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Video: President Obama Succinctly Explains Why Keystone XL Makes No Sense

Posted By Lowell F. on December 19th, 2014

The following response by President Obama to a question by Washington Post reporter Juliet Eilperin is one of the most succinct explanations I’ve heard from a high-ranking U.S. political figure on why the Keystone XL pipeline makes no sense for our country. As David Roberts of Grist puts it: “Okay, this is the best Keystone answer I’ve ever heard from him. Not sure I could have written a better one.” Key points by President Obama include:

  • It’s Canadian tar sands oil intended for export, not for the U.S.
  • The pipeline wouldn’t benefit America, it would benefit Canadian oil interests. “It’s very good for Canadian oil companies,” but not really for anyone else.
  • There would at most be a “nominal impact on U.S. [gasoline] prices,” and it wouldn’t particularly (if at all) benefit U.S. consumers.
  • Construction of the pipeline will create just a couple thousand temporary jobs, compared to the hundreds of thousands or million jobs rebuilding America’s infrastructure.
  • This project should not add to the problem of climate change, which imposes serious costs on the American people.
  • There’s been a “tendency to really hype this thing as some magic formula to what ails the U.S. economy, and it’s hard to see on paper where exactly they’re getting that information from.”

That sums it up nicely.

Posted in Oil

Even if Keystone Trade Talk Weren’t “Empty Nonsense,” Oil Industry Doesn’t Need More Corporate Welfare

Posted By Lowell F. on December 2nd, 2014

Over at Grist, David Roberts drives a sharp stake through the heart of the idea that President Obama “might use Keystone XL as a bargaining chip to trade in exchange for Republican support for … something else.” According to Roberts, “There is nothing to this Keystone trade talk. It is vaporware.” For good measure, Roberts adds that it is “empty nonsense.” In sum: in his view, it’s not happening.

But even if this talk about President Obama trading his approval of Keystone XL for something else weren’t “empty nonsense,” as Roberts explains, there’s certainly no reason to be lavishing the oil industry with even more favors, even more corporate welfare than it’s already received over the years. To the contrary, we clearly need to be weaning ourselves off fossil fuels and switching to clean energy as rapidly as possible, for a wide variety of reasons.  Here are just a couple recent articles – courtesy of Taxpayers for Commonsense – highlighting the pervasive largesse being lavished up a fossil fuel industry which certainly doesn’t need it.

1. Effective Tax Rates of Oil & Gas Companies: Cashing in on Special Treatment: “From 2009 through 2013, large U.S.-based oil and gas companies paid far less in federal income taxes than the statutory rate of 35 percent. Thanks to a variety of special tax provisions, these companies were also able to defer payment of a significant portion of the federal taxes they accrued during this period.”

2. Taxpayers are losing millions on natural gas extracted from federal land: “Federal taxpayers lost in excess of $380 million from 2006 through 2013 on gas extracted from onshore federal leases as a result of existing royalty relief for “beneficial purposes” and “unavoidably lost” gas. Most of this loss – 82 percent – was associated with gas used by drilling operators for beneficial purposes, which allows oil and gas companies to consume publicly owned natural gas for certain defined purposes at no cost.”

That last line can be broadened out to cover the myriad number of ways government policy allows fossil fuel companies to operate (at minimal cost) on publicy-owned lands, to damage the environment and public health at essentially no cost to them, to treat our waters and atmosphere as open sewers, and to continue receiving enormous taxpayer-funded corporate welfare while doing so. The Keystone XL pipeline is a classic example, in which a foreign company (TransCanada) wants to transport dangerous, dirty Canadian tarsands oil across the United States, in order to profit from exporting much of it to foreign markets.

What does the U.S. stand to gain from this? The whopping total of 35 permanent jobs; plus the risk of catastrophic spills into our rivers, lakes and aquifers; plus exacerbation of climate change, which harms all of us. A huge net negative, in other words, for everyone other than the investors in Canadian tar sands.  Those investors, by the way, include the mega-billionaire Koch brothers, who stand to gain a great deal if this pipeline is built, as they are major investors in Canadian tar sands. The question is, why would we be going out of our way to essentially subsidize super-rich fossil fuel magnates, especially when it represents the antithesis of what we need to be doing right now for environmental and economic reasons – transitioning as rapidly as possible from carbon-based fuels to clean, renewable energy?  Got us.

