The bill has the support of Duke Energy's CEO, hardly comforting. Of greater significance, the Peterson Institute for International Economics released a favorable analysis that showed the likely impact of the bill on energy consumption. The institute is named after noted right winger Peter G. ("Pete") Peterson who funds and controls the organization. Odd bed fellow for Kerry and Lieberman?
The following chart is taken from their report, Assessing the American Power Act: The Economic, Employment, Energy Security and Environmental Impact of Senator Kerry and Senator Lieberman’s Discussion Draft (p. 4):
Assessing the American Power Act, Petersen Institute for International Economics
The chart shows the difference between business as usual and the implementation of the American Power Act. By 2030, the country will be using 5.4 quadrillion btu's less energy as a result of this bill. That's just a 5% reduction from our current levels. This indicates that either conservation will not be a serious effort or that efforts are anticipated to fail.
There are significant reductions in coal usage, estimated at 44% by 2030. Petroleum usage will be reduced by only 7.5% by 2030.
The impact on renewable energy is negligible. Of special note, wind and solar power are virtually unchanged by 2030 and not significant contributors to alternative energy sources despite the great promise that both offer.
We do get a significant dose of nuclear power, however. The BP mess might look mild if one of those plants fails in a big way.
The net effect of the bill is to keep big oil in charge. Petroleum will be 34% of the total energy used under business as usual or the American Power Act scenarios. However, the prices and profits of big oil will rise exponentially. This is a certainty given the increased difficulty of identifying and tapping reserves and the notion of peak oil now adopted by the industry and the political hierarchy.
The critical element of the act that allows this capital preservation and expansion opportunity for oil is the ridiculously low gains listed for solar and wind power, both of which are open source, widely available, and eternally renewable.
Health reform legislation claimed to expand services but was largely a means of preserving the private insurance industry with little regulation. The recently passed financial reform package by the Senate keeps the perpetrators of the crisis in charge without truly addressing underlying greed and corruption.
In the same spirit, the American Power Act addresses coal pollution but not that from big oil petroleum products.
Of major significance, the act creates a guaranteed revenue and profit expansion scheme for big oil by diminishing the impact of highly viable alternative sources of energy.
Another triumph for The Money Party
This article may be reproduced in part or whole with attribution of authorship and a link to this article.
Previously: Too Big to Exist (TBE) - Big Oil
What I cannot understand is why the U.S. isn't asking other nations, who do have the technology to come in and stop the leak. With the U.S. approving attempts. (Supposedly Russia would nuke the leak, and I don't see how setting off a mega bomb is going to help!).
But the way to stop it supposedly is to drill additional pressure relief lines, so I don't understand why they don't have international help to speed up those drills and didn't do that a month ago.
On Cap & Trade, my understanding it's more about creating a new $2 trillion dollar trading market in carbon. i.e. more profits on fictional trading.
We also had green jobs from Stimulus created offshore and foreign companies receive funds from Stimulus for "green jobs". Obviously not helping America build up this much hyped green economy and assuredly not doing what Stimulus was supposed to do, i.e. hire Americans.
What about T. Boone Pickins gas conversion plan? How much potential for an environmental disaster is gas, and yes it is a carbon based fuel, but how much disaster is there for gas vs. oil?
I wouldn't lump all of Peterson's research in the fiction category and yes I do know about the attack on social safety nets generally. I have to take it paper by paper, statistic by statistic, equation by equation out of there, I cannot soup can label all research as "biased" at all after reading some of their papers.
Case in point is the above. I guess one could spin it as "biomass usage doubles" but when it goes from 2% to 4%, that statement is misleading.
T. Boone Pickins is an uber conservative, but I really think he might be onto something and then building up powerline infrastructure to the wind corridor, which I believe is in NW Texas? Anywho, they do not have the high voltage power line infrastructure to get the energy out. I wonder if they could just charge up some mega batteries and move it around like milk. It's not like we have the cows brought to the house to get milk, same idea.
