Monday, June 14, 2010

View from the Shore


Unfortunately, the boats the boys are looking at in the distance in the above picture are not trawling for shrimp in the Gulf waters.  My family spent last week at the beach near one of the front lines for fighting the oil spill.  Fortunately we saw little evidence of the oil, but the coast will not be as fortunate going forward. 

Spending the week watching the fleets of boats on the horizon and helicopters flying overhead, I reflected on all of the bad news coming from the energy industry these days.  Of course, the big news is the BP Horizon explosion and unstoppable leak.  But in the past couple of weeks there has been a blowout at an EOG Marcellus Shale gas well in Pennsylvania, an explosion of a gas pipeline in Cleburne, TX caused by a crew installing utility poles, another explosion of a gas pipeline in the Texas panhandle caused by bulldozer striking a pipeline and news that an abandoned Taylor Energy well damaged in 2004 by Hurricane Ivan is leaking oil that is headed for the mouth of the Mississippi River.  I even saw reports that a Chevron oil pipeline in Salt Lake City, UT broke and spilled oil in the watershed of Great Salt Lake

That's a lot of bad news in a very short period of time.  Each incident was caused by independent circumstances, but none of it bodes well for the energy industry.  This is a moment in history when domestic production of oil and gas is poised to grow.  President Obama has taken steps to open up more offshore acreage for leasing, the public has a greater understanding of the economic and geopolitical ills of buying foreign energy and the natural gas industry has been making inroads in telling its story.  These are all big positives for the domestic energy production.  But suddenly the energy industry is forced to play defense at a crucial time. 

That there have been major failures is not a surprise given aging infrastructure, the proximity of population to energy resources and the systematic dismantling of the Minerals Management Service from the inside over the past decade.  That they have happened so close together is an unfortunate surprise that likely will tilt the regulatory landscape.  Expect more state-level regulation and scrutiny, a stronger and more intrusive MMS and possibly greater support for higher mineral extraction taxes.  The current ill-advised moratorium on deepwater drilling is an overreaction caused by people demanding action from a government that is by necessity dependent on the perpetrator of the spill to clean it up.  This is not a good environment for clear thinking.

Being a Louisianan, I have long been very concerned about the loss of the state's wetlands.  The causes are many, and the potentially devastating impacts caused by the BP spill will only accelerate a process that  has been going on for generations.  There was a very good op-ed piece by James Carville in the Sunday New Orleans Times Picayune that summarizes much of my thinking.  (It is a good read - no matter what you think of James, he is a tireless advocate for the state.)  Louisiana has long been a provider to the country (energy, transportation, seafood, etc.) but it has more often than not been treated poorly.  Now much of this is our own fault, as we historically depended on crooked politicians (Leander Perez, Huey Long, Edwin Edwards, etc.) who put their own interests above those of the state.  But in many cases, Louisiana has been treated as a colony rather than a full member of society.  That is unlikely to change in the short-term, but the damage caused by this thinking is deep.

[UPDATE:  Good article in the Houston Chronicle citing some of the same issues.  It also notes an accident at a Marcellus well in West Virginia where a fire burned for five days after hitting an unexpected pocket of methane - sounds like the same cause of the incident in Caddo Parish in April.  What is it with accidents in the Marcellus Shale?  It's like a self-fulfilling prophecy of doom.  Every incident in that region makes drilling the largest shale reserve in the country that much more difficult.]

1 comment:

Anonymous said...

Robert, very good analysis of where we are in this mess. Not nearly enough attention has been paid to how we Louisianians got raped by the politicians in the early days of the industry in Louisiana. Starting with Huey Long and Win-or-Lose corporation, our offshore oil and gas reservoirs were leased off in bulk, for a pittance, to Texaco so that Long and his family and allies could become rich at the state's expense, which they did, and continue to do so. Perez did the same thing in Plaquemine Parish. The political barons made sure that oversight was weak by underfunding the State Mineral Board. Big oil was allowed to carve up our wetlands with canals that permitted salt water intrusion, killing off the fragile protection of the ecosystem throughout our marshlands. We were terrible stewards of our resources, and we are paying the price.