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Offshore Drilling Debate
Posted by Gail the Actuary on September 16, 2008 - 10:20am
Update: 9/17: This legislation passed 236 to 189 the House of Representatives yesterday. The Senate is not scheduled to vote on the same legislation. Instead, it is working on a drafting a different plan that would give a handful of southern states the option to expand offshore drilling. It is questionable whether anything can be passed by year end. Also, President Bush has said he would veto the version passed by the house, if such a plan is passed. (But all the representatives who voted for the legislation can tell their constituents they did so!)
Legislation that would remove the ban on offshore drilling is now being debated in Congress, and can be seen on C-Span. What is involved? The area involved is a band between 50 and 100 miles out, along the East and West coasts. These are areas that may contain a little oil, but are not areas where geological evidence would suggest that a significant amount of oil is likely to be available.
According to an article in the San Francisco Chronicle:
Waters within 50 miles of shore would be off-limits. States could choose whether to drill between 50 and 100 miles, but would be offered no financial incentives - such as a share of oil royalties - for taking the environmental risk of putting oil and gas rigs off their shores.
The bill would let the federal government decide whether to drill more than 100 miles offshore. But drilling supporters note that the distant location of the areas would make it more difficult to drill and to deliver oil and gas to shore.
According to a Red Green and Blue article,
Some oil industry representatives question the effect of the proposals, citing federal studies that show that more than 80% of known oil reserves are inside the 50-mile limit and therefore unavailable. Very little is known about oil reserves beyond 100 miles. Waters off almost the entire Pacific coast — where all three governors oppose drilling at the 50-mile barrier — is considered too deep for drilling 100 miles offshore.
“You would just open a door to an empty room at the end of a very long hallway,” said Brian Kennedy, spokesman for the Institute for Energy Research, an organization funded by the oil industry. Kennedy also said that, without some sort of revenue sharing for state governments, there would be little incentive for states to approve additional drilling.
The compromise would offer a lot of benefits, in return for ability to do this drilling, according to the same Red Green and Blue article:
The compromise contains a 5-year extension of the renewable energy tax credits, which are key to the growth of the renewable energy industry. The bill would invest $84 billion in conservation and efficiency, which will be fully offset with loophole closers and other revenues. Approximately $30 billion will come from new revenues from the oil and gas industry through such measures as repealing a tax break for oil companies which Democrats have long sought.
The bill also funds
• A $20 billion “Apollo Project” like effort to support the goal of transitioning 85% of America’s new motor vehicles to non- petroleum-based fuels within 20 years;
• $7.5 billion for R&D focused on the major technological barriers to alternative fuel vehicles, such as advanced batteries;
• $7.5 billion to help U.S. automakers and parts makers re-tool and re-equip to become the world leader in making alternative fuel vehicles;
• Consumer tax credits of up to $7,500 per vehicle to incentivize Americans to purchase advanced alternative fuel vehicles (those that run primarily on non-petroleum fuels) and up to $2,500 to retrofit existing vehicles with advanced alternative fuel engines;
• New consumer tax credits of up to $2,500 to purchase highly fuel efficient vehicles, to help Americans reduce their annual gas costs and reduce oil imports;
• Extending and expanding the $2,500 tax credit for hybrid electric vehicles;
• $500 million for R&D into new materials and other innovations to improve vehicle fuel efficiency;
• $2.5 billion in R,D&D on next generation biofuels and infrastructure;
• Tax incentives for the installation of alternative fueling stations, pipelines and other infrastructure;
• Expanding transmission capacity for power from renewable sources;
• New dedicated funding for the weatherization assistance program;
• Provides grants and loan guarantees for the development of coal-to-liquid fuel plants with carbon capture capability. Plants must have lifecycle greenhouse gas emissions below those of the petroleum fuels they are replacing;
• Supports nuclear energy by increasing staff at the NRC, providing workforce training, accelerating depreciation for nuclear plants, and supporting R&D on spent fuel recycling to reduce nuclear waste;
• Provides a CO2 sequestration credit for use in enhanced oil recovery to increase production from existing oil wells while reducing greenhouse gas emissions.
