How Much Does BP Pay Us for Privilege of Soiling Our Shores?

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The Mineral Management Service claims that revenues from oil production once became the country’s second largest source of revenue after income tax.

As the industry continued to evolve through the 1950s, oil production became the second-largest revenue generator for the country, after income taxes.

That’s a historical claim, though the American Petroleum Institute still pitches a version of it: “one of the federal government’s largest sources of non-tax income.” But it got me thinking about how much we’re actually getting from the oil companies, like BP, in exchange for them soiling our shores.

Last year, the Minerals Revenue Management department of the Mineral Management Service reported $9.9 billion in royalties from all mineral exploitation. Of that, MRM collected $5.8 billion for all federal offshore drilling of oil and gas.

$5.8 billion for exposing an ecosystem like the Gulf to the risk of the catastrophe that is now playing out. BP will pay more in liability or cleanup than that.

Of the $5.8 billion MMS brought in from offshore oil and gas drilling, $3.1 billion appears to come from oil, which is our share of the $23.5 billion in revenues for 425,199,067 BBL of oil drilled off shore.

Do the math. If I’m doing my math correctly, that means we’re getting less than $7.60/BBL for royalties the oil. That’s not all the money we get, mind you. There’s the actual bonus bid for the drilling rights and rent up until oil starts flowing; BP paid $34 million to the rights to this particular site. And starting in 2008, royalty percentages for Gulf leases were raised to 18.75%, but a lot of those leases aren’t producing yet. But using the $7.60 we’ve been getting for oil, taking the highest estimates for the rate of spill–70,000 BBL/day–and assuming it will spill for a total of 90 days, taxpayers would get less than $48 million in oil revenues for all that oil, enough to ruin the Gulf ecosystem for a generation, not to mention the serious damage to the fishing and tourist industries. While not all of the fishing and tourist industries will be destroyed, in 2008 all Gulf states brought in over $1 billion in fish, shrimp, and oysters, and $20 billion in tourism.

Read more →

Dr. Sludgelove: Or How I Learned To Stop Junk Shotting And Love Teh Bomb

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Maybe those wacky Russians had it right and the best chance at actually shutting off the bleeding earth below the once and future Deepwater Horizon platform is to bomb the damn thing shut. From Jeremy Hsu via CSM:

Using a nuclear explosion to try to plug the gushing oil well in the Gulf of Mexico might sound like overkill, but a Russian newspaper has suggested just that based on past Soviet successes. Even so, there are crucial differences between the lessons of the past and the current disaster unfolding.

The Russians previously used nukes at least five times to seal off gas well fires. A targeted nuclear explosion might similarly help seal off the oil well channel that has leaked oil unchecked since the sinking of a BP oil rig on April 22, according to a translation of the account in the daily newspaper Komsomoloskaya Pravda by Julia Ioffe of the news website True/Slant.

Weapons labs in the former Soviet Union developed special nukes for use to help pinch off the gas wells. They believed that the force from a nuclear explosion could squeeze shut any hole within 82 to 164 feet (25 to 50 meters), depending on the explosion’s power. That required drilling holes to place the nuclear device close to the target wells.

Yeah, yeah I know …. oooooh spooky nukes! But we have a whole catalog of conventional bunker busters, couldn’t one of these mothers of all bombs (MOABs) do the trick? I don’t know, I am not a deepwater oil well implosion expert. But you know what hasn’t worked? The big top hat, the little top hat, the giant sippy straw, the blow out preventer, toxic dispersant sold by a BP subsidiary and the top kill and junk shot BP blathers about are laughable on their face. The solution ideas to date have been straight out of the Wile E. Coyote Acme School of BP Profitology. And the Ferengi like addiction to oil profit is exactly the issue as BP has clung to every bone headed idiotic play available that will keep their precious oil well viable for production; all the while bleeding out its black death to the Gulf. BP would literally rather kill the Gulf and screw the citizenry than destroy its investment.

Now I first mentioned the bomb idea about a week ago, kind of tongue in cheek, in some of our backstage discussions (the theory is now known as the “bmaz bomb”). But I am not alone. Oh no, not alone at all; there are legitimate people going there too. Christopher J. Brownfield is a former nuclear submarine ranking officer in the US Navy and has a subsequent academic background in international energy policy. Brownfield has the same thought I have regarding the possibility of using conventional explosives to shut the well off:

But there could be be a third option that Obama might bring to the table, once we recognize that BP is just as concerned about salvaging its precious asset as it is about stopping the spill. Our military could potentially use a carefully placed combination of conventional explosives to collapse the well. Our technology is much better than that of the Soviet Union in 1966, so we should be able to make this work without having to go nuclear. I’m confident that the U.S. Navy, the Army Corps of Engineers, and some private-sector organizations could come together and make this happen. The only question is whether Obama will be bold enough to take charge of this problem at the risk of his presidency slipping down the deep, dark well.

