Tag Archives: Oil exports

Welfare Kings? Study Finds Half of New Oil Production Unprofitable Without Government Handouts

Repost from DeSmogBlog

Welfare Kings? Study Finds Half of New Oil Production Unprofitable Without Government Handouts

By Justin Mikulka • Tuesday, October 3, 2017 – 13:03
Oil derrick with 'welfare' spelled on Scrabble tiles.
Oil derrick with ‘welfare’ spelled on Scrabble tiles. [Main image is a derivative of “Creative Commons Oil Rig” by SMelindo, used under CC BY 2.0]
new study published in the peer-reviewed journal Nature Energy found that 50 percent of new oil production in America would be unprofitable if not for government subsidies. The study, performed by researchers at the Stockholm Environment Institute and Earth Track, Inc., found that, at prices of $50 per barrel, light oil produced by hydraulic fracturing (“fracking”) was heavily dependent on subsidies.

In fact, forty percent of the Permian basin in Texas would be economically unviable without subsidies, and for the home of Bakken crude production, Williston Basin, that number jumps to 59 percent, according to the researchers.

In addition, the study highlights what this additional fossil fuel production means for impacts to the climate:

…continued subsidies for oil investment could produce oil (and associated gas) that, once burned, will yield CO2 emissions equivalent to nearly 1 percent of the remaining global carbon budget for all sectors of all economies.”

At current oil prices, perhaps the most effective “keep it in the ground” strategy might be to stop subsidizing oil production.

But what happens with these subsidies when the price of oil is over $100 per barrel, as it was several years ago? The authors of the study report that, under such a scenario, government subsidies are simply “transfer payments” to oil investors. The oil would be profitable without the subsidies, which become, at that point, simply free cash for investors.

While this study provides valuable insight into how subsidies affect oil production and the climate, it notes that its conclusions are not unique. The authors point out: “As others have found regardless of the oil price, the majority of taxpayer resources provided to the industry end up as company profits.”

US Taxpayers Subsidizing Oil Exports to China

Since the U.S. crude oil export ban was lifted in 2016, exports have risen much faster than most purported experts predicted, with volumes recently topping 1.5 million barrels per day. Much of these exports are the heavily subsidized light sweet oils produced by fracking in the oil fields of Texas and North Dakota.

And while major oil producers such as Harold Hamm, CEO of Continental Resources and major Trump donortestified in Congress that it was unlikely U.S. oil would be exported to China, that has quickly proven to be false.

Bloomberg recently reported that Wang Pei, an executive for Chinese oil and gas company Sinopec, said, “Our refining system really likes U.S. crude.”

That appetite for oil in China and other nations like India isn’t shrinking, spurring the U.S. oil and gas industry to ramp up production to export far greater amounts.

Why are U.S. oil producers so keen to export their oil to other countries? Terry Morrison of Occidental Petroleum recently made the answer clear, saying, “It’s an alternative outlet for your production, i.e. better prices.” Better prices. At this point, American taxpayers are now subsidizing oil production so that oil companies can sell it to other countries like China for higher prices.

As the Midland Reporter-Telegram notes, “analysts are forecasting Permian Basin crude production will increase between 400,000 and 700,000 barrels per day in the coming years,” with the majority likely for export. However, as the Nature Energy study pointed out, 40 percent of that production is dependent on subsidies making it economically viable in the first place.

Taxpayer-funded subsidies don’t just incentivize oil production for export. As previously noted on DeSmog, taxpayers are also subsidizing the expansion of ports in Texas to provide access for loading oil onto the largest oil tankers, also destined for foreign shores.

India just received its first shipment of American oil and as DNA India reported, “Officials here said the U.S. crude supply will help India to keep oil prices low and stable to benefit consumers.” Then, U.S. taxpayers are ponying up money for oil production to benefit foreign consumers. This seems like a bad deal for U.S. taxpayers and a horrible deal for the climate — but another big win for the oil industry.