It is not too surprising that the oil and gas industry is not in favor of the legislation. The legislation provides for a whole host of benefits, and a big piece of the cost would be paid for by new taxes on oil and gas companies. The off-shore drilling provision could best be described as window dressing.
The remainder of the cost would presumably be covered by higher taxes. I am willing to bet this will not happen. Instead, the higher cost will just be added to the deficit. Looks like legislation both Democrats and Republicans can favor!
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If the 80/20 rule were to be applied, this legislation would not make any sense whatsoever.
ESOMAMAMWO - Every SOlution MAkes MAtters WOrse. double-plus
I've heard that the offshore oil bad will expire anyway at the end of the month if nothing is done.
What happens then? Do the individual states get to decide what to do?
We can shut down the drive for new drilling if we just conserve enough to force the oil price down further. Oil companies are not likely to do a lot of drilling if the price of oil looks like it will hold below $30/barrel.
Even price volitility that drops that low could shut down exploration. People are not going to forget that car dealers would not pay much on trade-ins of SUVs for a while which should hurt new SUV sales for some time. If we forget and start buying SUVs again, we can get a fuel price upswing that we can beat back down again by not driving as much. As long as the spike is short, we'll still discourage exploration.
Still, our best bet is to drive the price of oil down as far as we can and keep it there as we transition off of oil. The oil price volitility is bad for the wallet.
Chris
That may be true, but voluntary conservation and rationing by price can only go so far. We can conserve even more with incentives to push us along, like the ones in this bill.
I agree that organized conservation could be the most effective. The rationing plan developed by the Economic Regulatory Administration seems quite similar to the more recently invented TEQs though it just applies to liquid fuels. The US plan is described here: http://www.osti.gov/energycitations/product.biblio.jsp?osti_id=6307185 and TEQs are described here: http://www.teqs.net/
The incentives in both plans are that you get paid for energy you don't use.
Chris
Yea, that's THE solution: Do Buy Gas-Guzzzlers, But just Don't Use Them!
Join the Big Conversion from Vehicles into Parkicles!
Hmmm, let me see.
The state is going to fund innovation to move transport off oil and the state is going to subsidize consumers in the purchase of innovative off oil transport vehicles and they want me to spend big bucks wildcatting in locations where there is no known source rock and have me pay for all the forgoing out of my "rumour oil" revenues.
Where do I sign up? Sounds like an offer I cannot refuse.
Also, there is not much difference in cost between drilling 80 miles offshore and drilling 120 miles offshore all else being equal.
What would Sarah do?
Unfortunately, I think we may soon find out. :(
Well, the state probably won't subsidize consumers directly, More likely it will dump their tax money into the producer without the intermediate runaround. Consumers will get some sort of credit deal, maybe like a student loan, where they can never default no matter how the fixed rate fluctuates. But overall, yes, you get the idea: "Win-Win".
The auto-industry, investment banks and big players will be made whole. The smaller fish, the car-dealers and developers, the smartgrowthistas, the ankle-biter developers, they will be made whole so they can continue to serve the piranhas.
cfm in Gray, ME
In one sense, I don't care about this legislation.
In the mid- to long run, peak oil and the (lack of) speed with which we can transition to a much less oil intensive economy will all but ensure that any economically viable oil or natural gas deposit will be tapped. As I say over on my site, if they discovered oil under the Washington Monument, they'd replace it with an oil rig.
That somewhat overstates the situation, of course, since it definitely matters how we go about such things, and we could all conjure up scenarios where we screw this up beyond all belief. But in the long run, I would be very pleasantly surprised (or horrified, depending on the circumstances) to find that we never tapped these reserves.
