Four years ago last week a horribly stressed sheet of steel -- the blow-out preventer on the Deepwater Horizon oil rig -- behaved like a horribly stressed metal plate, and standing aside like a coward while 5 million barrels of oil boiled up from the overheated sub-ocean floor into the Gulf of Mexico. Just a few weeks ago the Obama Administration gave BP, the company which oversaw this gusher, a Good-Housekeeping Seal of Approval, and allowed the company to resume bidding for new leases in the Gulf. BP promptly overbid on most of the next federal offering.
Listening to the Bipartisan Policy Commission's discussion in Washington, D.C. about the future of ultra-deep oil drilling, it's honestly hard to justify the Administration's decision. This is a pretty establishment crowd -- people who redesigned the offshore leasing process for "all of the above" Interior Secretary Salazar, refugees from the oil industry, people who advise the oil industry on environmental compliance -- and they are shockingly in accord:
The idea of cleaning up an oil spill, 45 years after the Santa Barbara oil spill, is regarded by the top American experts in the field as a joke.
The industry has made astonishing technological progress in extracting oil, and almost none in making extraction safe. Indeed, a new report from National Research Council on the oil industry's favorite next frontier, the off-shore Arctic, concludes that under present conditions "It is unlikely that responders could quickly react to an oil spill..." They aren't even set up to react, and they want drilling permits!
The oil industry has learned nothing. BP is refusing to pay for baseline studies of the environmental consequences of Deepwater Horizon. A voluntary, anonymous "near misses" reporting protocol adopted years ago by the Norwegian oil industry, (and American aviation), is just being considered by the Department of the Interior, and fought by the oil industry, I suspect because it would give stressed employees (not just silent steel plates) an outlet to report when they were being pushed to cut corners to meet deadlines to save money.
There is universal agreement among the panelists on some other topics. The U.S. oil industry will not produce nearly the volume of oil it is promising unless it is bribed, "given a price signal" at well above current $110/barrel oil prices. There is a lot of safer, cheaper oil in the world than that being pursued in the Arctic and deep under the Gulf by multinational oil companies -- Big Oil is going after the most dangerous, dirtiest oil molecules -- because those are the only molecules they can get at. The affordable, understandable, plain vanilla oil reserves just happen to sit under mostly (Norway excepted) horrendous pieces of real estate and governance (Turkmenistan anyone?) Ruining the Gulf of Mexico didn't expose Tony Hayward to any particular personal risks. He's landed a nice, new cushy job. Trying to break into the Russian oil monopoly in Siberia turned out to be a much riskier effort.
If the global price of oil was affordable, say $75, the multinational oil majors would cancel virtually all of their new developments. In some ways the president's "all of the above" mantra translates into "including the impossible and the unaffordable." Except for a few companies that landed the very best real estate in the Bakken and Eagle Ford, oil companies producing the much heralded "light tight revolution" in U.S. oil are losing their investor's money and their shirts. Sample quote, "The only way we can make money is if we stop drilling. And if we stop drilling, we blow away in three years." Already $35 billion in shale oil and gas investments have been written off -- a sum that dwarfs Fox News's favorite renewables loser, Solyndra, at $530 million.
Arctic oil? A figment for the 2040s. Oil majors have just left $6 billion on the shrinking ice shelf of the Chukchi Sea -- with nothing to show for it. The Russians have signed coproduction agreements with U.S. companies like Exxon-Mobil. But each of these envisage the drilling -- by 2020 -- of precisely one well -- not even a down-payment on a serious exploration. (The Russians do get a lot of foreign investment and technology while they slow walk that one well. Vladimir Putin is no fool.) In that same period of five years, global solar panel production is likely to soar by 400 percent. The next tranche of drilling in Alaska will not even suffice to replace the steadily shriveling flow of Prudhoe Bay oil that keeps the Trans Alaska Pipeline going. Saudi America? Not without much more expensive gasoline. Indeed, The Wall Street Journal argues that even current relatively modest exports of U.S. refined gasoline and diesel is raising prices at the pump. (Don't expect your congressional candidate to spend a lot of time this fall explaining this fact.)
Ultra-deep water? It's going to be where the money goes, because oil majors can't find anyplace else to invest their obscene profits from explorations of two decades ago. But one of the panelists commented that Deepwater Horizon's bill will probably wipe out all of the past and future profits BP has made from decades drilling in the Gulf of Mexico.
Yet, four years later, none of the panel could imagine that the world would actually stop the oil industry from plunging into more fiscally absurd and wildly reckless endeavors -- or that the industry would stop itself - because, as they put it, "we just don't know what else to do tomorrow."
Solar panels anyone?
A veteran leader in the environmental movement, Carl Pope spent the last 18 years of his career at the Sierra Club as CEO and chairman. He's now the principal advisor at Inside Straight Strategies, looking for the underlying economics that link sustainability and economic development. Mr. Pope is co-author -- along with Paul Rauber --of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which the New York Review of Books called "a splendidly fierce book."