Nuclear, all it takes is one accident and Chernobyl is something all should be aware of.
This is a very well written piece, it explains the politics and $$, which I sure didn't know the details of.
Thanks for the kind words
Those are all excellent points, particularly the label of "fictional market" for cap and trade. I look at the vaunted American Power Act and think back to the second "Leaders' Debate" in the recent British election. Each of the three candidates were fluent in the needs for huge changes in energy consumption and non nuclear alternative sources. Each had programs to do this to varrying degrees. Their programs were all beyond what is proposed here.
Essentially, the American Power Act was an excuse to launch offshore drilling under the guise of a necessary compromise to get a viable energy bill. However, just looking at the estimated impact, we can see that the act will have little impact on the most robust renewables, wind and solar, are not included. I'm not qualified to comment on the Boone Pickens plan for a wind program or the ambitious solar programs outlined. However, it's clear that comprehensive solutions are being offered. Why didn't those show up in this bill? I don't think it's serious, which is a shame.
I think digging around into the visibility of gas conversion
I mean there is no way currently to replace oil as the main energy source. That said, I think your post brings to light it's just more corporate lobbyist wish lists vs. anything in the national interest or macro economic interests as well.
I'd like to see the total costs of BP advertising vs. lobbying and see if those costs exceed simply building the safety structures in the rig that they bypassed to save costs.
I'll bet it's a 10:1 ratio. Billions are spent every year on "public relations", instead of investing in real safety, technology and infrastructure.
Pickens and gas
I am not an expert, but here is my non-expert opinion of why the Pickens plan is not good:
We can produce a lot of energy from solar and wind. There are two issues with this. One is transportation. The solution seems simple: build out a better power grid. The other problem is the intermittent nature of solar and wind sources. I see two solutions for this. One is improved battery technology. Will the technology improve enough to solve this issue anytime soon? Who knows. The other solution, which is technologically viable right now, is to use natural gas to fuel power plants to fill the wattage gap when solar and wind are not there. A gas powered plant is the only plant capable of starting and stopping for the short periods needed to fill the natural gaps in wind and solar production. So until battery or other storage technology vastly improves, massive gas-to-electric production is needed to get us off coal (the dirtiest fuel) for electricity. It makes no sense to me to divert gas to vehicle use when it has an indispensable role in electrical production if we want wind and solar to replace coal. If we can limit oil use to vehicles, that will go much further than what is being otherwise proposed.
I am guessing that Pickens owns a lot of gas and is eager for any new uses that will drive up its price as fast as possible.
are something like 500 years and domestic. i.e. diverting gas won't run out actual supply, that's my understanding.
but at this point I think we might see the entire global economic coated and buried in a think black goo. In other words, I'm hearing more and more they cannot stop this leak and .....I'm now wondering just how much this will grind the global economy to a halt.
Looks like i need to put my engineering hat on and start reading. This is not my area at all, just another reader but I should be able to parse it to some degree.
Shale Gas and Mini Reactors
Apparently the US (and in other countries) is on the verge of tapping very cheap natural gas from shale that would last several hundred years. Its possible however that in drilling through to the shale that if a pipe broke or exploded that water supplies could be polluted since the shale lies deeper than water. Odds are against this but no one has to tell me that sh*t happens and that the risk is not worth the reward. Tough to replace water and we die without it.
I predict though that the cheap ng will win out over any potential concerns. You know the deal there is a lot of lobbying from these companies. Shell is involved in the US as are Exxon and others.
This is going to put renewables in an untenable position economically. There is already a fledgling infrastructure for natural gas refill stations. In order to make use of shale gas its probable that LNG production facilities will be necessary though. Those are not safe either. Transport seems safe but production is another story.
The bottom line economically is that shale gas may be half the cost of what we pay now for ng.
