Category Archives: Oil Industry

Canadian oil production, Climate Change, ExxonMobil, Global warming, Oil exports, Oil imports, Oil Industry, Oil prices, Paris Climate Agreement

Flood of Oil Is Coming, Complicating Efforts to Fight Global Warming

A surge of oil production is coming, whether the world needs it or not.

A Norwegian oil platform in the North Sea. Norway’s production has declined for two decades, but its development of the Johan Sverdrup deepwater field should reverse the trend.
A Norwegian oil platform in the North Sea. Norway’s production has declined for two decades, but its development of the Johan Sverdrup deepwater field should reverse the trend. Credit…Nerijus Adomaitis/Reuters
The New York Times, by Clifford Krauss, Nov. 3, 2019

HOUSTON — The flood of crude will arrive even as concerns about climate change are growing and worldwide oil demand is slowing. And it is not coming from the usual producers, but from Brazil, Canada, Norway and Guyana — countries that are either not known for oil or whose production has been lackluster in recent years.

This looming new supply may be a key reason Saudi Arabia’s giant oil producer, Aramco, pushed ahead on Sunday with plans for what could be the world’s largest initial stock offering ever.

Together, the four countries stand to add nearly a million barrels a day to the market in 2020 and nearly a million more in 2021, on top of the current world crude output of 80 million barrels a day. That boost in production, along with global efforts to lower emissions, will almost certainly push oil prices down.

Lower prices could prove damaging for Aramco and many other oil companies, reducing profits and limiting new exploration and drilling, while also reshaping the politics of the nations that rely on oil income.

The new rise in production is likely to bring economic relief to consumers at the gas pump and to importing nations like China, India and Japan. But cheaper oil may complicate efforts to combat global warming and wean consumers and industries off their dependence on fossil fuels, because lower gasoline prices could, for example, slow the adoption of electric vehicles.

Canada, Norway, Brazil and Guyana are all relatively stable at a time of turbulence for traditional producers like Venezuela and Libya and tensions between Saudi Arabia and Iran. Their oil riches should undercut efforts by the Organization of the Petroleum Exporting Countries and Russia to support prices with cuts in production and give American and other Western policymakers an added cushion in case there are renewed attacks on oil tankers or processing facilities in the Persian Gulf.

Driving New Production

Daniel Yergin, the energy historian who wrote “The Prize: The Epic Quest for Oil, Power and Money,” compared the impact of the new production to the advent of the shale oil boom in Texas and North Dakota a decade ago.

“Since all four of these countries are largely insulated from traditional geopolitical turmoil, they will add to global energy security,” Mr. Yergin said. But he also predicted that as with shale, the incremental supply gain, combined with a sluggish world economy, could drive prices lower.

There is already a glut on the world market, even with exports from Venezuela and Iran sharply curtailed by American sanctions. Should their production come back, that glut would only expand.

Years of moderate gasoline prices have already increased the popularity of bigger cars and sports utility vehicles in the United States, and the probability of more oil on the market is bound to weigh on prices at the pump over the next few years.

The oil-supply outlook is a sharp departure from the early 2000s, when prices soared as producers strained to keep up with ballooning demand in China and some analysts warned that the world was running out of oil.

Then came the rise of hydraulic fracturing and drilling through tight shale fields, which converted the United States from a needy importer into a powerful exporter. The increase in American production, along with a choppy global economy, shaved oil prices from well over $100 a barrel before the 2007-9 recession to about $56 on Friday for the American benchmark crude.

Those low prices have forced OPEC and Russia to lower production in recent years, and this year many financially struggling American oil companies have slashed their exploration and production investments to pay down their debts and protect their dividends.

An Era of Cheaper Oil

The new oil will accelerate those trends, energy experts say, even if only for a few years as production declines in older fields in other places.

“This could spell disaster for every producer and producing country,” said Raoul LeBlanc, a vice president at IHS Markit, an energy consultancy, especially if the United States and Iran come to some sort of nuclear deal.

