Tag Archives: Fossil Fuels

Is this Benicia’s future? New Mexico stuck with $8 billion in fossil fuel cleanup

New Mexico Stuck With $8 billion in Cleanup for Oil Wells, Highlighting Dangers From Fossil Fuel Dependence

The oil industry boasts that it fills state coffers with revenues from drilling, but a new study finds a serious gap in funding available to tackle the environmental legacy of abandoned wells.

DeSmog.com, by Nick Cunningham, May 26, 2021
Oil stored in tanks. Credit: Bureau of Land Management (CC BY 2.0)

New Mexico is facing more than $8 billion in cleanup costs for oil and gas wells, an enormous liability that taxpayers could be left to pick up if drillers go out of business or walk away from their obligations.

Cleaning up old wells at the end of their operating lives can be expensive, and typically states require drillers to cover part of the cleanup cost at the outset, known as financial assurance requirements. The money is tapped later on when the well or pipeline must be dismantled and cleaned up.

But a study commissioned by the New Mexico State Land Office published on April 30 found that “financial assurance requirements do not exist for much of the oil and gas infrastructure explored in this study, and in some cases where such requirements are imposed, operators may have multiple ways of minimizing or avoiding those requirements.” The study was conducted by the Center for Applied Research, an independent analytical firm.

Inadequate bonding requirements means there is a serious gap in available funding to properly clean up after the fossil fuel industry. According to the report, it could cost as much as $8.38 billion to clean up the state’s tens of thousands of wells and associated pipeline infrastructure. Alarmingly, however, New Mexico only has $201 million tucked away for cleanup, leaving a hole of $8.1 billion.

“That’s $8.1 billion that we don’t have,” New Mexico Commissioner of Public Lands Stephanie Garcia Richard said in a statement. “Enormous sums of taxpayer money and money meant for public schools, along with the long-term health of our lands, are on the line.”

The industry likes to boast that oil and gas revenues contribute roughly a third of the state’s general fund — a fact that the New Mexico Oil & Gas Association (NMOGA) triumphantly advertised in a recent report and regularly highlights on social media.

Indeed, drilling accounts for a large source of state revenues. In April 2021, for example, the state took in $109 million in royalties, a record high. Those funds will be funneled into public services, including schools and hospitals.

As the report exposed, however, the massive liability put onto the public in cleanup costs somewhat undercuts the notion that the oil and gas industry is a financial godsend.

The industry has helped fill state coffers in recent years, with oil production booming to roughly 1 million barrels per day, more than double production levels from five years ago. According to the report, last year the oil and gas industry produced nearly 370 million barrels of oil and 2 trillion cubic feet of natural gas from roughly 60,000 wells, which was transported on 35,000 miles of pipelines.

But as the State Land Office study highlights, the industry is leaving behind enormous costs for the state and the general public to deal with at a later date, a liability that is mostly obscured from public discussion.

The average cost to plug an old well and reclaim the surface is over $182,000 per well, but the state only has the finances to cover a little over $3,200 per well. The funding gap is even more staggering for pipelines. Decommissioning and reclamation costs are roughly $211,000 per mile of pipeline, but available financial assurance only totals about $51 per mile.

A pump jack in Roswell, New Mexico. Credit: BLM(CC BY 2.0)

The risk to the public from inadequate bonding requirements is compounded by the fact that oil and gas drillers can go out of business long before wells are cleaned up, which can be years or even decades later. The U.S. shale industry has burned through hundreds of billions of dollars in cash, and there have been more than 250 bankruptcies of North American oil and gas companies since 2015. And as the clean energy transition accelerates, the financial challenges to the industry are likely to only grow more severe.

The state has long suffered from the roller coaster cycles of extractive industry, according to James Jimenez, executive director of New Mexico Voices for Children, a health, education, and economic advocacy organization. “We’ve made policy choices in boom times that have really exacerbated our over-dependence on oil and natural gas revenues,” Jimenez told DeSmog.