Another happening right now is mini reactors. I believe these are probably safe. Initially they will be used in out of the way places where oil is imported. These are the size of a small walk in refrigerators self contained and cheap. Like renewables they help decentralize the grid which will be necessary to support electric cars in the next 10-20 years. The biggest advantage with these safety wise is that they are self contained and built at a factory environment rather than onsite. Toshiba is expected to apply for a license for one in a small Alaska town soon. Bill Gates is involved with these also. He backs a mini design that uses spent fuel from existing reactors that could power the entire country for 200 years.
Toshiba and Bill Gates Plot Mini Nuclear Reactors
This is where the power industry is headed unless the renewable energy sector gets more competitive price wise.
the problem with nuclear
although this sounds interesting because the "spread" when someone blows up and of course it will, should limit the contamination area. but the problem is you cannot get rid of it....as in ever.
decentralization of power sounds like a very good idea and to sell "home generators" of a variety pack of sources, or multiple sources sounds like a great idea too.
But this is looking like the entire gulf is going to turn into a toxic dead coated swamp. What do you know about the immediate problem? Is there any military, any nation, anybody beyond BP and the USA who can deal with this, any technology not being used?
Great point. You should write it up.
"The investigation into what went wrong when the Deepwater Horizon exploded April 20 and started spilling millions of gallons of oil into the Gulf of Mexico is sure to find several engineering failures, from cement seals that didn't hold back a powerful gas bubble to a 450-ton, 40-foot-tall blowout preventer, a stack of metal valves and pistons that each failed to close off the well.
"There was, however, a simpler protection against the disaster: mud. An attorney representing a witness says oil giant BP and the owner of the drilling platform, Switzerland-based Transocean Ltd., started to remove a mud barrier before a final cement plug was installed, a move industry experts say weakens control of the well in an emergency. NOLA.com, May 6
All you need is the price of oil rig mud...
From what I have been reading the BOP was developed in the 1930's and the design hasn't changed much if at all since.
The pipes on these deep water rigs are actually too thick for the BOPs to close off. The ram shear doesn't have enough ooomph to cut through and seal these pipes. They don't even test them - so this same problem would happen on all other deep sea rigs where the drilling pipes are too heavy.
Regarding the mud thing, I cited a Forbes article early on that said it may well have been a decision by the on board operators not to follow through on a safety protocol due to economic issues $$ that caused the accident. In other words there was something they could have done to prevent this but it would have caused them to lose the well so they dissented and then the blowout happened.
what do you know
about anything that can actually work generally? The thing with the secondary drilling, why can't they speed that up? It's like the world is still in denial on what this will do and it's almost really too late. The oil has now moved into the stream to take it out to the Atlantic, but this is not the Exxon with a limited amount (regardless of how massive) of total oil.
Is the only sure thing and the directional drilling will take another couple of months to get close then they have to intersect with the 7 inch pipe inside the 21 inch pipe then pump the pipe full of mud and cement. That process took 9 months in 1979 with IXTOC. They have two rigs drilling now - they started within a week of the blowout. Newer tech should shorten that time span but who knows?
BP has already said that they are going to try and muck it up next week forcing mud and junk then cement in it through the BOP but in the WSJ they said if it doesn't work the mud could stress the wellhead and cause a blowout. Remember the pipe and wellhead have been weakened each day more and more by the sand thats flowing through with the oil.
They can also pull the well head and put another BOP onto it but in the event of failure there the oil flow would be tremendous. That will be next if next weeks attempt goes sour. The wellhead will be breached at that point so why not?
If you have a water leak in your basement the plumber shuts the water off before repairing the pipe because that water pressure makes it near impossible to repair the pipe. Being a mile underwater doesn't help any.
I believe this proves deep sea drilling is not safe period and should be banned. This will go on for at least two more months and could get much worse if next weeks attempt goes sour.
What is killing me is that they will process and sell the oil they are recovering now through the straw pipe inserted into the main pipe. This will mitigate BP's costs here and maybe allow for a profit. I'd love to see their internal memos regarding this.
Dispersants Making Clean Up Impossible
I think the worst thing they could have done is use disperants to keep the oil from coming to the surface. Those underwater plumes will end up killing and ruining a vast area of sea life.
