Sean Churchfield, Shell Operation Manager for Alaska, answers questions during a US Coast Guard hearing. (Credit: Bob Hallinen, Anchorage Daily News)

The main reason an offshore oil rig ran aground off the coast of Alaska late last year was because oil company Royal Dutch Shell was trying to depart state waters to avoid paying millions in taxes.

Sean Churchfield, operations manager for Royal Dutch Shell in Alaska, testified to the Coast Guard over the weekend that the Kulluk, an Arctic offshore drilling rig, left Dutch Harbor in December “driven by the economic factors.” When the Coast Guard’s legal advisor Lt. Cmdr. Brian McNamara asked why leaving by the end of the year was such a concern, Churchfield said:

“The end of the year to my understanding was when the tax liability potentially would have become effective.”

The cost of maintaining the rig in Dutch Harbor was another factor, but the tax liability was larger, according to Churchfield. The Kulluk is a 28,000 ton oil drilling ship that ran aground off the shore of Sitkalidak Island, Alaska due to an extremely strong winter storm in the waning hours of 2012. The Coast Guard took part in a joint operation to evacuate all crewmembers. Currently, the Kulluk and its counterpart the Noble Discoverer are in Asia for repairs.

Soon after the Kulluk left Dutch Harbor, an email from Shell to the Dutch Harbor Fisherman revealed that tax issues did play into the decision to leave when it did. During a press conference the day after the accident, Churchfield said, “The reason we moved it down (to the Seattle-area) was to get off-season repairs done.” Soon after, a Shell spokesman told the Alaska Dispatch that the Kulluk left because of a two-week window in which the weather looked safe through the Gulf of Alaska.

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Oil and gas drillers are taking advantage of a quirk in the tax system unavailable to renewable energy companies such that a growing number are paying minuscule tax bills. [Forbes]

More and more of the companies benefiting from new technologies that are fueling America’s recent energy boom are paying little or no taxes.

In early May, Emerge Energy Services sold $127 million in shares in an initial public offering. Emerge (EMES) supplies sand to oil and gas drillers for blasting through rocks in the hydraulic fracturing process. The company says demand for frac sand has risen nearly 1,600% in the past decade, according to the IPO documents. It expects demand to double again in the next decade.

Sales at Emerge, which provides various services to energy companies, have more than tripled in the past two years to nearly $1 billion in 2012. It earned just over $27 million last year. Nonetheless, Emerge, which is structured as a master limited partnership, paid just $160,000 in overall taxes, for a rate of 0.5%, and none of that went to the federal government.

“The IRS has been very generous to these companies,” says Willard Taylor, a corporate tax lawyer at Sullivan and Cromwell. “Absent a change, the number of companies looking to take advantage of this tax status will continue to grow.”

Politico: “Where’s President Obama’s climate agenda?” [Politico]

Bill McKibben won the 2013 Sophie Prize for his work mobilizing people to climate activism. [AP]

Warming oceans could lead to more dolphin deaths in South Australia. [Guardian]

The State Department’s Inspector General is looking into serious conflict-of-interest concerns regarding the industry ties of the consultants that wrote the draft analysis for the Keystone pipeline. [The Hill]

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A coalition of people who live and work near the drilling rigs that have allowed the U.S. to see incredible booms in oil and gas production is in Washington, D.C. this week demanding that both government and industry be held accountable when drilling causes health and environmental problems.

Members of the “Stop the Frack Attack” coalition held a forum yesterday because, as their website states:

Impacted communities [are] “experts” schooled in the curriculum of hard knocks doled out by the oil and gas industry.

In total, 16 people spoke at the forum representing eight different states. They included ranchers, mothers, librarians, nurses, and former industry employees. They came from various political backgrounds — in fact, one speaker held up the Constitution, the Bible, and his badge from the Conservative Political Action Conference (CPAC) this year to relate how he has pled with Republicans to help communities pushed to the wayside by oil and gas companies.

All of the speakers described the impacts of oil and natural gas drilling on their health and property. For example, Kristi Mogen, whose community in Wyoming was evacuated after a well blowout in April 2012, spoke of her two daughters and husband who suffered nosebleeds and other health effects afterwards. And Rod Brueske of Longmont, Colorado explained how his “American dream was shattered by multinational companies” after a natural gas well across the street from his farm released chemicals into the air.

This is an important moment for oil and natural gas policy in Washington, D.C.  The Senate Energy and Natural Resources Committee this week is holding the final two of its three recent forums on natural gas policy issues. Of the 36 witnesses invited to share their opinions about natural gas in the U.S., none are citizens from affected communities.