Like the shale boom, the coming supply surge is a sudden change in dynamics. Guyana currently produces no oil at all. Norwegian and Brazilian production has long been in decline. And in Canada, concerns about climate change, resistance to new pipelines and high production costs have curtailed investments in oil-sands fields for five consecutive years.

Production of more oil comes at a time when there is growing acknowledgment by governments and energy investors that not all the hydrocarbons in the ground can be tapped if climate change is to be controlled. But exploration decisions, made years ago, have a momentum that can be hard to stop.

A drilling ship operated by Noble Energy for Exxon Mobil off Guyana. The South American country’s entry into the ranks of oil producers follows a string of major discoveries. Credit…Christopher Gregory for The New York Times

“Legacy decisions keep going,” said John Browne, BP’s former chief executive. “Things happen in different directions because decisions are made at different times.”

The added production in Norway comes despite the country’s embrace of the 2016 Paris climate agreement, which committed nations to cut greenhouse-gas emissions. Its sovereign wealth fund has cut investments in some oil companies, and its national oil company, Equinor, has pledged to increase its investments in wind power.

Equinor, which recently changed its name from Statoil to emphasize its partial pivot to renewable energy, nevertheless defends the new field on its company website, asserting, “The Paris Agreement is quite clear that there will still be a need for oil.”

Norway’s rebound from 19 years of decline began a few weeks ago as Equinor began production in its Johan Sverdrup deepwater field. The field will eventually produce 440,000 barrels a day, increasing the country’s output from 1.3 million barrels a day to 1.6 million next year and 1.8 million in 2021.

In Brazil, after years of scandal and delays, new offshore production platforms are coming online. Production has climbed over the last year by 300,000 barrels a day, and the country is expected to add as much as 460,000 more barrels a day by the end of 2021. In the coming days, Brazil is scheduled to hold a major auction in which some of the largest oil companies will bid for drilling rights in offshore areas with as much as 15 billion barrels of reserves.

In Canada, the 1,000-mile Line 3 pipeline that will take oil from the Alberta fields to Wisconsin, is near completion and awaiting final permitting. Energy experts say that could increase Canadian production by a half million barrels a day, or about 10 percent.

And the most striking change will be in Guyana, a tiny South American country where Exxon Mobil has made a string of major discoveries over the last four years. Production will reach 120,000 barrels a day early next year, rising to at least 750,000 barrels by 2025, and more is expected after that.

Guyana potentially has the most complicated future of the four countries. Its ethnically divided politics are sometimes turbulent, and Venezuela claims a large portion of its territory. But with the oil fields miles offshore, drilling is largely protected. In addition, Venezuela is mired in a political and economic crisis and unlikely to challenge a Chinese state company which has an oil investment in Guyana, along with Exxon Mobil and Hess.

Energy experts say the new production from the four nations will more than satisfy all the growth in global demand expected over the next two years, which is well below the growth rates of recent years before economic expansion in China, Europe and Latin America slowed.

At the same time, new pipelines in Texas are expected to increase United States exports to 3.3 million barrels a day next year, from the current 2.8 million.

That adds up to a vast surplus unless there is a resurgence of global economic growth to stimulate demand, or a prolonged conflict in the Middle East or other disruption to supply.

“To support prices, OPEC is going to have to extend and probably deepen their production cuts for a while,” said David L. Goldwyn, a top State Department energy diplomat during the Obama administration. “Getting the prices up to the point where Aramco can launch its I.P.O. is a big Saudi priority.”

The new barrels on the world market will also put pressure on companies producing in the United States, where profit margins for shale production are slim at current price levels and stock prices are falling.

“If I was in the business I would be scared to death,” said Philip K. Verleger, an energy economist who has served in both Democratic and Republican administrations. “The industry is going to face capital starvation.”

American oil executives express concern that drilling will fade in North Dakota, Oklahoma, Louisiana and Colorado as oil prices drop to as low as $50 a barrel in the next few years. Small companies are expected to merge, while others go bankrupt.