Letting it surface allows for clean up.
Kevin Coster Comes to the Rescue
Dylan Ratigan today
I couldn't catch it but something about the leak cannot be stopped and it would take 900,000 days or 24 years to run out, something like that. Plus Obama administration is busy blaming BP instead of pulling out all of the stops, right now, to stop the leak.
Then there are scientists saying a bomb is the way to go to cause a massive cave in and plug up the leak. That sounds scary because how can one determine which way a cave in goes by just "dropping a bomb" on the area, couldn't that go the other way and make it worse?
Russians Have Used a Bomb For Sealing Gas Wells on Land
Its never been done in the ocean.
There is nothing Obama can do frankly. The government is not in the oil well leak fixing business really.
Does Ratigan belive Obama can put a cape on fly to the gulf then a mile underwater and seal the pipe with his laser vision?
no it was more getting to the truth
Someone else said they had this in the gulf and that tankers can pump in the oil/water mix near the leak, clean it and even reprocess it but all of those tankers are holding oil, sitting in the ocean waiting for the price to increase.
I think there is something Obama can do and that's simply clear the path to find a solution and act immediately, regardless of what BP says.
Sieze their assets to secure future claims
Or some other dramatic action is really in the cards. Obama ran as someone who could make government work. Right now, he looks like Nero.
Big Problems in Appalachian Shale Patch
What has gone wrong with the Gulf Rig explosion has also happened with Appalachian Shale. The Drillers used benzene laced lubricants to push the rigs pipe faster. Benzene is carcinogenic in parts per billion. So they got kicked out of the Catskills and many other parts of Appalachia. Shale Gas drilling shortcuts should sound familiar.
Ironically, there are vegetable based lubricants which
do the trick of petroleum. But then, when would a self-respecting rough-neck ever propose an renewable?
Nonetheless, there is 2 political questions: one support for Kerry-Lieberman? Two, dismantling the idiot regulations stopping mechanics from doing vehicle conversions to natural gas. A $10,000 license is needed for each vehicle manufacturer, class and model type. Like Jeep, Liberty, Sport is just on of several hundred licenses.
The process to release the gas from the shale is called 'fracking' and thats where they use a myriad of poisonous materials.
Energy companies have no use for human life. We are expendable but like I said I bet this continues on for some time and maybe forever because the end product is cheap and America was America when we had cheap energy.
Alternative Energy is Cheaper Today!
The best solution is to take away all of the corporate welfare being doled out to the fossil fuel industries and give it to renewable energy.
Once that is done, there would be no way that fossil fuels would be able to compete with renewable energy.
But even if everything stayed the same, photovoltaic energy is already cheaper in the sunny southwestern states than what the electric utility companies charge. The same goes for wind energy.
What makes alternative energy expensive are the batteries. So the solution is to force the electric utilities to buy back any excess electricity produced, which by the way, is always produced during the most expensive daytime hours.
Of course, if we were ever to force the fossil fuel industries to actually pay for all the environmental damage they cause just from the drilling and mining, they would immediately go out of business.
Back That Up
The RI PUC just turned down a wind farm proposal that priced power at 24.5 cents/kwh plus a 2.75% bribe to the utility plus about 6 cents/kwh for the power cables to the mainland making the first year cost about 31 cents/kwh.
They wanted a 3.5% annual multiplier built in over 20 years making the end cost in 20 years about 62/cents/kwh. This price is also lower due to federal tax credits and regional renewable energy credits.
Thats plus the utility distribution costs.
This is a utility grade power project there are no batteries as there would be in a residential set up.
The market rate to consumers now here is 9 cents and its likely to go down to 8 as NStar in MA just lowered their rate to 8 based on lower natural gas rates (most of our power here is from ng plants). CapeWind came in at 20.7/cents/kwh with the same 3.5% multiplier.
So 8 cents versus 31 cents. Which is cheaper?
I've seen various vague claims that renewables are cheaper but never any detailed explanation of the claims.
