Monthly Archives: December 2014

Fossil fuels, Oil industry subsidies

Rich countries are subsidizing oil, gas and coal companies by $88 billion a year

Repost from The Guardian
[Editor: Hmmm… do you think maybe the anti-tax crowd will latch onto this one?  Not likely.  The Guardian story is an excellent summary of an incredibly important new study by the Overseas Development Institute (ODI) and Oil Change International.  I highly recommend the original sources: a 4-page summary report and recommendations, the full 74 page report, and a 6-page report on the United States subsidies.  – RS]

Rich countries subsidising oil, gas and coal companies by $88bn a year

US, UK, Australia giving tax breaks to explore new reserves despite climate advice that fossil fuels should be left buried

• Fossil fuel exploration subsidies – mapped

By John Vidal Monday 10 November 2014
The fossil fuel bailout - G20 subsidies for oil, gas and coal exploration
The fossil fuel bailout – G20 subsidies for oil, gas and coal exploration

Rich countries are subsidising oil, gas and coal companies by about $88bn (£55.4bn) a year to explore for new reserves, despite evidence that most fossil fuels must be left in the ground if the world is to avoid dangerous climate change.

The most detailed breakdown yet of global fossil fuel subsidies has found that the US government provided companies with $5.2bn for fossil fuel exploration in 2013, Australia spent $3.5bn, Russia $2.4bn and the UK $1.2bn. Most of the support was in the form of tax breaks for exploration in deep offshore fields.

The public money went to major multinationals as well as smaller ones who specialise in exploratory work, according to British thinktank the Overseas Development Institute (ODI) and Washington-based analysts Oil Change International.

Britain, says their report, proved to be one of the most generous countries. In the five year period to 2014 it gave tax breaks totalling over $4.5bn to French, US, Middle Eastern and north American companies to explore the North Sea for fast-declining oil and gas reserves. A breakdown of that figure showed over $1.2bn of British money went to two French companies, GDF-Suez and Total, $450m went to five US companies including Chevron, and $992m to five British companies.

Britain also spent public funds for foreign companies to explore in Azerbaijan, Brazil, Ghana, Guinea, India and Indonesia, as well as Russia, Uganda and Qatar, according to the report’s data, which is drawn from the OECD, government documents, company reports and institutions.

Oil and gas exploration expenditure in G20 countries (public and private)
Oil and gas exploration expenditure in G20 countries (public and private). Photograph: ODI/Rystad Energy

The figures, published ahead of this week’s G20 summit in Brisbane, Australia, contains the first detailed breakdown of global fossil fuel exploration subsidies. It shows an extraordinary “merry-go-round” of countries supporting each others’ companies. The US spends $1.4bn a year for exploration in Columbia, Nigeria and Russia, while Russia is subsidising exploration in Venezuela and China, which in turn supports companies exploring Canada, Brazil and Mexico.

“The evidence points to a publicly financed bail-out for carbon-intensive companies, and support for uneconomic investments that could drive the planet far beyond the internationally agreed target of limiting global temperature increases to no more than 2C,” say the report’s authors.

“This is real money which could be put into schools or hospitals. It is simply not economic to invest like this. This is the insanity of the situation. They are diverting investment from economic low-carbon alternatives such as solar, wind and hydro-power and they are undermining the prospects for an ambitious UN climate deal in 2015,” said Kevin Watkins, director of the ODI.

The report is important because it shows how reforming fossil fuel subsidies is a critical issue for climate change.

“The IPCC [UN climate science panel] is quite clear about the need to leave the vast majority of already proven reserves in the ground, if we are to meet the 2C goal. The fact that despite this science, governments are spending billions of tax dollars each year to find more fossil fuels that we cannot ever afford to burn, reveals the extent of climate denial still ongoing within the G20,” said Oil Change International director Steve Kretzman.

The report further criticises the G20 countries for providing over $520m a year of indirect exploration subsidies via the World Bank group and other multilateral development banks (MDBs) to which they contribute funds.

The authors expressed surprise that about four times as much money was spent on fossil fuel exploration as on renewable energy development.

“In parallel with the rising costs of fossil-fuel exploration and production, the costs of renewable-energy technologies continue to fall rapidly, and the speed of growth in installed capacity of renewables has outperformed predictions since 2000,” said the report.