“Because of the really volatile nature of the oil and gas industries, we haven’t had sustainability in the programs,” he said. A dependence on a boom-and-bust industry has forced the state to make cuts to school systems during downturns in the past.

“We need to reduce this over reliance we have on oil and natural gas to fund really basic important programs like our K-12 education and higher education systems,” Jimenez said. He added that the state should diversify its revenue base, such as through progressive taxation on the wealthy and supporting non-extractive business sectors.

Even as money flows to the state from drilling today, the unfunded liabilities of cleanup that are dumped onto the public also highlight the downside to such high levels of drilling. “The $8 billion that it would take to do the cleanup would have to come from somewhere,” Jimenez said. Dollars spent on cleaning up the waste from the oil and gas industry, are dollars not spent on other important needs, such as rural broadband or road infrastructure, he added.

“The answers are simple and urgent — raise royalty rates and taxes on the industry, stash away the revenues in our Permanent Fund to stabilize cash flows, and spend current budget dollars on investments to diversify our economy,” Thomas Singer, senior policy advisor at the Western Environmental Law Center, told DeSmog via email.

NMOGA did not respond to a request for comment.

Well pad near Roswell, NM. Credit: BLM(CC BY 2.0)

On top of the financial risks from abandoned wells, the fossil fuel industry brings numerous environmental and public health hazards as well. Oil and gas operations have contributed to a deterioration in air quality in the state. And in northwestern New Mexico, there have been more than 300 accidents since 2019, including oil spills, fires, blowouts, and gas releases, and much of it has occurred on Navajo land, as reported by Capital & Main.

A recently published peer-reviewed study found that shut-in conventional oil wells in the Permian basin could be leaking a substantial amount of methane, a powerful greenhouse gas that exacerbates climate change.

“New Mexicans must recognize that while industrialization of our landscape to produce oil and gas brings revenue today, if not properly cleaned up, it also jeopardizes our economy of the future,” Singer said. Allowing drillers “to defer this obligation indefinitely puts the state and taxpayers at great risk that they will have pick up the tab or leave these areas as polluted sacrifice zones.”

Bay Area refineries taking a new path – going from processing crude oil to renewable energy

Refineries Renewed  – Phillips 66, Marathon move to renewable biofuels

East Bay Express, By Jean Tepperman, September 16, 2020
OIL CHANGE: Local residents stand tall in front of the Phillips 66 refinery, which will become the world’s biggest producer of renewable fuels by 2024. PHOTO BY GLENN HUMMEL

Residents of East Bay refinery communities, public officials and environmental organizations had mixed reactions to recent surprise announcements by two Bay Area oil refineries: Phillips 66 said its Rodeo refinery will stop processing petroleum and switch to producing biofuel—made from living plants. It will also close its Rodeo carbon-processing plant. Days later, Marathon announced it would close its Martinez refinery and consider using it to produce biofuel.

“It’s really historic to see 50 percent of the refineries in Contra Costa make a decision to go from processing crude oil to renewable energy,” said Supervisor John Gioia. “It moves us in the right direction, knowing it’s not where we want to end up.” He added that, since the converted refineries will probably employ fewer workers, the county’s big challenge will be “to assist workers to find replacement jobs with equal pay [and create] pre-apprenticeship programs to get local people into jobs.”

Rodeo resident Maureen Brennan said, “I’m 60 percent excited for the community about this new technology and 40 percent worried. I’m happy to have less pollution from the refinery. I’m just suspicious.” She noted that Phillips 66 hasn’t withdrawn permit applications for “two tar-sands-related projects.” Nancy Rieser, another refinery neighbor, was skeptical about the refinery’s mention of “used cooking oil” as a raw material. She said she feared that, instead, rainforests in Brazil and Paraguay would be cleared for “industrial soybean production” to supply the biofuel industry.

And Greg Karras, author of a recent report calling for gradual decommissioning of California refineries, said the move to biofuel is a “strategy to protect oil companies’ stranded assets.” State and federal support for this strategy diverts resources from the real solution: electrification of transportation.