When someone lays it out in detail with no vague generalities I'll but into the cheaper theory.
I don't feel renewables have to be cheaper buy outrageously higher is another thing.
A Deal a Few Years Back to Buy Renewables from Green Mountain
Green Mountain Energy used to sell me pure renewable electricity a few years back at par with fossil fuels.
Green Mountain was bought out by a little company called BP. At the time, I thought that fungible dollars would be paid into the corporate BP till, which they could use for any purpose.
The BP ads used to say, "Why should anyone trust an oil company". That was in 2001, they were painting themselves as the good-guy oil company. I guess we found out how that worked out.
The latest on regulating the Oil Trust is that the MMS regulators would write drilling reports in pencil, send the report to the Oil Trust and the Oil Trust made corrections and traced over the rest in pen.
On Par Not Cheaper & Through RECs and Tax Credits etc
13.7 cents for a 12 month contract price versus the low I could find of 0.0899 cents/kwh in the New York city area through Green Mountain Energy. Thats a little over 50% more for the renewable rate. They make some profit by selling carbon offsets to coal plants and such and through tax credits otherwise the rate would be higher.
On par? I'm not sure but a lot better than the 300% difference that the wind power company was trying to stiff RI with.
Chevron has a renewables division that is doing great things for onsite power that allows manufacturing plants and such to avoid the grid. I'll bet that 13.7 rate in New York would be great if the distribution costs were cut out. Thats where renewables has a possible edge price wise right now plus it helps to decentralize the grid which saves money and allows for better security etc.
From the Green Mountain site if you put in a bad zip code.
Carbon Offsets & RECs
The zip code you entered is not in a competitive electricity market served by Green Mountain. However, you can still support renewable energy for your home by purchasing renewable energy certificates (RECs) from Green Mountain, which are available to customers in any geographic region. With the Green Mountain Home product, we match 100% of your monthly electricity use with clean energy from renewable resources throughout the U.S. We make it easy to green up your home! Click here for more information or to purchase Green Mountain Home Offsets.
Green Mountain also has a variety of carbon offset products to help you reduce your environmental impact from other areas of your life, like driving and flying. Want to learn more
new poll on the oil spill
over in the right hand column. I hope to put up a fresh post later with expert videos, status, solutions that are probable to work and the never ending politics and other reasons for no real action.
If this was WWII, we'd all be singing work will make you stronger. (sic).
Civil Fines of $4,300 a Barrel
This could be a budget buster for BP. Depending on the number that is settled on for the leak and how long this takes I figure the fines could be in the tens of billions.
BP Liable for Up To $4,300 a Barrel With No Cap on Liability
New post and new comment thread
I started a new oil open thread post to continue the discussion. replying to your comment in new thread.
Thank you BuzzFlash.Com
BuzFlash.Com posted this article on it's front page yesterday. That's a nice nod at the Economic Populist and the fine work that goes on here.
See BuzzFlash publisher Mark Karlin's editorial on how to deal with BPP here.
The Oil Belongs to Us, Not British Petroleum: Let the Revolution begin here!
Those "share" buttons do work and people pick up on good pieces. I don't know why they do not comment here, but they sure do read here which we all should be grateful for.
I'm trying to improve the fact we've got some good supports on the site for discussion.
What do you think about my latest oil piece? Myself, I'm not surprised at all by team Obama being an extension of team Bush frankly. The entire financial reform situation sealed the deal for me.
Also, the politics are insane. We have talking heads on cable and so often the political sites pick up on the trivial and the nonsensical, all the while the middle class is destroyed, the environment is destroyed, the economic future is destroyed....
I mean there just ain't no common sense! Maybe we should rename the site "do you have common sense? Can you add up 2 numbers together?
I'm beginning work but I'll check your article out tonight. I like the graphic. Looks like Rube Goldberg.
The finger in the dike is slipping and public outrage is about to blow. We'll see how it's shaped and controlled but this may be too much to manage.