Scott D. Sheffield, chief executive of the Texas-based producer Pioneer Natural Resources, said he expected the growth of United States oil production to ease from 1.2 million barrels a day this year to 500,000 barrels next year and perhaps 400,000 barrels in 2021. Those increases are modest compared with the average increase of a million barrels a day every year from 2010 to 2018.

But Mr. Sheffield said he was optimistic, in part because new supplies coming to market could be offset by production declines in older fields in Mexico and elsewhere after 2021.

“There are no more big, giant new projects except Guyana,” he said. “We just have to be patient for a couple of more years.”

A version of this article appears in print on , Section A, Page 1 of the New York edition with the headline: Needed or Not, Oil Production Is Set to Surge.

Crude By Rail, Oil Industry, Oil trains, Rail industry

NYTimes on oil train disasters since Lac-Mégantic: “Deadly Cargo Still Rides the Rails”

Rail Industry Publication Attacks New York Times Over Lac-Mégantic Oil Train Tragedy

DeSmog, By Justin Mikulka, August 26, 2019 (Read time: 7 mins)
Lac-Megantic oil train fire
Train burning in Lac-Mégantic, Quebec. Credit: Transportation Safety Board of Canada, via CC BY-NC-ND 2.0

Six years after the oil train derailment and explosion in Lac-Mégantic, Quebec — which claimed 47 lives and destroyed the downtown of this small lakeside town — The New York Times reviewed what progress has been made since the disaster, with a headline that noted “Deadly Cargo Still Rides the Rails.”

However, Railway Age, the leading rail industry publication, attacked The Times’ coverage in an incredibly flawed critique. The title of finance editor David Nahass’s take-down is “Clickbait Journalism at The New York Times.”

In reality, both stories miss the mark on oil train safety.

The New York Times makes a major error in the industry’s favor regarding rail safety, as well as serious omissions about the risks of moving flammable cargo by rail.

Nevertheless, Nahass claims that The New York Times “sadly exhumes and retreads the memories of those lost and the pain of those who suffered trauma in order to generate readership.”

Distorting Reality

Nahass did get one thing correct in his story, which comes across like rail industry propaganda: “The perception of progress on the rail safety front is not universally perceived.” It isn’t universally perceived because, for the transport of flammable materials by rail, progress hasn’t happened. Instead, the Trump administration is in the process of rolling back the few meaningful regulations that had been put in place in the U.S. since the 2013 disaster.

To support his claim, Nahass points to three areas that he says have seen improvements in rail safety: tank car design, positive train control (PTC), and train speed guidelines.

Nahass cites the new tank car designs, DOT-117R and DOT-117J, as an industry action to improve oil train safety. But that claim is based on the premise that these rail cars do not rupture during accidents. Three accidents involving the DOT-117R tank cars have occurred in recent years, two with oil trains and one with an ethanol train.

As DeSmog has reported, all three were major disasters.

In June of 2018, an oil train derailed in Doon, Iowa. Fourteen of the DOT-117R tank cars ruptured, spilling 230,000 gallons of oil into a flooded river. In February, another oil train of DOT-117R tank cars derailed in Canada, resulting in another major oil spill. In April, an ethanol train with DOT-117R tank cars derailed and exploded in Texas, leading to the local evacuation of a residential area and causing a large fire that burned a stable and killed three horses.

Three crashes with the new “safe” tank cars. Three major failures. Railway Age’s failure to mention these accidents can only be described as “an editorial issue” of the type Nahass accuses The New York Times as being guilty of.

The one glaring error in favor of the rail industry from the Times’ coverage is that the “effectiveness [of DOT-117 tank cars] in a real-world disaster remains to be seen.” Considering all three accidents involving these rail cars resulted in fires, spills, and evacuations, this statement is a huge error. The rail industry’s top trade magazine should have been thanking The Times instead of attacking them.

As for the claim that speed limits have improved rail safety, that claim, too, is without merit. Every major oil train accident after the Lac-Mégantic disaster has happened below the speed limits. DOT-117 tank cars appear unable to withstand derailments at low speeds, as evidenced by them failing in three out of three accidents.