Phillips 66 announced that, starting in 2024, the refinery will become the world’s biggest producer of “renewable diesel, renewable gasoline, and sustainable jet fuel,” reducing the use of fossil fuel. The company said the change will cut carbon dioxide emissions from the refinery by 50 percent, sulfur dioxide by 75 percent and reduce pollution in general. The plant will produce 50,000 barrels of biofuel a day, compared to its current output of 122,000 barrels a day of petroleum products.

In addition, the project’s website, Richmond Renewed, says it “will provide high-paying family-wage jobs with healthcare benefits. Crude oil refinery workers will have the opportunity to transition to produce renewable fuels. Construction jobs for refinery conversion will help the county recover from the COVID-induced recession.”

The Phillips 66 biofuel project—and the possible project at Marathon in Martinez—reflect an oil-industry trend that started before the current economic problems. Many California policies have been promoting a move from fossil-fuel transportation. And environmental activists have been winning battles against planned fossil-fuel expansion. “There’s a lot about this project that’s way less terrible” than previous proposals, said Karras. San Luis Obispo County recently nixed a Phillips 66 plan to bring crude oil by rail from Canada’s tar sands to its Santa Maria refinery. And for years community opponents have stalled two Rodeo refinery proposals they say are also about tar sands: construction of propane and butane storage tanks and expansion of tanker traffic.

For starters, refinery neighbors and environmental organizations are focusing on making sure the county won’t approve the new proposal without a thorough public study. “To understand the details—local pollution shifts, where the feedstock will come from, how many millions of acres could be needed for soy, palm trees, you name it—there must be a full-scale environmental review combined with a 180-degree shift away from their planned tar sands expansions,” said Wilder Zeiser of Stand.earth.

Just Transition

Many are also concerned about the loss of jobs. Mike Miller, president of United Steelworkers Local 326, which represents workers at Phillips 66, said the company told him they could probably handle the reduction in jobs through attrition—10 or 20 people typically retire every year, Miller said, and “there are a lot of older people at our facility.” He added that when the company tells the union something, “most of the time they tell us the truth.” He said the company also mentioned the possibility of transferring workers to other Phillips facilities.

Supervisor Gioia reported that in his conversations with Marathon about its possible conversion to biofuels, managers estimated that the new plant would employ fewer than half of the number soon to be laid off from its Martinez refinery.

The problem, Gioia said, is that “the new jobs in the green economy aren’t there yet.” Many communities whose economies depend on fossil fuel, he said, are looking to the example of the electric-bus manufacturing plant recently opened in L.A. County. “Contra Costa is ground zero” for figuring out how to make a just transition from fossil fuels, Gioia said.

U.S. Representative Mark DeSaulnier said in a statement, “Workers must be taken into consideration and supported through [this] process—including with proper training, advanced warning, and jobs worthy of their skills. I have already begun and will continue to bring together local stakeholders to ensure that a transition away from fossil fuels does not leave anybody behind.”

In his report, Karras calls on governments to require fossil-fuel producers to pay up-front into a fund to help communities recover from their economic and environmental impacts and to provide income support and retraining for laid-off workers. Noting the support for biofuels from state and federal government, he said, “The project being proposed is so heavily subsidized that there’s every justification for holding the company responsible for making the workers and the community whole.”

In addition to jobs, neighbors are concerned about leftover toxic pollutants. Crockett resident Rieser said Phillips has “tanks of toxins and old oil sludge on both sides of Route 80. How will these be dealt with? Abandoned?” In addition to converting the refinery, Phillips 66 says it will close the nearby carbon-treatment plant, leaving another toxic site. A requirement to clean up the pollution, she said, should be a condition of any permit the county may grant.

Clean Fuel?