And, last week, the Department of Energy announced the approval of a second facility to export natural gas to other counties, while the Department of the Interior released rules governing hydraulic fracturing on public lands that lack basic public right-to-know measures.

A new report released from the Center for American Progress shows that the five largest oil companies earned more than $30 billion in profits in just the first quarter of 2013. Put a different way, in only one minute these companies make more than “what 95 percent of American households earn in an entire year.”

And yet, citizens living near drilling rigs have to deal directly with the costs of drilling. As Jon Fenton, a rancher in Wyoming who admitted he hadn’t been on an airplane until six years ago when he began working on behalf of his community stated at the forum yesterday, “It’s us who have to bear that burden…but now I know that there are things worth fighting for.”

Republican members of the House Natural Resources Committee will do their level best at a hearing today to perpetuate a host of myths about the pace and efficiency of oil and gas development on federal lands compared to state and private lands. And as in the past, their level best won’t be on the level.

Today’s hearing, “State Lands vs. Federal Lands Oil and Gas Production: What State Regulators Are Doing Right,” is the latest attempt to show that the Obama administration, through regulations, bureaucratic obstacles, and an ideological hostility to the oil and gas industry, has thwarted traditional energy development on 700 million acres of federal and tribal lands and those private lands where it controls the mineral rights.

Those criticisms fly in the face of the facts:

• Oil production from federal lands and waters in every one of the last four years was higher than it was in 2008, according to an analysis of Energy Information Administration data by the Congressional Research Service.
• The oil and gas industry itself has cut back on its requests to drill on public lands, from an average of 6.6 million acres in 2006 to 2008 to 4.8 million acres annually from 2009 to 2012, a decline of 27 percent.
• The production of shale gas and shale oil in recent years is taking place “largely outside of the Federal lands” because that’s where those resources are, according to 2012 testimony by Adam Sieminski, administrator of the Energy Information Administration to the House Energy and Commerce Committee.
• The vast majority of shale oil and shale gas plays exist underneath non-federal lands, a study by the Center for Western Priorities found. That study, “Follow the Oil,” showed that only ten percent of shale gas plays occur on federal lands, and only 7 percent of shale oil and mixed plays are on federal lands.
• High oil prices Market forces and depressed natural gas prices have been driving oil and gas developers to shift from drilling for natural gas to drilling for shale oil in places like North Dakota, where the resources largely lie beneath private lands. Oil and gas companies have made “market choices…to shift their production to oil and other liquid plays and away from gas,” according to Mark Squillace, professor of law at the University of Colorado. “And this means less activity on public lands.”
• State and federal permitting procedures for oil and gas are fundamentally different, with negotiations to resolve problems taking place before permitting begins on private land but after the process begins on federal land, making it almost automatically faster to get permits on lands where the state controls the permitting. As the Congressional Research Service reported, “A private versus federal permitting regime does not lend itself to an ‘apples to apples’ comparison.”
• The Congressional Research Service also found that between 2006 and 2011 the federal Bureau of Land Management has significantly cut its time for processing drilling permits from an average of 127 days to 71 days, while the time it has taken for industry to complete its processing chores has increased from an average of 91 days to 236 days.

Many critics of the federal oil and gas leasing program ignore that these resources are on publicly owned lands and waters — they belong to every American. And as the Federal Land Policy and Management Act makes clear, these lands are for multiple uses — including hunting, fishing, recreation, and grazing — and not just for oil and gas production. Despite this multiple use management requirement, the president has leased 2 acres for oil and gas production for every one acre of land conserved for future generations.

Members of the House Natural Resources Committee should be more concerned about that imbalance, rather than their fictitious statements about oil and gas production from federal lands and waters by President Obama.

Tom Kenworthy is a Senior Fellow with the Center for American Progress Action Fund. Daniel J. Weiss is a Senior Fellow and the Director of Climate Strategy at the Center for American Progress.

By Bill Becker (Part 1 can be found here)

With debate over the Keystone XL pipeline heating up, the White House has issued an update of President Obama’s “Blueprint for a Clean and Secure Energy Future“. It is the latest of White House policy pronouncements that leave us wondering whether President Obama will ever uncage his inner revolutionary to fight for genuine energy security.

At this point, it’s anyone’s guess. The blueprint’s content does not live up to the promise of its title. It contains stark contradictions. It sticks to Obama’s all-of-the-above energy strategy – a strategy transparently designed to keep all-of-the-above special interests happy. Because it supports all types of energy — including the fossil fuels responsible for global climate change — it advocates nothing.