Some things that people at times forget to factor into this debate, include the cost of finding and developing a field offshore; it increases with distance. And, how much of this cost will our overlords at ExxonMobil expect us to pay through tax subsidies? How feasible is it to go after this oil, and what quality is it? If it were profitable I don't think that Congress or Santa Barbara could have stopped them for all these years since platforms in the Gulf and North Sea have figured out how to drill in fairly deep water.
Politically it is turning into an issue like abortion and gay marriage. The right will use it during campaigns knowing that nothing will materialize later.
I don't think you have ever drilled a well. I don't think you have ever been offshore.
To go an extra 50 miles your helicopter or SV burns a few extra gallons of gas. Distance is not the deciding variable. Depth matters. Deeper water demands more expensive hardware. But depth and distance do not necessarily correlate.
Tax credits for hybrids?
Massive incentives for automakers and suppliers to invest in fuel efficiency?
Congress has completely forgotten how the free market works. They act as if GM owns ExxonMobil and wants people to consume as much oil as possible. The automakers don't need more bailouts from the gov't and more money to give to UAW pension plans and CEO salary. Put that money into alternative fuel/energy infrastructure (the govt's only real role here anyway) or save it.
The mere fact that this is on the table is proof enough for Peak Oil. I mean, consider this: if there were plenty of oil on dry land, why bother looking for it in such extreme places? We're running out, folks; it's like the old lady in her home rummaging for change in her couch to pay the mortgage on her house because she doesn't have much left... Show's almost over... And watch oil prices rebound once/if the credit mess and recession are resolved...
- $7.5 billion for R&D focused on the major technological barriers to alternative fuel vehicles, such as advanced batteries;
Anyone interested in the battery issue can look directly at Cobasys, a venture controlled by Chevron. Cobasys owns the patents on the use of NiMH batteries in electric cars. In other words, unless CHEVRON approves, NO MANUFACTURER can use NiMH batteries in an automobile.
This is a travesty. I'm guessing Cobasys/Chevron will be jockeying for position to suck at least some of the $7.5 Billion from the trough for a product that was already developed AND deployed in the GM EV1 and RAV4 EV eight years ago! It is the perfect example of patent control being used to prevent society from moving forward.
It is also another classic case (similar to Tesla) where a genius loses control of his patents. Stanford Ovshinsky is a brilliant inventor who was outgamed by his own business.
http://en.wikipedia.org/wiki/Cobasys
Exactly!
In the security industry there is a concept of security theater. These are security counter-measures that don't actually improve security but are designed to make people feel secure. Their effect is purely psychological. They are sometimes needed to fend off panic that would otherwise occur if security is not visible enough.
I think we are witnessing some drilling theater here. It doesn't actually improve oil production but it makes the hoi polloi feel like someone is doing it.
The real measures are all the R&D and tax breaks dollars for alternative fuel vehicles and other stuff. Of course the oil industry is against it. The bill is bringing the end of oil as the prime transportation fuel.
Considering the limitations of the political process, this bill looks as good as it could get. It addresses many key problems.
- Prevent or lessen angry reactions at high gas prices that may cause riots.
- The ramp up of alternative infrastructures in appropriate scale
- Unlock funds in a dire economic environment
It sounds too good to me. A little bit of real compromise as opposed to window dressing. Despite the fact that I am often accused of being leftwing, I have no problem with oil companies -especially domestically owned ones, making some money. I fear this bill is an alternative energy subsidy too far, and an oil company tax too many. I'd settle for good, rather than make a futile attempt for best.
Another thing, some sort of financial incentives for the states whose shorelines we propose drilling off of would be prudent. IMO the real local cost is psychological, i.e. the percieved risk of environmental degradation is massively higher than the actual risk. But, you gotta put in something for the brave state lawmakers/governors who risk the wrath of a substantial segment of their populations by supporting off-shore drilling.
I don't understand. Don't you feel the urgency?
We need to build non-oil infrastructures fast and if we leave it to market forces, in the current economy this will take forever.