The sheer audacity of Nahass claiming that the rail industry deserves credit for positive train control (PTC), a system for monitoring and controlling train movements, as a safety measure is stunning.

As documented on DeSmog, PTC was first recommended as a safety measure almost 50 years ago. The industry has fought against this critical safety technology for the ensuing five decades, has ignored a 2008 Congressional mandate to implement the technology by 2015, and continues to delay rolling out this proven safety measure. A top rail lobbyist was even given an award for his work in delaying its implementation.

Nahass says, “Avoidable death is a tragedy no one should have to bear.” Hundreds of people have died because the rail industry has been fighting PTC, which includes well-funded lobbying efforts. Avoidable deaths are not a tragedy for the rail industry but a by-product of successful lobbying and higher profits.

Meanwhile, neither The New York Times nor Railway Age mentions how new regulations to require modern braking systems on trains, which still use 19th century technology were repealed under the Trump administration.

Lac-Mégantic Was ‘a Corporate Crime Scene’

Shortly after the 2013 Lac-Mégantic disaster, Martin Lukacs, columnist for The Guardian, wrote a prophetic statement: “The explosion in Lac-Mégantic is not merely a tragedy. It is a corporate crime scene.”

At DeSmog — and in more detail in my book Bomb Trains: How Industry Greed and Regulatory Failure Put the Public at Risk— we have documented how this disaster was the result of lax regulation and corporate cost-cutting. Yet Nahass ignores all of that information when saying the accident was a result of three events, none of which were related to the root cause of the problems leading to the accident.

Even the Transportation Safety Board of Canada noted 18 factors that contributed to the deadly oil train accident. The fact that Nahass only listed three of these is another example of a blatant “editorial issue.”

Deregulation Caused Lac-Mégantic Deaths and Continues to Increase Risks

Nahass purports that the worst thing about The New York Times story was that “it highlights deregulation as a possible cause for the tragedy.” I have no doubt deregulation was the root cause of the Lac-Mégantic tragedy.

The accident could have been avoided if a back-up braking system had been engaged. But this system wasn’t used because the rail company, Montreal, Maine, and Atlantic (MMA), wasn’t required to and instead explicitly instructed the train’s engineer not to engage it.

The train was also much heavier than allowed. MMA knew this but instructed the engineer to ignore that fact, a sign of weak regulatory oversight. Despite attempts to require two-persons crews, the train that destroyed downtown Lac-Mégantic was allowed to be operated with only a single crew member — another risk factor. No regulations required the oil in the tank cars to have been “stabilized,” removing its flammable vapors. At the time, modern braking systems were not mandatory for trains carrying flammable cargo, and while a rule changing that was put in place in 2015, the Trump administration has since repealed it.

That fateful night in Quebec in 2013, a train full of flammable material was parked on the top of a steep hill above a small town. It was left on the main tracks, with the engine running, and no safety measures were in place to address known causes of runaway trains — a problem that The Times correctly notes has gotten worse since 2013.

However, Railway Age defends deregulation as a way to improve safety, even after the recent deadly Boeing airline disastersthat also seem to have roots in industry deregulation.

At a November 2016 conference examining lessons from the Lac-Mégantic disaster, Brian Stevens, who at the time was National Rail Director for Unifor, Canada’s largest private sector union, clearly cited deregulation as the root cause of the accident.

“Lac-Mégantic started in 1984. It was destined to happen,” said Stevens, referring to the start of a deregulatory era for rail that continues today in both the U.S. and Canada.

These days, the Trump administration is actively working to roll back recently passed federal rules governing the rail industry. The Federal Railroad Administration has explicitly stated a focus on removing regulations and letting rail companies volunteer to implement safety measures.

Even that freedom from regulation isn’t enough for the rail industry. Its main publication wants freedom from journalistic critique as well. The attack piece in Railway Age is not just an egregious editorial failure; it represents a basic moral failure of an industry that continues to put profit over safety.