Crude By Rail, DOT-111, Federal Regulation (U.S.), Rail inspection, State regulation

NY Gov. Cuomo accuses federal officials of moving “unacceptably slow” on proposed rules

Repost from RecordOnline, Middletown, NY

Cuomo: Feds need to address crude-oil shipments by rail

By Leonard Sparks, Dec. 1, 2014

ALBANY – New York Gov. Andrew Cuomo called on the federal government to tighten rules governing crude-oil shipments by rail as the state released a report Monday documenting actions to protect Hudson River communities from derailment-related spills and explosions.

State rail inspectors uncovered more than 700 track and equipment defects and 12 hazardous material violations during seven inspection “blitzes” this year, according to the report, which documents New York’s progress in implementing 12 recommendations to improve safety.

Cuomo’s administration accuses federal officials of moving “unacceptably slow” on proposed rules to make crude shipments safer, including a proposal to phase-out the DOT-111 rail cars that many consider unfit for shipping oil.

“Over the past six months, our administration has taken swift and decisive action to increase the state’s preparedness and better protect New Yorkers from the possibility of a crude oil disaster,” Cuomo said. “Now it is time for our federal partners to do the same.”

Hydraulic fracturing has fueled a surge in U.S. oil production and the use of trains to carry highly flammable crude from the Bakken shale fields in North Dakota to Albany’s port. From there it is shipped by rail and water down the Hudson River valley.

On July 6, 2013, a train derailed at Lac-Megantic, a town in Quebec, Canada. Oil leaked from the train’s DOT-111 cars and ignited, causing explosions and the deaths of 47 people.

In February, a freight train pulling empty oil cars derailed in the Town of Ulster. Supervisor Jim Quigley said he has been vocal about upgrading the tank cars.

New York added five safety inspectors, began training local emergency responders and started the process of updating spill-response plans as part of a multipronged strategy to protect communities along shipment routes.

Last month, the state urged the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration to “expeditiously” remove DOT-111 cars from service or require they be retrofitted to carry oil.

Sen. Charles Schumer described the cars as “ticking time bombs.”

“I am pushing DOT to commit to the strongest of these regulations as soon as possible,” he said. “We can’t afford any delay.”

Crude By Rail, Rail inspection, Schools

Map shows 100 schools along crude oil train tracks

Repost from WestfairOnline, White Plains, NY

Map shows 100 schools along crude oil train tracks

By: Mark Lungariello, December 01, 2014

On July 6, 2013, a train hauling more than 70 cars filled with volatile crude oil derailed in Quebec, Canada, after its engine caught fire and power to its air brakes was cut. Several DOT-111 oil tankers filled with crude mined from South Dakota’s Bakken Shale ignited, spilling oil and sending a fireball into the sky of the town of Lac-Mégantic that destroyed 30 buildings, according to reports.

Forty-seven people died. Several thousand more were evacuated while oil seeped into the soil and local waterways. The Quebec derailment and several other disasters have brought increased scrutiny on the transportation of crude oil by rail as the amount of oil mined domestically continues to multiply.

A map of schools in the Hudson Valley within a mile of crude oil train lines. (Click to go to interactive map page.)
A map of schools in the Hudson Valley within a mile of crude oil train lines. (Click to go to interactive map page.)

New maps from state environmental groups show there are more than 100 public and private K-12 schools within a mile of train lines used to transport crude oil through the region. Albany-based Healthy School Networks released the maps last month in partnership with a coalition of environmental and education activists.

“They are crossing from Buffalo through Rochester and from the upper reaches of Lake Champlain and the Adirondacks to the Port of Albany, then down along the Hudson River,” Claire Barnett, executive director of Healthy Schools Network, said. “A catastrophic event, should it happen near an occupied school, could devastate a community for a generation or more.”

From 15 to 30 trains carrying crude out of South Dakota travel through the Hudson Valley region each week. Each train can haul dozens or as many as 100 oil cars, each that carry tens of thousands of gallons of the Bakken crude, which experts say is more volatile and unstable than other forms of oil. Oil is also transported by barge on waterways through the region and plans are in the gestation phase to begin transporting other types of crude through the area by rail as well.

The maps also included BOCES schools. Statewide, the maps identified 351 schools within one mile of train lines. In Monroe County alone, in the Rochester area, 63 schools were within the one-mile zone.