Consider:

Oil Production: The President’s energy blueprint acknowledges that “rising gas prices serve as a reminder that we are still too reliant on oil, which comes at a cost to American families and businesses.” It “urges Congress to take up common-sense proposals that will further reduce our dependence on oil”.

At the same time, it boasts that since President Obama took office, “responsible oil and gas production has increased each year” in the United States. “Under my administration, America is producing more oil today than at any time in the last eight years,” the President said last year. “Over the last three years, I’ve directed my administration to open up millions of acres for gas and oil exploration across 23 different states. We’re opening up more than 75% of our potential oil resources offshore. We’ve quadrupled the number of operating rigs to a record high.”
If we are too dependent on oil, why is the President so bullish on producing more?

Energy Research: At a time the United States is under-investing in renewable energy R&D, the President’s new budget proposes $375 million for research on “cleaner energy from fossil fuels” including “more responsible” natural gas production and more funding for “clean coal” technology and carbon capture and storage.

While some fossil fuels are dirtier than others, none are clean. They all emit greenhouse gases when they are burned. They all involve environmental disruption when they are extracted. The cleanest of the fuels from a carbon standpoint, natural gas, has been accused of contaminating groundwater and leaking so much methane that it could be a bigger contributor to climate change than coal.

Meantime, clean energy is all around us but greatly underused. As others have pointed out, the greatest power plant ever created gives us free energy with no pollution, delivers it everywhere within seconds from 93 million miles away and won’t run out of fuel for 7 billion years. Rather than harvesting energy from the sun, why are we still trying so hard to dig it up from underground?

Corporate Welfare: To his credit, President Obama has urged Congress to repeal billions of dollars in taxpayer subsidies for the oil industry. But from the standpoint of an effective market, providing taxpayer money for research on “cleaner energy from fossil fuels” is no better. The coal, gas and oil industries are all grown up now and making pretty good livings. Most other businesses have to do their own R&D to remain relevant in a changing market. Why shouldn’t the fossil industries?

As for natural gas, why should taxpayers foot the bill to help the industry be more responsible? If gas companies don’t adopt more responsible production practices voluntarily, the government’s job is not to write them a check; it’s to implement regulations that protect the public. That’s what EPA is trying to do with the standards it announced last year to control methane and other air pollutants from oil and gas operations.

In the meantime gas companies aren’t showing a lot of interest in responsible production; instead they seem to be fracking and drilling as fast as they can before regulations can take effect.

Making Our Own Drug: The International Energy Agency predicts that fracking and horizontal drilling will make the United States the world’s largest oil producer sometime around 2017, surpassing even Saudi Arabia.

That would be a welcome change from nearly a half-century of dependence on foreign oil. But it also would make us the world’s biggest producer of one of the products most responsible for global climate disruption. Is that the title we want? Or, as the nation responsible for most of the greenhouse gases in the atmosphere today, shouldn’t we set a more moral example as the nation that leads the world to a low-carbon economy?

Shouldn’t we at least have a national energy plan that defines how and when we’ll end our dependence on oil, foreign or domestic- a downramp that signals our commitment to other nations and gives financial markets an incentive to capitalize our transition to clean energy?

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Rio Grande del Norte in New Mexico

President Obama plans to use his executive authority to permanently protect five new national monuments next week.  This marks a significant step for the administration: It is now willing to step in and protect special places when Congress refuses to act.

The new monuments will be:

-  Rio Grande del Norte, in New Mexico

-  San Juan Islands, in Washington

-  First State, in Delaware

-  Harriet Tubman Underground Railroad, in Maryland

-  Charles Young Buffalo Soldiers, in Ohio

Of particular note is Rio Grande del Norte, which at 240,000 acres is the largest monument that the administration has designated thus far.  Also, First State National Monument in Delaware will change the fact that the state is the only one in the U.S. without a national park unit.

The announcement of these designations under the 1906 Antiquities Act fits well with President Obama’s challenge to Congress during his State of the Union address:  “If Congress won’t act soon to protect future generations, I will.”  The last Congress was the first since World War II that failed to protect a single new acre of parks, monuments, or wilderness, despite millions of acres proposed for protection by adjacent communities.  As John Podesta, Chair of the Center for American Progress put it, “The last Congress was the most anti-environmental in history, so President Obama is right to respond to the calls of local communities that want their public lands protected.”

The permanent protection of hundreds of thousands of acres is also critical because it is the administration’s next step towards putting the conservation of public lands on equal ground with energy development. In the president’s first term, he leased 6.3 million acres of public lands to oil and gas companies, while only 2.6 million acres were protected by Congress and the executive combined.   Last month former Secretary of the Interior Bruce Babbitt called on the administration to permanently protect one acre for each one drilled.