Posted in Oil, Tar Sands, subsidies
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“Seeking Alpha”: Oil Price Plunge Should Have Tar Sands, Shale Oil Investors “Very Very Nervous”

Posted By Lowell F. on November 29th, 2014

The plunge in world oil prices in recent weeks has been dizzying. As with all major changes in prices, there are winners and losers in this situation. The biggest potential losers, of course, are the highest-cost oil producers — Canadian tar sands, “tight oil” and “shale oil,” etc.  Thus, according to investor website “Seeking Alpha,” the ongoing oil price plunge should be making investors in Canadian tar sands “very very nervous.” Key points from “Seeking Alpha” include:

  • “‘Black Friday’ offers new meaning to desperate oil bulls as their last-ditch hope – OPEC cutting production – just failed.”
  • High-cost producers are vulnerable. Say ‘goodbye’ to your dividend and earnings… perhaps your equity too, if oil ends up at $50.”
  • “…we think the Saudis also know that $70 oil mostly wipes out their US shale ‘competitors’ – and our opinion is, the oil price will go low enough that it will kill off for a decade the massive flow of funds into the sector.”
  • “…this [oil price] decline could last a lot longer – a couple years….And as anyone who follows gold stocks has observed, ‘a couple years’ can be a most painful experience.”
  • Canadian Oil Sands Limited’s “total cost of per barrel oil production [is] over $85″ per barrel, compared to current crude oil prices under $70 per barrel.
  • “Here’s why COSWF bulls should be very, very nervous”: “The shift in the WTI futures price curve began this past summer, and we believe it is a quantum, generational, shift... the day of reckoning has come. We do not see much improvement for years.”

Also note this Reuters article, which cites an International Energy Agency report that “Canadian synthetics (oil sands) projects have the highest percentage of production of the types examined here (about 25 percent) that would fall into a negative net present value if there were to be an extended period of prices below [$80 per barrel].” And check out this Toronto Star column, which argues, “Oops. There go the tarsands,” and along with them Canadian Prime Minister “Stephen Harper’s entire resource-based approach to the economy.” And then there’s this article by Desmog Canada, which reports:

If oil prices continue their slide downward, the cancellation of high-cost oilsands projects are likely, but just because prices rebounded in the past and investment returned, does not mean that is a guide for the future, warns James Leaton, research director of the Carbon Tracker Initiative.

Thursday night at the Royal Ontario Museum in Toronto, Leaton told the crowd of over 170 people the Alberta oilsands are a big target for investors looking to reduce risk because of the high capital expenditure (capex) costs.

“The oilsands are Canada’s elephant in the atmosphere,” said Leaton, an originator of the “carbon bubble” theory. “We see investors moving away from high-cost, high-carbon projects, so there is a challenge that capital is not going to automatically flow to Alberta anymore.”

All in all, this situation is “a pretty big shock” to Canadian tar sands producers. That includes “Suncor Energy Inc. and Canadian Natural Resources Ltd., which each fell the most in at least three years yesterday, [and which] operate in one of the most expensive places on earth to produce oil.”

The bottom line is this: you don’t have to be an economic genius or an oil market expert to understand that if it costs $85 per barrel or higher to produce heavy, dirty tar sands oil that currently is selling for around $52 per barrel, you’re probably not going to be making much money operating or investing there. To the contrary, you probably want to be running as fast as you can away from that entire sector, particularly if you think oil prices will stay low for an extended period of time. No wonder why “Seeking Alpha” says Canadian tar sands investors should be “very very nervous” at this point.

Posted in Oil, Tar Sands
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Is ExxonMobil Starting to Take the Fossil Fuel Divestment Movement Seriously?

Posted By Lowell F. on October 14th, 2014

Is ExxonMobil starting to worry about the fossil fuel divestment movement?  Based on this article, it certainly looks that way.

Exxon Mobil is wielding its public relations might against the fossil-fuel divestment movement, signaling that climate-change activists have struck a nerve at the world’s biggest publicly traded oil and gas company.

Exxon Mobil’s blog, titled “Perspectives,” posted a lengthy attack Friday about the divestment movement, which urges universities, churches, pension funds, and other big institutional investors to dump their shares of oil and coal companies as part of the fight against global warming.

But the blog post calls the movement “out of step with reality,” saying it’s at odds with the need for poor nations to gain better access to energy, as well as the need for fossil fuels to meet global energy demand for decades to come.

So far, the climate advocates’ progress at getting a growing number of institutions to shed holdings in fossil fuel companies remains pretty small compared with the scale of the industry they’re battling.

