June 11, 2010
Ken Silverstein
EnergyBiz Insider
Editor-in-Chief
The BP oil disaster is spilling over and affecting other fossil-fired fuels as well as the prospects for climate change legislation.
While deeply saddened by the oil leak in the Gulf of Mexico, environmentalists are using the occasion to ensure that future energy projects get the scrutiny they deserve before such facilities are allowed to operate. And they will have a sympathetic ear both from federal and state regulators as well as the constituencies who are involved. Ironically, though, that strategy will likely cost them a favorable vote this year on climate change.
Consider that green groups are trying to block a $1.6 billion coal-fired power plant that is now being built in Arkansas. Groups like the National Audubon Society and the Sierra Club have filed court documents alleging that the Southwestern Electric Power Co. has failed to do the basic environmental leg work necessary. They are saying that the facility would harm water quality and damage aquatic life in the area.
It's a fight that has become embolden in light of the BP oil disaster and one that is spreading throughout the country. Already, legal action to stop coal plants in Michigan and Ohio is occurring. Meantime, Shell is battling green groups in Alaska to proceed as planned to drill for oil and gas in the Arctic Ocean while Earthjustice has filed suit to stop at least 18 other oil and gas drilling programs now underway.
Environmental groups have long warned against the perils of offshore drilling. They have said not only that it can cause massive destruction but also that the findings would be inconsequential in terms of the impact they would have on foreign oil consumption. Their efforts have largely paid off, albeit public sentiment had been turning until right before the Gulf of Mexico spill.
With rising gas prices and increased belligerence from oil producing nations like Iran, the American people and their elected representatives started to look inward for solutions. Enter the notion of expanding offshore drilling -- not just as a way to increase domestic production but also as a tool to win over those U.S. lawmakers who have been undecided about how they would vote on climate change.
Environmental groups have joined to oppose more drilling and President Obama now agrees that it should be halted until there are more answers. But such a position will also kill any chance of climate change legislation for a time. Simply, there are not enough votes to overcome stall tactics in the U.S. Senate unless more offshore development is brought into the mix as a bargaining chip.
"What a tragic irony if the oil spill becomes an excuse to put off lasting action on fossil fuels," says Fred Krupp, president of the Environmental Defense Fund. "It should be a rallying cry. America must not choose between taking strong action on the spill and taking comprehensive action on climate and energy."
Low Point
It's dreadful all the way around. For starters, the accident is likely to spill more than 15 million barrels of oil into the Gulf, making it the worst on record. And analysts say that the whole mess will cost BP at least $10 billion.
Then there are the livelihoods of those most adversely affected by the spill. That includes both the fishermen and the offshore oil and gas workers, who produce about 20 million barrels of oil a day for consumption here. The fallout, meanwhile, extends to the coal sector as indicated by the legal action taken in Arkansas, Michigan and Ohio.
A recent letter by the International Association of Drilling Contractors that was written to U.S. Interior Secretary Ken Salazar says that a long-term ban on new offshore drilling sites in the Gulf could cost up to 10,000 rig jobs by the end of June. Lee Hunt, president of the organization, explains that that shallow-water drilling differs significantly from deep-water drilling, and poses virtually no threat to the environment.
"Many companies will be hard pressed to survive under the pressure of such losses, rendering permanent the unnecessary unemployment of thousands," writes Hunt. "Unlike other coastal industries, which will be compensated by BP for lost jobs and business, the loss of contracts and jobs in shallow-water drilling will be declared force majeure action by the government. Consequently, there will be no recourse to reimbursement for the shallow-water industry."
Critics say that if there is a lesson in this it is that the country must create more of its own energy and specifically from sustainable sources. The U.S. Energy Information Administration says that about 85 million barrels a day of oil are produced by foreign sources and that the United States consumes about 22 percent of that. At the same time, coal makes up half of all electricity generation. The two industries are responsible for the preponderance of greenhouse gas emissions.
Needless-to-say, the demand for all fuels will rise as the global economy perks up and as developing nations build. That then necessitates a diversified energy portfolio. But it also requires that each segment of the energy economy use the most modern pollution controls and the safest extraction methods.
Environmentalists have won the drilling debate battle for now. But they may end up losing a bigger war. "With the focus squarely on the Gulf spill, there is little interest in moving a Climate bill that almost no one likes," says Frank Maisano, spokesperson for several utility concerns.
Confidence in the oil exploration sector is now at a low point -- a dynamic that is also affecting the natural gas and coal industries. The debacle in the Gulf will keep more offshore drilling at bay. But it will also prevent a near-term agreement on climate change legislation now before Congress.
Copyright © 1996-2010 by CyberTech, Inc. All rights reserved.
To subscribe or visit go to: http://www.energycentral.com