Main Image: Train burning in Lac-Mégantic, Quebec. Credit: Transportation Safety Board of Canada, via CC BY–NC–ND 2.0

Climate change denial, Koch Industries, Oil Industry

Koch Industries – from Fred Koch’s John Birch Society to Charles’ & David’s climate change denial as far back as1991

Christopher Leonard’s New Book Puts an Ever-Expanding ‘Kochland’ on the Map

Repost from DeSmog, by Sharon Kelly, August 16, 2019

Kochland book cover over Pine Bend refineryChristopher Leonard’s new book, Kochland: The Secret History of Koch Industries and Corporate Power in America, begins, appropriately enough, with an FBI agent, who is investigating criminal activity by the company, standing in a field with a pair of binoculars, trying to catch a glimpse of the daily operations of a company that prizes secrecy.

Koch Industries was under investigation for theft of oil from the Osage and other Indigenous nations. Walking into the company’s office building involved passing through security checkpoints, Leonard explains, so numerous that one investigator later told Leonard that it “reminded him of traveling to CIA headquarters in Langley, Virginia.”

Through exhaustive reporting and extraordinary interviews with past and current company executives, including some turned whistleblower, Kochland offers readers a view far larger than can be seen through binocular lenses, walking readers past those layers of security checkpoints and into the inner workings of an institution that has for decades tirelessly built itself into practically all American lives, while largely evading accountability or transparency.

While Charles and David Koch’s political operations have been the subject of powerful investigative reporting by the New Yorker‘s Jane Mayer, author of the landmark book Dark Money, and numerous others, Leonard probes into the business that not only funds the Koch political machine, but also represents the clearest embodiment of the Kochs’ market fundamentalist political philosophy in action.

The Invisible Elephant in the Room

In 1961, when Charles Koch joined his father Fred — a founder of the John Birch Society who had, as Mayer reported, previously helped Hitler and Stalin build out their oil refineries, Koch Industries, was generating $3.5 million in profit a year, Leonard writes.

By the end of the Obama administration, company had grown enough to leave Charles and David Koch with personal fortunes of $81 billion (contrasted against Bill Gates’ $81 billion). Koch Industries says its workforce now numbers 130,000 people worldwide, roughly half of those in the U.S., and that it operates today in 60 countries.

As much as it is mammoth — its “annual revenues are larger than that of Facebook, Goldman Sachs, and U.S. Steel combined,” Leonard told NPR — if Koch Industries is the elephant in the room, it has sought to master the art of being a virtually invisible one.

That inconspicuousness is built into its business model. The company invests little in consumer brands and largely acts as industrialization’s middleman, churning raw fossil fuels into not only gasoline at its Pine Bend refinery in Minnesota, but also into the ingredients that become our buildings, our clothing, and other items that we may not know about because even those who closely track the Kochs’ politics have been unable to trace (are they involved with fracking, for example? A definitive answer is surprisingly hard to come by, says Koch Docs director Lisa Graves).

Koch Industries is also omnipresent in the agricultural machine that, in Leonard’s words, has become “one immense machine that laundered energy from fossil fuels into food calorie energy that humans could eat,” thanks to natural gas–based fertilizers. Not only does it manufacture those fertilizers, it produces livestock feed, cattle, and even the disposable plate you might eat your meal from.

Leonard describes how Charles Koch sought to grow and harness the entrepreneurial spirit of his management staff by treating them like small business owners, attuned not to performance metrics or budgets but directly to the company’s profits and losses — with the key difference being that the privately held Koch Industries, not workers or management, are reaping the profits.

“What resulted was a kind of perpetual motion machine,” Leonard writes of one era in the company’s history, “a company that grew and then cited that growth as justification to grow faster.”

The 704-page book offers an inside-the-fenceline view of how that company has operated and grown over the years, including a blow-by-blow account of how Koch Industries sought to break the back of a refinery workers’ union in the 1970s. Leonard presents readers with a riveting narrative of “the war for Pine Bend,” including helicopter airlifts and the apparent attempted sabotage of the refinery via a runaway diesel train engine.

Shrouded in Secret, Beyond Consumer Reproach

In Kochland, it seems, the only form of accountability that executives recognize as important comes from business losses.