Environmental group Riverkeeper prepared an additional several maps depicting the potential impact area of local crude oil accidents based on the 300-yard blast radius and 1,100-yard evacuation zone from the Quebec derailment and a Casselton, N.D., derailment that spilled more than 400,000 gallons of crude.

“Based on the human consequences of these two accidents, it is clear that communities on both sides of the Hudson River could be impacted by a crude oil rail disaster,” said Kate Hudson, Riverkeeper’s Watershed Program director.

A CSX Corp. rail line runs from Albany to the state’s border with New Jersey. Land trust organization Scenic Hudson said that 47.7 miles of that track are within yards of the Hudson River. The group estimates the risk area in the event of a derailment would be more than 200,000 acres and include 100,000 households and six drinking water intakes.

The U.S. Department of Transportation Emergency Response Guidebook recommends a half-mile evacuation zone for accidents involving rail cars with flammable liquids and a mile zone around any rail car filled with those materials if they are on fire.

Environmental groups are calling for state and federal government reforms. These include asking government officials to provide emergency planning aid to schools, reduce speed limits for crude oil trains and impose stricter regulations and inspections for deteriorating DOT-111 tankers. The U.S. Department of Transportation is considering stricter regulations of the cars, but environmental groups have said the proposed laws don’t go far enough.

The state has increased its inspection of cars in response to recent derailments, but oil industry experts look to continue to expand their processing capacities as the amount of crude mined through hydraulic fracturing surges. The amount of Bakken moving through the U.S. has risen from 9,500 rail carloads in 2008 to 415,000 rail carloads in 2013, according to the Department of Transportation.

Fracking, Natural gas, Oil Industry

First Phase of Global Fracking Expansion: Ensuring Friendly Legislation

Repost from Inter Press Service
[Editor: Significant quote: “’Under pressure from the fossil fuel industry – which has deep pockets and promises employment and investment – several governments have already started to weaken their environmental legislation, alter their tax regimes and put in place industry-friendly mining licensing and production processes, in order to attract foreign investors and expertise….’”  See especially U.S. government promotion below.  – RS]

First Phase of Global Fracking Expansion: Ensuring Friendly Legislation

By Carey L. Biron
Fracking fluid and other drilling wastes are dumped into an unlined pit located right up against the Petroleum Highway in Kern County, California. Credit: Sarah Craig/Faces of Fracking
Fracking fluid and other drilling wastes are dumped into an unlined pit located right up against the Petroleum Highway in Kern County, California. Credit: Sarah Craig/Faces of Fracking

WASHINGTON, Dec 1 2014 (IPS) – Multinational oil and gas companies are engaged in a quiet but broad attempt to prepare the groundwork for a significant global expansion of shale gas development, according to a study released Monday.

Thus far, the hydraulic fracturing (or “fracking”) technologies that have upended the global gas market have been used primarily in North America and, to a lesser extent, Europe. With U.S. gas production in particular having expanded exponentially in recent years, however, countries around the world have started exploration to discern whether they, too, could cash in on this new approach.

According to an estimate published last year by the U.S. Energy Information Administration, some 90 percent of the world’s shale gas could be found outside of the United States – an incredibly lucrative potential. “It’s likely there will be a revolution,” Maria van der Hoeven, the executive director at the Paris-based International Energy Agency, has said.

Yet according to the new study, from Friends of the Earth Europe, a watchdog group, only Brazil has strengthened its regulatory regime in anticipation of this expansion. Of the nearly dozen countries the new report looks at, most are doing the opposite.

“Under pressure from the fossil fuel industry – which has deep pockets and promises employment and investment – several governments have already started to weaken their environmental legislation, alter their tax regimes and put in place industry-friendly mining licensing and production processes, in order to attract foreign investors and expertise,” the report states. “This is often at the expense of the public interest.”

In terms of production this remains a nascent industry. Nonetheless, neither governments nor companies appear to have undertaken efforts to guard against the complexities that will arise, including around the potential for social, environmental and even political tensions.

“The industry is trying to change the legislation in those places where they want to operate, to try to repeat as much as possible the favourable policies we’ve seen in U.S. energy policy,” Antoine Simon, a shale gas campaigner with Friends of the Earth Europe and lead author on the new report, told IPS.

“The key here is to ensure that the legal frameworks are as friendly for the industry as possible. That’s the first phase of this global strategy, and we’re seeing it in each country we studied.”

