Category Archives: Keeping Watch on Earth News

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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NO LNG Exports in Coos Bay – last day for comments

Repost from NO LNG Exports

NO LNG Exports in Coos Bay – last day for comments

Today is the last day to submit comments on dredging in Coos Bay. Check out the talking points in the link below and make sure to send in your comments about dredging to coosbaychannelmodEIS@usace.army.mil with the subject “Coos Bay Channel Modification Project EIS” before today ends.

The U.S Army Corps of Engineers is preparing an Environmental Impact Statement (EIS) to analyze the potential environmental effects of approving a major dredging project on the Bay. The Jordan Cove LNG Export Project proposes to widen and deepen the Coos Bay Federal Navigation for LNG Tankers. The project would be funded in part by $60 million state grant, meaning taxpayers would foot the bill for a project that would largely benefit a Canadian corporation.

Read talking points for your comments in the link here:http://www.rogueclimate.org/savethebay…

  • Submit Comments on Dredging in Coos Bay
  • Submit Comments on Dredging in Coos Bay
  • See more at ROGUECLIMATE.ORG
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NO LNG Exports

on Monday

On Thursday, September 21, 2017 the Canadian Company behind the Pacific Connector gas pipeline and LNG export terminal filed their application with the federal government, marking their third attempt to build a 235 mile pipeline through southern Oregon to ship fracked gas overseas.

You can help stand up to Jordan Cove by filing as an Intervenor on the project today!

Individuals, impacted landowners, conservation organizations and community groups can file as intervenors allow

See More

OCT12

Thu 4 PMMrytle Creek LibrFriends of Myrtle Creek Library, 231 NE Division St, Myrtle Creek, OR 97457
2 people interested

 

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Phillips 66 Seeks to Increase Number of Oil Tankers on San Francisco Bay

Repost from Earth Island Journal

Proposal could pose risk to local communities and wildlife

A version of this story originally appeared on the Baykeeper website.

The oil company Phillips 66 wants to increase the number of tanker ships carrying crude oil across San Francisco Bay to its refinery in Rodeo — from 59 to 135 tankers per year. They have also proposed increasing the average amount of oil unloaded at Rodeo from 51,000 barrels to 130,000 barrels a day.

oil tanker in san francisco bay
Photo by Jill/Blue Moonbeam StudioAn oil tanker crosses under the Golden Gate Bridge. Phillips 66 has submitted a proposal to increase the number of oil takers that can carry oil to its bay-side refinery by more than two-fold.

More than doubling the number of oil tankers would increase the risk of oil spills in the Bay. Oil spilled in the water can kill birds and other wildlife, make the Bay unsafe for recreation, and contaminate local beaches.

Plus, the company’s proposal raises other concerns. The increased tanker traffic would likely carry dirty, heavy tar sands oil from Canada. This type of oil is difficult, if not impossible, to remove after a spill.

In 2010, when tar sands oil spilled into Michigan’s Kalamazoo River, response crews were unable to completely remove the oil from the riverbed, even after five years of expensive cleanup efforts. If tar sands oil spilled in San Francisco Bay, it could harm wildlife in the water nearby and smother bottom-dwelling creatures that are critical to the Bay’s food chain.

The Phillips 66 refinery already has a poor track record of oil spills. In September 2016, oil was spilled there during the unloading of a tanker ship, causing large oil slicks in the northern San Francisco Bay. Over 100 residents near the refinery sought treatment at hospital emergency rooms for exposure to fumes that were later linked to the oil spill.

And then again, in September of this year, a small spill at the Phillips 66 refinery wharf left a 20 foot by 20 foot oil sheen on the Bay’s water. The impacts of small spills like this can accumulate and harm the overall health and resilience of the Bay and its wildlife.

Phillips’ needs a modified permit from the Bay Area Air Quality District to proceed with the expansion, and the district is beginning work on an environmental impact report for the proposal. Following that process, the board of directors will vote on whether to proceed.

In communities near the refinery, public opposition to Phillips’ expansion proposal is building. Baykeeper, a nonprofit advocating for the health of the Bay ecosystem, is working alongside community and environmental organizations to oppose any increase of oil tankers on San Francisco Bay. So far, over 24,000 Bay Area residents have responded to action alerts and told responsible agencies to reject the proposal.

A similar coalition effort succeeded in stopping two previous proposals for expansion of Bay Area oil refining. Along with partner organizations and many concerned community members, Baykeeper stopped Valero Energy Corporation’s attempt to expand its rail yard and bring more oil by train to its Benicia refinery. That proposal would have led to a risk of oil spills and possible accidents along the Bay shoreline and in communities near railroad tracks. Our coalition also stopped a planned crude oil storage facility that was proposed by the energy infrastructure corporation WesPac for Pittsburg.

Whether we live close to or far from a refinery, every Bay Area resident has a stake in the number of tankers carrying crude oil across the Bay. Our communities and many local businesses rely on a healthy Bay. And for wildlife that depends on the Bay, it’s a matter of life and death. By saying no to the risk of more oil spills on San Francisco Bay, we can make sure this place we call home is protected for future generations.

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