As a private firm, Koch Industries faces none of the reporting requirements that publicly traded companies must meet — Leonard recounts how during a 1989 deposition, Charles Koch was forced to reveal sales and profit figures, which Leonard writes were “considered top secret” by the company, but for a publicly traded firm, a widely available set of numbers.

Koch Industries

Koch Industries eludes consumer boycotts by selling products that are inescapably entwined in the infrastructure of daily American life. As much as any single organization, Koch Industries has made any problems it is responsible for — intentionally, in Leonard’s telling — structural, problems that cannot be addressed through individual consumer action.

When it comes to environmental accountability, Leonard diagnoses structural issues inside the company in the 1990s that facilitated law breaking. In a fascinating chapter, Leonard offers readers an account of Koch Industries deliberately and repeatedly spewing contaminated wastewater into wetlands in Minnesota, a major violation of environmental law to which the company pled guilty in 1999.

“The company learned that violating regulations could put a dent in its profit margins, and responded accordingly,” Jennifer Szalai wrote in a New York Times review of Kochland. “It now imprints upon employees the need for ‘10,000 percent compliance’: obeying 100 percent of the laws 100 percent of the time.”

That narrative isn’t a perfect fit for the facts — just a year later, Koch pled guilty to falsifying documents and settled with the Justice Department for $20 million over benzene pollution in Corpus Christi, Texas, and an attempted cover-up, according to Greenpeace.

And 10 years later, a Koch subsidiary reached a deal with the U.S. Environmental Protection Agency and Department of Justice over environmental law-breaking that spanned seven states. Those violations resulted in a $1.7 million fine and $500 million in repair obligations, Greenpeace adds as it details both accidental spills or leaks and toxic pollution (at times with the permission of state regulators) that have sickened those living around the plants.

If anything, what Koch Industries seemed to learn from costly environmental fines and settlements is that it can be cheaper to change the law today than it is to pay the fine tomorrow. Leonard details how, for example, the Kochs began, via a nonprofit group, to sponsor free educational events for judges, hosted in luxurious locales, which organizers said by 2016 had attracted more than 4,000 state and federal judges from every part of the country.

Power in Politics

The Kochs’ power as political actors is, of course, notoriously non-transparent — which can conceal not only the mechanisms they use for leverage, but also the degree of self-interest that may motivate their work.

David Koch
David Koch speaking at the 2015 Defending the American Dream Summit at the Greater Columbus Convention Center in Columbus, Ohio. Credit: Gage Skidmore, CC BY–SA 2.0

While the Kochs have labored strenuously to market themselves as sincere ideological Libertarians, defending personal freedom (for property owners, at least) against government encroachment, their agenda is interwoven with threads of visible self-interest.

From their earliest forays into politics — like David Koch’s failed 1980 Libertarian party vice-presidential bid as part of a campaign that championed abolishing the Department of Energy — the political platforms they support consistently seem to include planks that would benefit the Kochs’ business. (And in cases where their business interests and ideologies might conflict, it may be worth bearing in mind that the Kochs who Leonard describes are adept at strategizing with a long-range view, accepting short-term losses at times in the pursuit of longer-term gains.)

That long-range strategy extends to the Koch network’s stance on climate change — and here, Mayer credits Leonard’s book with breaking new ground, demonstrating that when it comes to opposing action on climate change, “their role went as far back as 1991.”

“If there is any lingering uncertainty that the Koch brothers are the primary sponsors of climate-change doubt in the United States, it ought to be put to rest by the publication of “Kochland,” Mayer wrote in the New Yorker. “Magnifying the Kochs’ power was their network of allied donors, anonymously funded shell groups, think tanks, academic centers, and nonprofit advocacy groups, which Koch insiders referred to as their ‘echo chamber.’”

Koch Docs, an online archive launched August 9, has collected many of the documents used by Leonard and others to understand how Charles Koch and his company operate.