Biofuel helps reduce the amount of climate-disrupting carbon dioxide produced each year because it’s made from living plants. The carbon dioxide they absorb when they grow balances that emitted when they’re burned. “It’s probably true that biofuel will be some of what we need” to transition from a fossil fuel transportation system, Karras said. That’s because biofuel can be substituted for petroleum in existing vehicles and distribution systems, although for use in airplane engines, it must be blended with at least the same amount of petroleum fuel.

But according to the nonprofit Biofuel Watch, biofuel is “misleading as a climate solution,” for several reasons. One is that producing biofuel still releases carbon dioxide and toxic pollutants. Phillips 66 says the new facility will be 15 percent solar-powered, implying that the other 85 percent of the power will come from burning some kind of fuel.

Hydrocracking, the process Phillips 66 says it will use to produce biofuel, requires large amounts of hydrogen. And the refinery’s process for producing the hydrogen also produces large amounts of carbon dioxide, Karras said—along with health-harming pollutants.

In addition, burning biofuel in vehicles produces some of the same kinds of pollution as burning petroleum products, especially the “particulate matter” that causes the most harm to human health. A report from the National Institutes of Health evaluated research comparing the pollution from burning biofuel and petroleum. Results varied depending on the exact composition of the fuels, but in general the biofuels produced substantial amounts of particulate and other pollution, although less than petroleum. Low-income people of color are mostly likely to live near the refineries and freeways where those pollutants are concentrated.

A 2019 study compared two “pathways” for California to get off fossil fuel, one focusing on renewable fuels, the other on electrification of transportation. It estimated that the electrification pathway would reduce particulate pollution enough to avoid about 12,000 premature deaths a year. The renewable-fuels pathway would also avoid some premature deaths from particulate matter—but only about a quarter as many, 2,800 a year.

Land and Climate

The other big concern about biofuel is where the raw material comes from. Phillips 66 says it will be processing “used cooking oil, fats, greases and soybean oils.” But according to Biofuel Watch, the supply of used cooking oil is very limited. Phillips 66 has said that it will use soy oil from the Plains states, but these supplies are also limited. Many fear that the demand for soy and other biofuel crops is adding to the large-scale destruction of forests.

“Where biofuel production has been successful – using vegetable oils, corn, and sugarcane for example – the environmental and social consequences of vast new demand for these commodities has had severe and rippling effects on markets, food production, biodiversity, and human rights,” wrote Gary Hughes of Biofuel Watch. Destroying forests and soil to produce biofuel sometimes releases several times as much carbon as burning the fossil fuels they replace, according to a report from that organization.

State and federal policies heavily subsidize biofuels, according to Marijn van der Wal of Stratas Advisors, quoted in the Los Angeles Times story on the Phillips 66 announcement. Under the California Low Carbon Fuel Standard and the federal Renewable Identification Number program, producers of biofuel earn “credits” they can sell. They also get $1 per gallon through the federal Blenders Tax Credit program. Altogether, van der Wal estimated, this adds up to “about $3.32 a gallon . . . enough to cover production costs.”

Most American biofuel is produced in California “due to economic benefits under the Low Carbon Fuel Standard,” according to the US Department of Energy. But in a recent letter to the California Department of Energy, Biofuel Watch said this policy “locks in fossil fuel reliance” and “provides cover” for continuing the use of fossil fuel. That’s because it perpetuates the “liquid-fuel supply chain” and liquid-fuel vehicles. This “distracts from the imperative of deep transformation of our energy economy.”

Another Bay Area refinery shutting down fossil fuel production – Phillips 66 in Rodeo

Phillips 66 is turning a California oil refinery into a biofuel plant

Phillips 66 said its Rodeo refinery near San Francisco will make fuel from used cooking oil, fats, greases and soybean oils. Above, a taco shell, dripping oil, emerges from a deep fryer. (Barbara Davidson / Los Angeles Times)
Los Angeles Times, by Bloomberg, August 12, 2020

Phillips 66 has become the latest in a string of U.S. refiners to announce plans to convert an oil refinery into a biofuel plant.