Would it work? Heck, I dunno. But it sounds a little more plausible than hair brained schemes BP and the government have put their collective heads together to produce so far. I know this, out here in the west they use explosives to seal off mine shafts all the time, and quite effectively. You would think that the right experts could devise a solution that would close off a sufficient portion of the narrow well hole here to seal it permanently.

There is a lot of experience in controlled implosions under a variety of circumstances. Would it be harder a mile under the sea? Sure, but if we have the technology to be drilling there and two miles further down from the sea floor, then we ought to be able to figure this out too. If it destroys BP’s precious well, that is just an extra benefit; they don’t deserve it anyway.

As profound nukulur scholar Major King Kong would say, “Wahoooooooo”. Bomb the sucker!

[graphic by the one and only twolf and thanks to Eli for some terminology help]

The EPA’s History of William Reilly

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I was going to go clean the house and forget about the BP disaster for a few hours. But then I saw the EPA files on William Reilly, the Republican Obama appointed to co-chair his BP Disaster “Looking Forward” Commission.

From the EPA’s institutional perspective, he sounds like a nice guy: a Republican conservationist of the sort that went the way of the NE Republican. Here’s a fairly interesting policy piece from him.

But I wanted to highlight just a few parts of EPA’s institutional history of Reilly for what they say about Obama and this commission.

First, there’s the description of Reilly as a broker of compromise.

Reilly’s proclivity for drawing people together will not just be directed outward, toward the regulated community: it can also be expected to bring new cohesion to the internal operations of EPA.

[snip]

Reilly’s personal style–gentlemanly and soft-spoken–makes him the ideal mediator, effective at bridging differences even when antagonisms are intensely felt and there seems to be no common ground for agreement.

[snip]

In recent years, Reilly has scored successes with his efforts to secure dialogue and cooperation among frequently polarized business and environmental leaders. One such widely applauded breakthrough occurred in November 1988 when 25 previously warring environmentalists, industrialists, and developers made a public commitment to a “no net loss” goal for U.S. wetlands, a resource heretofore subject to dangerously rapid depletion. These same people, so harmonious by late 1988, had scarcely been on speaking terms when Reilly first coaxed them to convene for a meeting in July 1987.

This is a guy with Obama’s instinct for the mushy middle, right there between corporations and environmentalists.

Perhaps most telling, though, are the lessons in a report for President Poppy Bush on the Exxon Valdez spill completed under Reilly and then-Transportation Secretary Samuel Skinner’s guidance two months after the spill (that’s a picture of Reilly at the cleanup site–the picture above is Reilly at the Kuwait oil fires during Poppy Bush’s Saddam war). I expect he’ll write something similar for Obama’s commission six months from now.

  • Preparedness must be strengthened. Exxon was not prepared for a spill of this magnitude–nor were Alyeska, the State of Alaska, or the federal government. It is clear that the planning for and response to the Exxon Valdez incident was unequal to the task. Contingency planning in the future needs to incorporate realistic worst-case scenarios and to include adequate equipment and personnel to handle major spills. Adequate training in the techniques and limitations of oil spill removal is critical to the success of contingency planning. Organizational responsibilities must be clear, and personnel must be knowledgeable about their roles. Realistic exercises that fully test the response system must be undertaken regularly. The National Response Team is conducting a study of the adequacy of oil spill contingency plans throughout the country under the leadership of the Coast Guard.
  • Response capabilities must be enhanced to reduce environmental risk. Oil spills–even small ones–are difficult to clean up. Oil recovery rates are low. Both public and private research are needed to improve cleanup technology. Research should focus on mechanical, chemical, and biological means of combating oil spills. Decision-making processes for determining what technology to use should be streamlined, and strategies for the protection of natural resources need to be rethought.
  • Some oil spills may be inevitable. Oil is a vital resource that is inherently dangerous to use and transport. We therefore must balance environmental risks with the nation’s energy requirements. The nation must recognize that there is no fail-safe prevention, preparedness, or response system. Technology and human organization can reduce the chance of accidents and mitigate their effects, but may not stop them from happening. This awareness makes it imperative that we work harder to establish environmental safeguards that reduce the risks associated with oil production and transportation. The infrequency of major oil spills in recent years contributed to the complacency that exacerbated the effect of the Exxon Valdez spill.
  • Legislation on liability and compensation is needed. The Exxon Valdez incident has highlighted many problems associated with liability and compensation when an oil spill occurs. Comprehensive U.S. oil spill liability and compensation legislation is necessary as soon as possible to address these concerns.
  • Read more →