Oil companies, I mean those that own some reserves, will be at the receiving end of a massive wealth transfer once we get on the descending slope. They will sell all the oil they can produce at the highest possible price. What is wrong with tapping into this to fund the alternative infrastructure? The money has to come from somewhere.
I do feel the urgency, it is the politics that I don't think is ready. At this point I'd rather get half a program for posr-peak, than risk getting none.
The polar bear, swimming north toward the nearest block of ice [400 miles away], swam on.
OR
What if the real certainty of gross environmental destruction were massively higher than the perceived risk? Multiple orders of magnititude higher.
cfm in Gray, ME
Drill it.
America has to get this out of its system.
If you find a (modest) endowment, then make best use of it.
If it flops, then you can move on to working out what you will do next.
If it remains a big question mark then it will be a football for political point scoring.
Just do it and have done with it.
(while you can still afford the rig day rates).
After reading about this proposal more, I see this as a $35 Billion giveaway to the automakers, and a bunch of tax incentives to burn E85:
- The $20+$7.5+$7.5 Billion are direct giveaways. $35 Billion with no strings attached? Come on...
- The $7500 tax credit will be used mostly to sell more E85 capable cars. I guarantee that the final language will ensure that any E85 capable vehicle qualifies. So, all those giant SUVs clogging the lots will get a $7500 tax credit!!! Nice job, lobbyists.
- I wonder who got the $2500 for retrofitting inserted into the proposal? Ka CHING! Expect a sub-economy of crooks to spring up replacing fuel lines and reprogramming engine controls to burn E85, and charging $2500 for the service. Hopefully some entrepreneur will sell a kit for $300 that I can throw in a bin and still get the $2500 write off.
- $2500 for "highly fuel efficient vehicles"? Is this in addition to the $2500 hybrid credit, (assuming the hybrid is "highly fuel efficient" which not all are). Why not just make a $5000 credit for the highly efficient vehicles, and skip the hybrid crap? And does the $2500 mean I get a free scooter? I can carry two on a scooter, and a Smart car only carries two, so .....
- The $500 Million for "new materials and innovation" is absolutely, positively pork targeted at some specific company. Follow the money trail on that one and get back to us.
- $2.5 Billion for 'next generation biofuels'? A handout to the E85 crowd. I guess we'll be seeing E86 come out of this?
I'm sick of Washington. This amounts to $50 Billion set aflame with no concrete deliverable. I guarantee every single line item was written by some special interest.
How about this: A $1.00/gallon gas tax levied immediately, offset by a $400 per driver tax credit, one gallon at a time. Next year, the tax is $2.00/gallon, offset by $800, the next year $3.00 a gallon offset by $1200, and the fourth year, $4.00/gallon offset by $1600. If you use less than 400 gallons, you can cash in your credits and MAKE money on the deal. More than 400 gallons, you pay through the nose. People will THINK about their use of gasoline for a change. And that is the number one thing we need to do.
You are probably right in your analysis.
The more a person looks at legislation, the less sense it make! We have more E85 cars now that we will ever be able to provide Ethanol for.
Not only will we drill offshore, we will destroy every acre of land that has even a little bit of oil in order to fuel our vehicles. Industrial civilization will not die before it has consumed the planet. We must rearrange our living and lifestyle structures now. Of course we won't do this, and as James Howard Kunstler says, "People who refuse to negotiate with the circumstances that the world throws at them automatically get assigned a new negotiating partner: reality." The reality is that world oil production is near it's peak and that only a permanent shift away from the hyper growth, build roads everywhere, and drill drill drill economy will stave off the biggest catastrophe that we have ever seen as a species.
What I find absolutely crazy about the whole thing is that the people who want to drill appear to have no regard for future generations of Americans. It is the same old instance gratification thinking that has allowed us to reach this point in the first place. Instead of taking the easy way out like we always seem to do here is America, why not plan for an alternate path into the future?