The company said Wednesday that its 120,000 barrel-a-day Rodeo refinery near San Francisco will become the world’s biggest plant that makes so-called renewable diesel, as well as gasoline and jet fuel, out of used cooking oil, fats, greases and soybean oils.

The announcement came about a week after Marathon Petroleum Corp. said that it may convert two refineries into renewable diesel plants. In June, HollyFrontier Corp. said it would turn its Cheyenne, Wyo., refinery into a renewable diesel plant by 2022.

As refiners across the U.S. struggle with depressed fuel demand amid the pandemic, California’s low-carbon fuel trading scheme may represent a pathway for survival. Demand for so-called renewable diesel is surging in the Golden State as refiners buy increasing numbers of credits under the low-carbon fuel standard program, which aims to cut vehicle emissions 20% by 2030.

“There is overcapacity on the refining market,” Marijn van der Wal, biofuel advisor at Stratas Advisors in Singapore, said in an interview Wednesday. “Are we going to shut down our refineries or are we going to repurpose them?”

Renewable diesel is chemically identical to diesel derived from fossil fuels, according to Neste Oyj, the word’s biggest producer of the fuel.

The LCFS credits as well as federal RIN D5 credits and recently reintroduced Blenders Tax Credits generate about $3.32 a gallon in subsidies for renewable diesel producers, enough to cover production costs, Van der Wal said in a June report.

“It’s a mind-boggling amount of money,” he said by phone. “You will make a lot of money as long as all these subsidies come in.”

Find out why the smallest details can be the most important.
The Rodeo plant could start operating as early as 2024, producing 680 million gallons a year of renewable diesel, gasoline and jet fuel, the company said. Combined with production from an existing project in development, the plant would produce more than 800 million gallons a year. In addition to repurposing the Rodeo refinery, the company also announced it would be closing its 45,000-barrel-a-day plant in Santa Maria in 2023.

Last week, Marathon said it will convert its 166,000-barrel-a-day Martinez, Calif., refinery into a terminal facility and that may include a 48,000-barrel-a-day renewable diesel plant as soon as 2022. The company is turning its 19,000-barrel-a-day North Dakota plant into a renewable diesel plant by the end of this year.

The surge of new entrants into the California biofuel market is creating its own problems, Van der Wal said. Existing renewable diesel suppliers to California, including Neste and Valero Energy Corp., have locked up much of the feedstock, leaving less tallow and cooking oil for the newcomers. Additionally, so many projects are being proposed that there may not be enough diesel demand in California to absorb the additional fuel.

Letter from Andrés Soto: Chagrined at Valero’s alcohol diversion

By Andrés Soto, April 27, 2020
Andrés Soto, Benicia CA

As we wound down the first shelter in place Earth Day/Week, I was prodded into chuckling at the Herald’s front page story of Valero diverting some of its ethanol production to the making of hand sanitizing liquids! This is like applying antibiotic ointment to a bleeding gun shot wound. Thanks Valero.

Valero and the other fossil fuel companies have been knowingly contributing to the destruction of our atmosphere and trying to exacerbate the problem by moving into refining extreme crudes such a tar sands and fracked crude. Thanks Valero.

It is now understood that those who have been suffering the greatest health burdens over time from the fossil fuel economy are – surprise, surprise – also the most vulnerable to infection from COVID 19! Benicia and other refinery towns are on the front line with children and seniors suffering disproportionately from asthma and other auto-immune diseases. Thanks Valero.

Of course, to protect their position to profit from poison they need political support. The 2018 Benicia election saw Valero and its deep pocket “boots on the ground” building trades union allies spend an obscene amount of money to personally destroy the reputation of Planning Commissioner Kari Birdseye and and pump up the pro-polluter candidates Lionel Largaespada and Christina Strawbridge to victory. Thanks Valero.

If Valero and its fellow oil cartel members really wanted to help Benicia and Earth it would join community members, workers and city representatives in the planning of a managed decommissioning of the refinery and reduce risks to COVID 19, massive wildfires and toxic pollution. Thanks Valero.

Andres Soto
Benicia CA