Obama’s BP Disaster Commission: Looking Forward with No Subpoenas

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As promised Obama signed an executive order forming a presidential commission to study the BP disaster today. I thought it’d be instructive to compare what he just formed with what Edward Markey and Lois Capps proposed. Starting with this detail:

Sec. 4. Administration. (a) The Commission shall hold public hearings and shall request information including relevant documents from Federal, State, and local officials, nongovernmental organizations, private entities, scientific institutions, industry and workforce representatives, communities, and others affected by the Deepwater Horizon oil disaster, as necessary to carry out its mission. [my emphasis]

Obama’s envisioning this Commission “requesting” information from entities like BP and Halliburton. Capps and Markey, however, envision subpoenas:

(b) Subpoenas-

(1) ISSUANCE-

(A) IN GENERAL- A subpoena may be issued under this subsection only–

(i) by agreement of the Chairman and the Vice Chairman; or

(ii) by the affirmative vote of eight members of the Commission.

(B) SIGNATURE- Subject to subparagraph (A), subpoenas issued under this subsection may be issued under the signature of the Chairman or any member designated by a majority of the Commission, and may be served by any person designated by the Chairman or a member designated by a majority of the Commission.

(2) ENFORCEMENT-

(A) IN GENERAL- In the case of contumacy or failure to obey a subpoena issued under paragraph (1), the United States district court for the judicial district in which the subpoenaed person resides, is served, or may be found, or where the subpoena is returnable, may issue an order requiring such person to appear at any designated place to testify or to produce documentary or other evidence. Any failure to obey the order of the court may be punished by the court as a contempt of that court.

(B) ADDITIONAL ENFORCEMENT- In the case of a failure of a witness to comply with a subpoena or to testify when summoned under authority of this section, the Commission may, by majority vote, certify a statement of fact constituting such failure to the appropriate United States attorney, who may bring the matter before a grand jury for its action, under the same statutory authority and procedures as if the United States attorney had received a certification under sections 102 through 104 of the Revised Statutes of the United States (2 U.S.C. 192 et seq.).

Obama also has a different idea of who should serve on this committee, specifically providing for industry participation Read more →

Congress’ 30-Day Deadline for Rubber-Stamping Exploration Plans

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The other day, when Sheldon Whitehouse asked Secretary of Interior Ken Salazar why BP had gotten an exemption from the full-blown NEPA process from which it presumably should have been categorically excluded, Salazar referenced a 30-day deadline from Congress to approve exploration plans.

Senator, there has been significant environmental review, including Environmental Impact Statements that has been conducted with respect to this activity in the Gulf of Mexico. It is an area where we know a lot about the environment, we know a lot about the infrastructure that is there. The question of the categorical exclusion in part relates to the Congressional 30-day requirement that MMS has to approve or disapprove an exploration plan. [my emphasis]

Mineral Management Service Director Elizabeth Birnbaum elaborated on this 30-day deadline on Wednesday.

Under the National Environmental Policy Act we’re required to examine the environmental impacts of any major federal actions, certainly the oil and gas leasing is a major federal action. We have conducted many Environmental Impact Statements before we get to the point of an individual well drilling decision. We conduct an EIS on the full 5-Year Plan for oil and gas drilling, We have conducted EIS on the lease sales in the Gulf and then separately in Alaska. We also conducted some separate Environmental Impact Reviews on leasing in the particular area–drilling in the particular area in the Mississippi Canyon here in the Gulf. When we get to the point of deciding on an individual exploration plan for a particular permit, we are under a statutory obligation under the Outer Continental Shelf Lands Act to make a decision within 30 days. That very much limits our ability to conduct environmental reviews. Many of our environmental reviews are categorical exclusions. We review that to determine whether there’s a trigger for us to do a full Environmental Assessment, which we did actually on exploration plans for Arctic drilling. But we’re still limited to that 30-day decision, and we have to still make a decision on whether to go forward with an exploration plan within 30 days, which limits the amount of environmental review we can conduct. In the package that the Administration sent up to provide additional appropriations, we also asked to lift that limit in the Outer Continental Shelf Lands Act to allow 90 days or more to provide more full analysis of exploration plans before drilling.

Here’s a history of the OCSLA. The 30-day requirement itself is described in the plan approval process of the OCSLA.