I just don't get it, we claim to be the smartest species on earth yet we sh*t where we eat and sleep.
The oil industry is definitely not behind this legislation. Their view is that it is ridiculous (not exactly API's words).
I'll say it again...hoist the oil companies and the repugs by their own petards...give them want they want, right spanking now! Sign the legislation letting them drill everywhere, baby! Throw in a 10% production tax credit if they produce 25% of the amount of oil per year currently produced in the GOM. (to be taken away the instant oil exceeds $170/barrel...they did say that drill, baby, drill would get that price down!) The oil companies and their political bedfellows would crap bricks by the truckload...they would have to put up or shut up...let them explain why they are not drilling, and if they are, why the price of oil doesn't fall back to ~$26/barrel a la 2001! Let the politicians explain why we haven't achieved our vaunted energy independence after 10 years of Drill, baby, drill and why the price of oil keeps climbing. In the event of a deflationary crash, my victory stands...in that case the price of oil crashes and no one is drilling in the OCS or ANWR...CALL...THEIR...BLUFF!
While we are printing money and issuing debt to China and Japan, just print a butt-load more to subsidize wind and solar and geothermal (hot for commercial power and warm for residential (ground heat pumps))...explain to our debtors that it is in their best interest for us have home-made energy to stay afloat so we can buy their crap, else they go under too! Hell, we spend over $12B/month on Iraq and >$700B/yr on military/national reconnaissance/spy agencies/Homeland Security, so why not create some more debt and spend it on something that will sustain us in the long run?
http://www.salon.com/wires/ap/2008/09/16/D93874300_house_rollcall_offsho...
What, they won't be satisfied until and unless the drilling rigs are on the beaches?
Also, what do we make of this article in Fortune about ANWR and the '1002 area' and the mysterious 'formation #18'nd the enigmatic Chevron KIC-1 capped test well?
All yuse petroleum geologists here, whadd'ya think? 300B barrels or a pittance or somewhere (where) between? Bigger than KSA or a bunch of moose crap?
http://money.cnn.com/magazines/fortune/fortune_archive/1991/01/28/74613/...
This map/chart is very important as it demonstrates that we know approximately how much is offshore through the process of discovery by virtual drilling. Everything that has been explored or scientifically analyzed goes into the discovery time profile. The idea of "Drill, baby, drill" is ultimately passe and befitting the rock-headedness of the Republicans pushing for it.
Look up some of the posts on Dispersive Discovery (a new one soon on TOD) to get an idea of how the math works out via a probability-based approach. We really are at the tails of discovery in the USA. (not to mention the world)
Speaking of the offshore drilling debate..
Remember the afterhours 'session' the Repulicans held on August 1 2008 to protest Democratic 'inaction' on 'drill..drill...drill'?
Well, today they had their debate 9/17/08, except that Republican Representatives Peace and Price wanted to adjorn rather than debate.
Huh? What gives? Offshore drilling high jinx!
http://www.dailykos.com/
For a change to all this cynism I'd like to note that this proposal does mark a change to the conventional oil-only strategies. In fact, if it would be realized the drilling issue would rather serve as a fig leave masking all the other measures that can have a much stronger and quicker effect than the drilling efforts. The list still looks a bit arbitrary to me (for example from a return on investment view efficiency measures like weatherization should be on the top), but it looks like a start - probably too good to become reality in the political arena.
"...... this proposal does mark a change to the conventional oil-only strategies."
a change to the conventional oil-only strateies, but not a change to the looting of the treasury strategies.
This legislation is a must for the Democrats to take the drill, drill, drill mantra off the table. As long as this issue is on the table, the Republicans will be able to use this against the Democrats, especially with the addition of Ms. Drill, Sarah Palin. That is why I think the Republicans will find a way to kill the legislation. And what was that about yesterday with the Republicans calling for an adjournment? The Republicans aren't really interested in drilling; they are just interested in keeping this issue on the front burner. How anyone cannot be cynical about our government is beyond me.