No safeguards

Outside of North America and Europe, Argentina has moved forward the quickest on shale gas development, and thus offers a key example on legislative action for which companies may be looking.

For instance, Argentina has put in place a new law guaranteeing a minimum price for fracked gas. Further, this minimum price is some 250 percent higher than the previous valuation – a sweetheart guard against the bottomed-out prices that are currently impacting on gas production in the United States.

Simon says this law has a telling nickname in Argentina – the “Chevron Decree”, a reference to the U.S. oil and gas company. The day after the law was passed, he notes, Argentina’s main state-backed oil and gas producer signed a long-term production deal with Chevron.

Other countries have put in place favourable new tax policies for oil and gas investors. In Morocco, for instance, producers will be exempt from corporate taxes for the first decade of operation, while Russia has created similar policies for oil production over the next 15 years.

Yet the lack of action to simultaneously put in place environmental or social safeguards in most countries runs a variety of risks, Friends of the Earth Europe and others warn. Hydraulic fracturing requires massive amounts of water, for instance – up to 26 million litres per drill site.

The new report finds that a significant proportion of shale gas reserves around the world are located in areas that are already experiencing significant water shortages and even related violence. Likewise, many of these shale basins are beneath major cross-border aquifers.

Even before these issues are addressed by national governments, then, the oil and gas industry could gain influence in setting policy on the notoriously contentious issue of freshwater use.

Alongside concerns about the local impact of shale gas development is a broader lack of clarity today on the extent to which developing countries would be able to benefit from any new gas-related revenues. Thus far, only Brazil has specifically addressed this issue.

“In our research, Brazil was the only exception in terms of passing legislation that ensured they would get some significant revenues,” Simon says. “Really that doesn’t seem to be happening in other countries, where instead we’re seeing a lot of legislation that offers state aid to push investors to come to their countries.”

Beyond a few notable exceptions in Latin America and South Africa, Simon suggests that this issue has not yet seen significant opposition by civil society. Still, advocacy groups do point to a growing trend of global understanding and mobilisation on fracking concerns.

“As more and more studies confirm the risks of air pollution, water contamination, increased earthquake activity and climate change impacts from fracking, the more people oppose this destructive and intensive process,” Wenonah Hauter, the executive director of Food & Water Watch, a U.S. watchdog group, told IPS.

“The movement to ban fracking has resulted in hundreds of local communities taking action to stop fracking, several states and countries instituting moratoriums, and the movement continues to grow.”

In October, Food & Water Watch organized an international day of action to ban hydraulic fracturing. Hauter notes that the event featured “over 300 actions in 34 countries, from Australia to Argentina, even Antarctica, calling for a ban on fracking”.

Food & Water Watch reports that France and Bulgaria have already banned hydraulic fracturing, while local moratoriums have also been passed by hundreds of communities across the Netherlands, Spain and Argentina.

U.S. government promotion

Meanwhile, the drivers behind fracking-related pressures are not simply multinational companies and national governments keen on investment. It was in the United States where hydraulic fracturing was invented and proved its potential, and today the U.S. government is reportedly taking a central role in promoting these techniques worldwide.

In almost all of the countries studied for the new report, researchers found the development of shale gas to be “closely linked” to a U.S. government agency, the U.S. Unconventional Gas Technical Engagement Program (UGTEP). Housed within the U.S. State Department, since 2010 the UGTEP has engaged in a wide variety of technical assistance around gas development.

“Governments often have limited capability to assess their own country’s unconventional gas resource potential or are unclear about how to develop it in a safe and environmentally sustainable manner,” UGTEP explains on its website. “The ultimate goals of UGTEP are to achieve greater energy security by supporting the development of environmentally and commercially sustainable frameworks.”

While U.S. diplomats are specifically tasked with strengthening U.S. business prospects abroad, critics say UGTEP’s activities constitute the broad promotion of hydraulic fracturing under the guise of U.S. diplomacy.

“UGTEP uses official government channels and US taxpayers’ money to promote high-volume horizontal hydraulic fracturing worldwide, opening doors for the main global players in the oil and gas industry,” the Friends of the Earth Europe report states.

“Through UGTEP, the US is also actively engaged in re-shaping existing foreign legal regulations to create the desired legal framework for the development of shale oil and gas in the targeted countries.”

Edited by Kitty Stapp