(1) Except as otherwise provided in this subchapter, prior to commencing exploration pursuant to any oil and gas lease issued or maintained under this subchapter, the holder thereof shall submit an exploration plan to the Secretary for approval. Such plan may apply to more than one lease held by a lessee in any one region of the outer Continental Shelf, or by a group of lessees acting under a unitization, pooling, or drilling agreement, and shall be approved by the Secretary if he finds that such plan is consistent with the provisions of this subchapter, regulations prescribed under this subchapter, including regulations prescribed by the Secretary pursuant to paragraph (8) of section 1334 (a) of this title, and the provisions of such lease. The Secretary shall require such modifications of such plan as are necessary to achieve such consistency. The Secretary shall approve such plan, as submitted or modified, within thirty days of its submission, except that the Secretary shall disapprove such plan if he determines that

(A) any proposed activity under such plan would result in any condition described in section 1334 (a)(2)(A)(i) of this title, and

(B) such proposed activity cannot be modified to avoid such condition. If the Secretary disapproves a plan under the preceding sentence, he may, subject to section 1334 (a)(2)(B) of this title, cancel such lease and the lessee shall be entitled to compensation in accordance with the regulations prescribed under section 1334 (a)(2)(C)(i) or (ii) of this title. [my emphasis]

And that sets the standard for rejecting an application in 1334 (a)(2)(A)(i) this way:

(i) continued activity pursuant to such lease or permit would probably cause serious harm or damage to life (including fish and other aquatic life), to property, to any mineral (in areas leased or not leased), to the national security or defense, or to the marine, coastal, or human environment;

Now, I would have to do a lot more review of legislative history of the OCSLA to see where that 30-day deadline came from, though so many of the deadlines in the OCSLA are set at 30 days, it might just have been arbitrary (or, it might have been what appeared to be a reasonable deadline to make sure the process kept moving forward–you gotta Drill Baby Drill, dontcha know).

But given Salazar’s and Birnbaum’s statements, the effect appears to be clear. That 30-day deadline appears to ensure that the MMS only looks closely at these exploration plans if there’s a blinking red flag in the plan, and not something trivial like drilling in extremely deep waters and/or innovative drilling plans–the things Whitehouse noted that should have prevented this exploration plan from being exempted from an individual assessment, the things that are causing such acute problems now.

And of course, to actually change this 30-day rubber stamp process, the legislation is going to have to get by industry shills like Lisa Murkowski and James Inhofe. Something to look forward to, I guess.

Oh, one more thing. The Congressman who raised concerns about the Arctic drilling? That’s the normally loathsome Heath Shuler. Just an indication of how a giant disaster can turn even the bluest of dogs into hippie environmentalists.

BP Goes There: “No One Could Have Predicted…”

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Yeah, I know. Of course BP is saying, “no one could have predicted.”

Of course, BP had a big incentive not to predict these things: one of the reasons it was able to get an exemption from an individualized Environmental Impact Study is that it estimated the largest possible spill from this well to be 162,000 BBLs, making it less than the 250,000 BBLs estimated in its regional drilling plan. You see, BP had an incentive not to predict this catastrophe.

Update: See ThinkProgress’ compendium of “No one could have predicted” claims from early in this disaster.

John Hall Questions BP’s Greenwashing Campaign

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In yesterday’s Transportation Committee hearing, John Hall hammered BP American President Lamar McKay about something a number of others have, as well: the amount of money BP has spent on greenwashing of late.

The answer? $10-12 million last year and $20 million this year.

So it’s roughly probably about the same or maybe a little more than the cost of a blowout preventer.

Sounds like Hall would like to prevent businesses from deducting such expenses in the future.

Congress Gets Results on Corexit

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At yesterday’s hearing on the BP Disaster, Peter DeFazio and Jerrold Nadler hammered BP America President Lamar McKay on the relative toxicity and efficacy of the dispersant Corexit as compared to some other dispersants. They pointed out that Corexit is one of the most toxic of the approved dispersants and is not as effective as others. Here’s a chart of the relative toxicity and efficacy from the EPA (click to enlarge).

In addition, on Monday, Edward Markey wrote EPA Administration Lisa Jackson asking why BP was using Corexit rather than a less toxic dispersant. Among other questions Markey asked were:

It is my understanding that the main dispersants applied so far are from a product line called Corexit, some of which had their approval rescinded in Britain more than a decade ago, because laboratory tests found them harmful to sea life that inhabits rocky shores.

a. How did EPA ensure that this dispersant’s toxicity to aquatic life was evaluated?

b. Was its toxicity to mollusks and other sea life that inhabit the Gulf of Mexico evaluated, and if so, what were the results? If not, why not?

c. If EPA relied on toxicity studies for coastal morphologies different from that of the Gulf Coast, what was done to evaluate the applicability of those studies for the use of the dispersants in the Gulf of Mexico environment?

d. Was the toxicity to other subsurface aquatic life evaluated? If so, please provide details, and if not, why not?