Subsidies Impact Everything

The oil industry, led by its lobbying group the American Petroleum Institute, has long denied that it receives anything akin to a “subsidy.” In January former ExxonMobil CEO and now Secretary of State Rex Tillerson repeated this industry talking point during a Senate confirmation hearing. In response to a question from Sen. Jeanne Shaheen (D-NH), Tillerson said, “I’m not aware of anything the fossil fuel industry gets that I would characterize as a subsidy.”

Yet this new study notes that subsidies aren’t simply cash being handed to oil companies. Subsidies often come in the form of tax breaks, which is just one of the many ways oil companies receive government handouts.

Another subsidy of sorts noted in the report relates to the fact that the oil industry isn’t required to have nearly enough insurance to cover accidents like the deadly crude oil train explosion and fire in Lac-Megantic, Quebec. The study notes that “the July 2013 crude oil train explosion in Lac-Megantic, Quebec involved a Class II railroad with only $25 million in liability insurance. Costs of $2 billion or more will likely be shifted to the public.”

However, some of the main impacts of this ongoing support of the oil industry are the ongoing impacts to the climate, the environment, and public health. Should America be subsidizing oil for India and China, two countries that have crippling air pollution issues? What additional costs will be incurred due to climate change thanks to these subsidies?

Increased oil and gas production in the U.S. also means increased water consumption, increased contaminated fracking wasteincreased spills, increased oil trains, increased earthquakes, and increased flaring.

newly released poll from the University of Chicago and The Associated Press-NORC Center for Public Affairs Research found that 61 percent of Americans “think climate change is a problem that the government needs to address.” This latest study points to one major way the government could do that: by making the oil and gas industry pay the true costs of production instead of relying on U.S. taxpayers to insure its profits.

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Federal spending deal falls short on environment

Repost from the San Francisco Chronicle

Spending deal falls short on environment

By Annie Notthoff, December 17, 2015  |  Annie Notthoff is director of the Natural Resources Defense Council’s California advocacy program.
Senate Majority Leader Mitch McConnell Photo: J. Scott Applewhite, Associated Press
Senate Majority Leader Mitch McConnell Photo: J. Scott Applewhite, Associated Press

The spending and tax policy agreement Congress and the White House have reached to keep the government funded and running includes important wins for health and the environment.

But there’s good news to report, only because of the Herculean efforts of House Minority Leader Nancy Pelosi, D-San Francisco, Senate Minority Leader Harry Reid, D-Nev., and the White House, who worked tirelessly to block nearly all of the dozens and dozens of proposals Republican leaders were pushing.

Those proposals would have blocked action on climate, clean air, clean water, land preservation and wildlife protection and stripped key programs of needed resources. The Republican leaders’ proposals were the clearest expression yet of their “just say no” approach to environmental policy. They literally have no plan, except to block every movement forward on problems that threaten our health and our planet.

The worst aspect of the budget agreement is another clear indication of Republican leaders’ misplaced priorities — they exacted an end to the decades-long ban on sending U.S. crude oil overseas in this bill, in return for giving up on key elements of their antienvironment agenda.

Senate Majority Leader Mitch McConnell, R-Ky., made that give-away to the oil industry one of his top priorities. It will mean increased oil drilling in the U.S., with all the attendant dangers, with the benefits going to oil companies and overseas purchasers. That won’t help the American public, or the climate. It’s simply an undeserved gift to Big Oil.

In good news, the agreement extends tax credits for wind and solar energy for five years, which will give those industries long-sought certainty about their financing.

Wind and solar will continue to grow by leaps and bounds, helping domestic industry, reducing carbon pollution and making the U.S. less vulnerable to the ups and downs of fossil fuel prices.