Today’s news is welcome for any American who see the economic, health, and other long-term benefits of protected public lands, and is an important advancement for the president in the establishment of his conservation legacy.

Jessica is the Manager of Research and Outreach for the Public Lands Project at the Center for American Progress Action Fund.

Today, the Wall Street Journal editorial board published a gem of an editorial titled “Drill, Barack, Drill.” You might be able to guess what it’s about from the title.

It takes a report from the Congressional Research Service about drilling on public lands, engages in some flagrant cherry picking, shoots out some outright falsehoods, and concludes that the Obama Administration has been standing in the way of fossil fuel development on federal lands.

The truth, while sobering, is very different from the creative accounting performed by the Wall Street Journal ed board. Here’s the reality.

WSJ Says: “All of the increased [oil] production from 2007 from 2012 took place on non-federal lands.”

That’s one cherry to pick. There’s a whole tree though. Looking at the whole CRS report gives you the full story:

When comparing fiscal year 2010 with 2007, growth in the federal share of production was about 82 percent of the total.

That’s a lot of growth in production not on private and state lands. The report also says that crude oil production will continue to be significant, and “could remain consistently higher than previous decades.”

WSJ Says: “Federal share of total U.S. oil production has slid under Mr. Obama to 26% in fiscal year 2012 from 31% in fiscal 2008.”

In fact, oil production from federally owned places was higher in every one of the past four years compared to 2008, when oil hit a record high price of $142.50 per barrel. In fiscal year 2008, total crude oil production was 1,550 thousand barrels per day. The rate of production for the next four years has been: 1,731, 1,989, 1,715, and 1,627 thousand barrels per day. The Wall Street Journal may be trying hard here, but none of those numbers is smaller than 1,550.

The domestic boom is driven by ample tight oil (shale oil) and shale gas resources on private lands. In 2012, Adam Sieminski, the Administrator of the Energy Information Administration testified before the House Energy and Commerce Committee that:

Because the shale resource basins are largely outside of the Federal lands, so too is shale production. In this case, the geology is working in favor of non-Federal landowners.

The rapid increase in natural gas production from shale resources, found largely outside the Federal lands, over the last 5 years has significantly reduced natural gas prices and the relative attractiveness of conventional natural gas resources, including those of Federal and Indian lands. (EIA)

Also, most oil and gas shale plays in the contiguous U.S. are on private lands:

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By Jessica Goad

The United States is in the midst of an energy boom, seen for example in the rise of U.S. oil production to its highest level in 20 years. But this hasn’t stopped the oil and gas industry from clamoring for more access to public lands for drilling, and from criticizing the Obama administration for “[putting] in place more obstacles” and setting public lands “off-limits” to development.

For example, Senator David Vitter (R-LA), Ranking Member on the Senate Environment and Public Works Committee, even went so far as to state, “There’s no disputing the fact that our nation’s domestic energy production on federal lands has been stymied by this administration.”

But a new report released today by the Denver-based Center for Western Priorities called “Follow the Oil” shows that putting the blame on the president and his administration is nothing more than conservative messaging.  Much of today’s boom in oil and natural gas is from unconventional shale “plays,” areas that have only recently been opened through new technology.  And, as the report notes:

Nationwide, 90 percent of all current shale gas plays exist on nonfederal lands, with only 10 percent located on federal lands. Even starker, almost all shale oil resources exist on non-federal lands. Only 7 percent of current shale oil and mixed plays are found on federally-owned lands with the remaining 93 percent on nonfederal lands.

This map shows what those findings look like across the country, and where the industry is “following the oil”:

Additionally, economics are playing a role in driving drilling from public lands to nonfederal lands.  As the report states, “rapid development increased the supply of natural gas, driving down prices, and sending companies searching for other drilling locations and revenue sources.”

In other words, the oil and gas industry has met the enemy, and it is itself.

The release of this report comes at a very opportune time, considering that Sally Jewell, nominee to be the next Secretary of the Interior, will have her confirmation hearing in front of the Senate Energy and Natural Resources Committee this week

And as expected, key members of the committee are preparing to ask her questions about how the administration is stifling drilling on public lands. For example, Energy and Environment Daily reports that Senator John Barrasso (R-WY) will ask Jewell “where she stands on domestic energy development, job creation and federal regulations.”