Late yesterday, the EPA informed BP it’s going to have to switch to another, less toxic, dispersant within three days.

The Environmental Protection Agency informed BP officials late Wednesday that the company has 24 hours to choose a less toxic form of chemical dispersants to break up its oil spill in the Gulf of Mexico, according to government sources familiar with the decision, and must apply the new form of dispersants within 72 hours of submitting the list of alternatives.

The move is significant, because it suggests federal officials are now concerned that the unprecedented use of chemical dispersants could pose a significant threat to the Gulf of Mexico’s marine life. BP has been using two forms of dispersants, Corexit 9500A and Corexit 9527A, and so far has applied 600,000 gallons on the surface and 55,000 underwater.

I guess all these hearings aren’t entirely a waste of time.

(Updated with efficacy table.)

Update: Here’s EPA’s order to BP to use a less toxic dispersant. And here’s some data from the dispersant monitoring.

Update: According to Nadler’s office, the maker of Dispersit got an order from BP for 60,000 gallons today.

Sheldon Whitehouse Lists the NEPA Exclusions

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At yesterday’s Environment and Public Works hearing on the BP disaster, Sheldon Whitehouse asked Interior Secretary Ken Salazar and Council on Environmental Quality Chair Helen Sutley why BP had been exempted from doing an Environmental Impact Study on the Macondo drilling site. He listed a number of things that should categorically exclude a project from receiving such an exemption. Two of those almost certainly applied to this well.

  • Areas of high seismic risk or seismicity, relatively untested deep water, or remote areas
  • Utilizing new or unusual technology

In response, Salazar spoke about how much we know about that area.

Senator, there has been significant environmental review, including Environmental Impact Statements that has been conducted with respect to this activity in the Gulf of Mexico. It is an area where we know a lot about the environment, we know a lot about the infrastructure that is there. The question of the categorical exclusion in part relates to the Congressional 30-day requirement that MMS has to approve or disapprove an exploration plan.

You think Salazar knows he’s going to be held responsible for all the exemptions approved since this disaster?

In any case, here’s how much BP knows about the area:

An emergency response plan prepared by BP shows the British energy giant never anticipated an oil spill as large as the one seeping through the Gulf of Mexico.The 582-page document, titled “Regional Oil Spill Response Plan — Gulf of Mexico,” was approved in July by the federal Minerals Management Service (MMS). It offers technical details on how to use chemical dispersants and provides instructions on what to say to the news media, but it does not mention how to react if a deep-water well spews oil uncontrollably.

[snip]

In a section titled “Sensitive Biological & Human-Use Resources,” the plan lists “seals, sea otters and walruses” as animals that could be impacted by a Gulf of Mexico spill — even though no such animals live in the Gulf. [emphasis]

Sure, we know a lot about the environment. We just have some crazy belief that the walruses have decided to vacation on the Gulf of Mexico.

Obama’s Commission

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As we go through another round of hearings on the BP disaster today (at the Energy and Natural Resources Committee this morning, Bernie Sanders asked Ken Salazar whether the risk of a disaster like this was worth the $.03/gallon decrease on the price of gas in 2030; Salazar didn’t really answer), Obama has leaked his intent to appoint a Presidential Committee to investigate the spill.

President Obama plans to create a presidential commission to investigate the BP oil spill, administration officials said Monday.

The commission will be established by an executive order, they said. One official likened the new panel to one ordered by President Jimmy Carter to examine the partial meltdown at the Three Mile Island nuclear plant in 1979.

Thus far, though, the Administration has only leaked its intent, with no details on the mandate of the Commission.

It will be interesting to see whether this Commission falls into that great tradition of whitewash commissions, or whether it will be a real commission. Ken Salazar said that the work of existing investigations (an IG one, and a Coast Guard one, and a science one, I think) would feed into the Presidential Commission. But there are several other efforts to push an investigation. Barbara Boxer has asked DOJ to investigate whether BP lied on its drilling permit application (in its claim that it had a plan to respond to a disaster). And Lois Capps and Ed Markey have sponsored a bill that would mandate a commissions, with subpoena powers and restrictions on conflicts of interest.

As Atrios says:

Because Bob Kerrey, Tom Keane, and Tom Daschle Need Something To Do?

Yes I’m a bit negative about ‘presidential commissions.’ I’ll be more positive if experts, rather than ex-politicians, get to do the job.