Democratic leaders deserve all our thanks for what they were able to keep out of the budget deal. Gone are the vast majority of obstacles Republican leaders tried to throw in the way of environmental protection. Recall for a moment the 100 or more antienvironmental provisions Republican leaders tried to attach to these spending bills. Those included efforts to:

• Block the Environmental Protection Agency’s Clean Power Plan, which sets the first-ever limits on carbon pollution from power plants — our best available tool to combat dangerous climate change.

• Roll back the Obama Administration’s Clean Water Rule, which would restore protections for the potential drinking water supplies of 1 in 3 Americans.

• Repeal the EPA’s newly issued health standards to protect us from smog.

• Bar the Interior Department from protecting our streams from the pollution generated by mountaintop removal during coal mining.

• Strip Endangered Species Act protections for gray wolves, the greater sage grouse, elephants, the Sonoran Desert tortoise, and other threatened animals.

• Force approval of the proposed Keystone XL tar sands oil pipeline, which President Obama already has rejected.

There’s more work ahead to protect the environment, starting with eliminating the threat of oil drilling in the Arctic and off the Atlantic Coast.

But despite the efforts of Republican congressional leaders to hold the public hostage and bring us to the brink of another government shutdown, a budget deal has emerged that protects environmental progress.

 

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Top 3 Myths on Oil Export Ban; Meet the Lobbyists; Paris Agreement Should Spook; Climate Denial Scandal; 5 Stocks to Watch

From an E-ALERT by DeSmogBlog
Five excellent reports distributed by email on Dec 17, 2015

Top Three Myths Used to Sell the Lifting of the Crude Oil Export Ban, A Climate and Security Disaster In The Making

It can be difficult to win an argument when you have no viable position. However, when you are the oil industry, you can just buy the win. Which is what the oil industry is poised to do regarding the lifting of the crude oil export ban.

The GOP is currently holding up Congressional action needed to avoid a government shutdown by demanding inclusion of the lifting of the crude oil export ban in the government spending package.

Here are some of the disingenuous arguments the oil industry has paid to have members of Congress make over the past two years. Read more.

Meet the Lobbyists and Big Money Interests Pushing to End the Oil Exports Ban

The ongoing push to lift the ban on exports of U.S.-produced crude oil appears to be coming to a close, with Congress agreeing to a budget deal with a provision to end the decades-old embargo.

Just as the turn from 2014 to 2015 saw the Obama Administration allow oil condensate exports, it appears that history may repeat itself this year for crude oil. Industry lobbyists, a review of lobbying disclosure records by DeSmog reveals, have worked overtime to pressure Washington to end the 40-year export ban — which will create a global warming pollution spree. Read more.

Historic Paris Climate Agreement Should Spook Fossil Fuel Markets and Escalate Clean Tech Investment

World leaders reached an historic agreement in Paris moments ago, capping off the COP21 climate talks with a unanimous deal among 195 countries to curb global warming pollution and hasten the clean energy transition. The gavel just fell on the Paris Agreement, and it’s time to celebrate.

Is it enough to please everyone? No. Will people continue to suffer from climate-charged extreme weather events? Yes. But it is a welcome change from previous summit failures. Read more.

In Midst of ExxonMobil Climate Denial Scandal, Company Hiring Climate Change Researcher

Caught in the crosshairs of an ongoing New York Attorney General investigation exploring its role in studying the damage climate change could cause since the 1970’s and then proceeding to fund climate science denial campaigns, ExxonMobil has announced an interesting job opening.

No, not the new lawyer who will soon send the “private empire” billable hours for his defense work in the New York AG probe, though that’s a story for another day. Exxon is hiring for a climate change researcher to work in its Annandale, New Jersey research park facility. Read more.

Five Energy Stocks to Watch After Paris Climate Agreement

With a new global agreement on climate change gaveled into the history books in Paris tonight, many people including me believe we have just witnessed the end of the fossil fuel era.

So-called “pure play” fossil fuel companies that have not significantly diversified into other areas of energy production will be huddled in boardrooms this week trying to figure out what the Paris Agreement means to their bottom line. Read more.

 

 

 

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