‘Block and Tackle’ Under Trump

When it comes to the Trump administration, the focus of the book’s final chapters, Leonard compares the Koch strategy to a “block and tackle” system — in the sense that by working to block certain policies and offer the administration assistance tackling others, it’s possible to create a path of least interference for the administration that runs right where Koch desires.

“I’m more excited about what we’re doing and about the opportunities than I’ve ever been,” Leonard quotes Charles Koch as saying during a January 2018 meeting of Koch network donors in Palm Springs. “We’ve made more progress in the last five years than I had in the previous fifty.”

While Kochland goes a long way towards letting readers peer inside the windows of Koch Towers, much remains unknown about the organization, despite the efforts of Leonard and many others. But Kochland chips away at a significant portion of the opaque layer that’s shielded the Kochs from scrutiny.

Leonard’s work leaves open a question for readers — once you’ve had a glimpse inside the Kochs’ private capitalist empire, is it a place you want to live?

Because when it comes to both politics and consumerism, Leonard’s book suggests that an ever-expanding Kochland just might become inescapable.

Main image: Kochland book cover over original image of the Pine Bend oil refinery, one of many Koch businesses profiled in Kochland.  Credit: Tony Webster, CCBY–SA 2.0

Donald Trump, Oil Industry, Oil industry lobby, Scott Pruitt, US Department of Interior, US Environmental Protection Agency

Trump appoints another oil industry VIP, recording reveals industry execs celebrating their win

Repost from Politico
[Editor: Significant quote: “The Senate Energy and Natural Resources Committee will hold a confirmation hearing Thursday, March 28.”  See and contact committee members here: https://www.energy.senate.gov/public/index.cfm/members  – RS]

Recording Reveals Oil Industry Execs Laughing at Trump Access

The tape of a private meeting was made shortly after the lawyer for an influential industry group was tapped for a high-level post at the Department of the Interior.

By LANCE WILLIAMS, March 23, 2019
President Donald Trump and acting Secretary of the Interior David Bernhardt.
President Donald Trump and acting Secretary of the Interior David Bernhardt. | AP

Gathered for a private meeting at a beachside Ritz–Carlton in Southern California, the oil executives were celebrating a colleague’s sudden rise. David Bernhardt, their former lawyer, had been appointed by President Donald Trump to the powerful No. 2 spot at the Department of the Interior.

Just five months into the Trump era, the energy developers who make up the Independent Petroleum Association of America had already watched the new president order a sweeping overhaul of environmental regulations that were cutting into their bottom lines — rules concerning smog, fracking and endangered species protection.

Dan Naatz, the association’s political director, told the conference room audience of about 100 executives that Bernhardt’s new role meant their priorities would be heard at the highest levels of Interior.

“We know him very well, and we have direct access to him, have conversations with him about issues ranging from federal land access to endangered species, to a lot of issues,” Naatz said, according to an hourlong recording of the June 2017 event in Laguna Niguel provided to Reveal from The Center for Investigative Reporting.

The recording gives a rare look behind the curtain of an influential oil industry lobbying group that spends more than $1 million per year to push its agenda in Congress and federal regulatory agencies. The previous eight years had been dispiriting for the industry: As IPAA vice president Jeff Eshelman told the group, it had seemed as though the Obama administration and environmental groups had put together “their target list of everything that they wanted done to shut down the oil and gas industry.” But now, the oil executives were almost giddy at the prospect of high-level executive branch access of the sort they hadn’t enjoyed since Dick Cheney, a fellow oilman, was vice president.

“It’s really a new thing for us,” said Barry Russell, the association’s CEO, boasting of his meetings with Environmental Protection Agency chief at the time, Scott Pruitt, and the then-Interior Secretary, Ryan Zinke. “For example, next week I’m invited to the White House to talk about tax code. Last week we were talking to Secretary Pruitt, and in about two weeks we have a meeting with Secretary Zinke. So we have unprecedented access to people that are in these positions who are trying to help us, which is great.”

In that Ritz-Carlton conference room, Russell also spoke of his ties to Bernhardt, recalling the lawyer’s role as point man on an association legal team set up to challenge federal endangered species rules. “Well, the guy that actually headed up that group is now the No. 2 at Interior,” he said, referring to Bernhardt. “So that’s worked out well.”