Yes, this is exactly correct. I amend my previously overly-complicated idea. The Dems should ramrod through a bill that says "Any person, company, or entity, private, or government, can drill anywhere in any land or water that is territory of the United States of America"
Take the issue off the table, take the wind out of their sails, call their bluff.
I assure you that there will NOT be any rush to drill, baby, drill.
Enough of Republican bread and circuses...use judo on them.
I am saddened that this legislation is even progressing through Congress at this point in the election cycle. Here we are weeks away from a landmark election -- one in which Candidate A calls for, among other things, 45-100 new nuclear power plants, and in which Candidate B calls for, imho, a more strategic energy policy (though both plans share several common components).
Clearly the Dem-controlled Congress is scared of being called 'out of touch' with voters concerned about high gas prices at the pump. But ANY national energy policy should be led by the next president and NOT passed in the waning months of this lame-duck administration.
Yes, I want strategic action from Congress to move America to energy 'independence' within 10-15 years, but I sure as heck can wait until February/March to see what a more comprehensive package would look like. This current proposed patchwork of subsidies and appeasement to the so utterly deluded 'drill here / drill now / pay less' crowd should be sequestered until after the election -- when the Dem majority may actually increase in both the House and the Senate, allowing President Obama to truly put this nation on a path towards energy independence.
Oh, and whoever wins the White House, I can only hope that any and all policy proposals (energy, regulatory, health care...) follows the truly ground-breaking 'open source' policy development process introduced by the Energize America team (www.ea2020.org), which collectively defined a 20-point plan for US energy independence in 2006. EA2020 was an all-volunteer effort of ordinary but passionate and informed folks that was formally unveiled with NM Governor and former Secretary of Energy Bill Richardson. A fully transparent and democratic process is the only hope we have of ensuring that strategic national policies are truly defined with the best interests of the American people in mind.
In sum, 'we the people' can solve all of this country's major policy problems -- given the tools (blogs, wikis, net access, a base line of education) and opportunity.
Some things probably should not wait until February. The production tax credit for wind in an example. While both sides seem to use this as a football, the person most responsible for our current state on this is McCain who has ducked a number of votes on extending existing programs for renewables. His would have been the cloture vote in these cases. As grain prices look set to fall, McCain is dumping on the one bright spot remaining in the economy.
Chris
Clearly the Dem-controlled Congress is scared of being called 'out of touch' with voters concerned about high gas prices at the pump.
That's it exactly. They're terrified that the issue is moving against them (the election looks far less "in the bag" than it did just a few months ago) - and they're probably right.
But don't knock them too hard. They were pretty clever here to include policies that they can support and largely give lip service to "drill drill drill".
The question is whether they can fool the electorate in to thinking this is what they want.
Are you kidding? Yes, the Dem-controlled Congress is scared of being called 'out of touch'. But they are not terrified. This plan is working.
Get a grip and look at what Congress is doing. It's not a mistake. In one of the other threads today or yesterday, I think it was enemyofthestate pointed that out so nicely. Argentina. Chile. We've already gone down. Congress, like the Roman Senate, merely legitimized the ripoff for their "constituents", ie those people who could use a $7500 tax credit to buy a Prius. Not me. If this is like Argentina or Chile, people that complain, we need to ponder getting kicked out of helicopters at 3500 feet.
cfm in Gray, ME
Are they going to renew the 2006-7 tax credits for installing efficiency enhancements in your home?
Selfish reasons for asking of course.... It's time to replace the hot water heater and I'm planning on switching to an exterior tankless system. The model I'm looking at runs about $1500 at the home improvement stores (ignoring installation of course)... but if you get it on e-bay (~$800-$850) and they renew the $300 tax credit? Well... that makes it a very attractive purchase.
The kicker on the selfishness thingy? I'm going to do this anyway - I'd just like to save a buck. :)
But I also have little doubt that the credit would encourage many others to make the switch.