Senator Lisa Murkowski (R-AK), the Ranking Member on the committee, said she told Jewell in a meeting last week about “resource potential in Alaska, off-shore and in the National Petroleum Reserve-Alaska and Arctic National Wildlife Refuge, and the limitations to access.”

And Senator Mike Lee (R-UT) released a statement after Jewell’s nomination announcement that “The [Interior Department’s] approach has hurt our economy, killed jobs, and prevented states like Utah from generating critical revenue,” so questions about energy on public lands are also likely to come from him.

The report released today shows that, despite all of the questions Jewell may get on drilling on public lands, the industry in the end is “following the oil” to nonfederal lands.

Jessica is the Manager of Research and Outreach for the Public Lands Project at the Center for American Progress Action Fund.

Oil drilling in Utah's Uinta Basin. (Photo: S. Winterton, Deseret Morning News)

By Tom Kenworthy

Extensive oil and gas drilling in the Uinta Basin of northeastern Utah produces the great majority of the chemical air pollution that produces winter ozone in that rural region, a new interagency study has concluded.

“An emissions inventory developed for the study indicates that oil and gas operations were responsible for 98 to 99 percent of” volatile organic compounds “and 57 to 61 percent of” nitrogen oxides in the basin, the study concluded. Those substances combine in the presence of sunshine to produce ozone, which a recent report by the Environmental Protection Agency links to heart and lung diseases and mortality.

The Utah study, conducted by Utah state and federal agencies and three universities, collected data on pollutants last winter. The study said that ozone formation occurs in the region in about half of winter seasons, with severe ozone occurring about one year in four. It said that transport of ozone-producing chemicals from outside the Uinta Basin “is not likely to represent a major contribution to peak ozone events.”

At the press conference announcing the study results, the deputy director of Utah’s Air Quality Administration said ozone levels this year have at times exceeded 130 parts per billion in the basin, far above the 75 parts per billion level considered a health hazard by EPA.

The Utah study follows a recent investigation into ozone in Colorado which found that more than half of the ozone producing chemicals came from oil and gas operations in a community in Weld County, a region that has nearly 20,000 operating oil and gas wells.

Ozone has been a frequent problem during summer months in urban areas of the United States. Wintertime ozone in heavily developed oil and gas regions of the West, including northeastern Utah and western Wyoming, is a relatively new phenomenon fueled in part by snow cover that reflects sunlight and temperature inversions.

The Utah study said that new rules from the EPA requiring so-called “green completions” of oil and gas wells will reduce emissions of VOC’s. A study sponsored by the oil and gas industry criticized that effort, contending it would sharply reduce production.

The Utah study also recommended additional studies to develop ways of reducing ozone in the Uinta Basin. But Brock LeBaron, the deputy head of the state air quality administration, said the state plans no new regulations on the oil and gas industry, favoring instead voluntary steps by energy developers.

“Right now we’re not passing any new rules or regulations,” LeBaron said, according to a report in E&E’s Energy Wire. “We’re not saying you have to control these VOCs from this piece of equipment.”

Tom Kenworthy is a Senior Fellow at the Center for American Progress Action Fund.

By Bill Becker

It has not taken long for Barack Obama to face the first big test of his resolve on combatting global climate disruption.

That test is the Keystone Pipeline, which would carry one of the dirtiest of all fossil fuels from the tar sands of Canada to refineries on the Gulf of Mexico. Obama ultimately is “the decider” on whether or not to let the pipeline proceed.

A great deal has been written about the pros and cons of Keystone, including competing claims about its impacts on jobs, the environment, gasoline prices and so on. There is strong evidence that the money would be better invested in clean energy and associated jobs.

However, too little has been written about the moral dimension of Obama’s decision. That dimension is succinctly described by K.C. Golden, the policy director at Climate Solutions. He calls it the “Keystone Principle”:

We cannot abide any major federal action that results in long-term capital investments that lock in emission trajectories that make catastrophic climate disruption inevitable. More simply, we have much patient work to do over many decades to make it better, but we must immediately stop making it worse. We are in the “era of consequences” now. Each month brings new pictures of the victims. Today and every day from here forward, we can pledge ourselves to this and demand it of the Obama Administration: We will not allow major new investments in making climate disruption worse.

Allowing the pipeline to proceed is simply incompatible with any serious effort to reduce the consequences of climate disruption. On the other hand, killing Keystone would be solid evidence that Obama 2.0, liberated from re-election, is the climate leader we have been waiting for.

Keystone — in essence a pipeline that would bring persistent new atmospheric poisons into the United States and make us complicit with Canada in exporting them to other countries — is only one of several climate-related decisions Obama must make in the near term, each one a test of his resolve.

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