Today, Bernhardt is in line for a promotion: the former oil industry lobbyist has been nominated by Trump to be secretary of the Interior. The Senate Energy and Natural Resources Committee will hold a confirmation hearing Thursday, March 28. Bernhardt has been running the department since early January, when Zinke resigned amid an ethics scandal. The post gives Bernhardt influence over regulations affecting energy production on millions of acres of public lands, deciding who gets to develop it, how much they pay and whether they are complying with the law.

An Interior Department spokeswoman, Faith Vander Voort, said, “Acting Secretary David Bernhardt has had no communication or contact with either Barry Russell or Dan Naatz.” The IPAA executives were not available to comment on this story, a spokeswoman said.

At the meeting, the association’s leaders distributed a private “regulatory update” memo that detailed environmental laws and rules that it hoped to blunt or overturn. The group ultimately got its way on four of the five high-profile issues that topped its wish list.

Trump himself was a driving force behind deregulating the energy industry, ordering the government in 2017 to weed out federal rules “that unnecessarily encumber energy production.” In a 2017 order, Zinke called for his deputy secretary—Bernhardt—to make sure the department complied with Trump’s regulatory rollbacks.

The petroleum association was just one industry group pushing for regulatory relief — the American Petroleum Institute, the U.S. Oil and Gas Association and the Western Energy Alliance also were active. But since IPAA created its wish list, the Interior Department has acceded to nearly all its requests:

* Rescinded fracking rules meant to control water pollution. Frackers pressure-inject water and chemicals into the ground to break up rock and release oil and gas. In 2015, the Interior Department’s Bureau of Land Management moved to minimize water pollution caused by fracking, setting standards for well construction and proper management of fracking fluids. For the first time, the new rule also required frackers to get federal permits, a costly and time-consuming process, the industry complained.

The IPAA sued, contending the rule was not needed because fracking was already regulated by states. Under Trump, Interior sided with the energy industry, and in 2017 the rule was rescinded.

* Withdrawn rules that limit climate-change causing methane gas releases. An oil strike can release clouds of methane, a potent greenhouse gas. When producers lack the means to capture methane and sell it as natural gas, they either burn it or release it into the air. In 2016, to fight global warming, the BLM issued a rule sharply limiting these practices and imposing a royalty fee on operators who wasted natural gas on public lands.

IPAA sued, complaining producers would face huge financial losses. Trump’s Interior Department sided with the industry and in 2018 rescinded key provisions of the rule.

* Abandoned environmental restoration of public land damaged by oil development. To offset the harm of oil production, the BLM often required producers to pay for restoration projects as a condition of their permits. This practice of “compensatory mitigation” is used by many government agencies. In 2015, then-President Obama ordered Interior to set a goal of “no net loss for natural resources” when issuing development permits.

IPAA pushed back hard against the “no net loss” standard, arguing that developers might be saddled with exorbitant mitigation costs. In 2017, Trump himself ordered the repeal of the Obama mitigation rule. Interior Secretary Ryan Zinke attacked the concept as “Un-American.”

* Ended long-standing protections for migratory birds. Every year, millions of migratory birds are killed when they fly into power lines, oil waste pits and other energy development hazards, the U.S. Fish and Wildlife Service says. Since the 1970s, the service has promoted industrial safety practices to protect birds from accidental harm—and has prosecuted and fined energy companies responsible for the deaths of these birds.

IPAA complained it was unfair to prosecute energy companies engaged in legal activities that unintentionally harmed birds. In 2017, Trump’s Interior Department called a halt to prosecuting companies for the “incidental” deaths of birdlife. Bernhardt played an important role in crafting the legal opinion that gutted these protections, emails obtained through the Freedom of Information Act show.

“The IPAA’s wish list was granted as asked, in the executive order, and in the actions taken by the Department of the Interior,” said Nada Culver, senior counsel for the Wilderness Society environmental group, who reviewed the document for Reveal. “It pains me to say it.”