But, the article adds, while the fossil fuel divestment movement may be small now, it’s growing fast. As a result, the fossil fuel divestment movement clearly has ExxonMobil nervous, and there’s one clear piece of evidence to prove that’s the case: ExxonMobil’s attacking it. Because, let’s face it, that’s what the fossil fuel industry does when it sees a threat – relentlessly attacks, just as it’s done with clean energy and climate science in recent years. The problem for the fossil fuel industry, though, is that no matter how much money they spend attacking their demons, the reality – plummeting costs and rapidly improving technology for solar and wind, mountains of scientific evidence on climate change driven by fossil fuel combustion – isn’t going away.

All of which means the harsh reality for ExxonMobil and other fossil fuel companies is that, while they certainly are big and powerful today, that situation could change in a hurry. And if the fossil fuel folks don’t believe that, all they have to do is look at the land line telephone companies of the 1970s in the era of cell phones and Skype, or the traditional journalism business model in the internet age, then figure out if that could be them.  While they’re pondering this question, they might also consider whether in 10-20 years, will they be: a) kicking themselves for fighting the inexorable shift towards clean energy; or b) patting themselves on the back for joining it? At least at the moment, it looks like they’re foolishly, stubbornly sticking with option “a”.

Posted in Fossil Fuels, Oil
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“Koch could not compete if it actually had to pay for the damage it did to the environment”

Posted By Lowell F. on September 27th, 2014

We’ve written a great deal about how the powerful, entrenched fossil fuel industry leverages its incumbent advantage to game the U.S. political system. Among other things, all those profits from extracting and processing dirty energy help ensure that the government, which is theoretically supposed to look out for the public’s health and well-being, allows the fossil fuel companies to treat the air and water as a common sewer they can use for free. As if it’s not bad enough that the true health and environmental costs of fossil fuels are not “internalized” into the price of oil, coal and natural gas, these companies also have the chutzpah to continue accepting millions of dollars a year in taxpayer-funded corporate welfare. All the while, they fund a network of “think tanks” who spend their days denying climate science and falsely smearing clean energy. In short, it’s quite a racket they’ve got going.

Now, Rolling Stone has an amazing expose of perhaps the epitome of everything mentioned above – the Koch brothers and their “toxic empire.” We strongly recommend the entire article, even though it’s long.  For now, here are a few “highlights”:

  • This company is huge: Koch Industries brings in $115 billion in annual revenue, making it “America’s second-largest private company after agribusiness colossus Cargill.”
  • It makes this money essentially by trashing the planet. As the Rolling Stone article puts it: “Koch Industries’ toxic output is staggering…only three companies rank among the top 30 polluters of America’s air, water and climate: ExxonMobil, American Electric Power and Koch Industries” and “13th in the nation for toxic air pollution.”
  • The de facto “license to pollute” granted to the Koch brothers “amounts to a perverse, hidden subsidy” whose “cost is borne by communities.”
  • Koch Industries “has woven itself into every nook of the vast industrial web that transforms raw fossil fuels into usable goods…controls at least four oil refineries, six ethanol plants, a natural-gas-fired power plant and 4,000 miles of pipeline.”
  • The company is also “a key player in the fracking boom.”  As part of that fracking boom, “Thanks to the Bush administration’s anti-regulatory­ agenda – which Koch Industries helped craft – [Koch subsidiary] Frac-Chem’s chemical cocktails, injected deep under the nation’s aquifers, are almost entirely exempt from the Safe Drinking Water Act.”
  • “Koch is also long on the richest – but also the dirtiest and most carbon-polluting – oil deposits in North America: the tar sands of Alberta.”
  • “According to sworn testimony from former Koch employees, the company operated its pipelines with almost complete disregard for maintenance.”  It also covered up “small spills” and “falsif[ied] pipeline-maintenance records filed with federal authorities.”
  • Koch Industries was slapped with multiple, major fines for violations of federal environmental laws — but they didn’t particularly care. Instead, the company’s attitude was that “regulatory fines ‘usually didn’t amount to much’ and, besides, the company had ‘a stable full of lawyers in Wichita that handled those situations.’”
  • The Koch’s bottom-line business model is to “exploit breakdowns in the free market…profit[ing] precisely by dumping billions of pounds of pollutants into our waters and skies – essentially for free,” and “get[ting] richer as the costs of what Koch destroys are foisted on the rest of us – in the form of ill health, foul water and a climate crisis that threatens life as we know it on this planet. “
  • And finally, the best line of the entire article: “Richard Fink, head of Koch Company’s Public Sector and the longtime mastermind of the Koch brothers’ political empire, confessed to The Wichita Eagle in 1994 that Koch could not compete if it actually had to pay for the damage it did to the environment.” That pretty much sums it all up.
Posted in Fossil Fuels, Oil
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