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Exxon in California
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mac



Joined: 07 Mar 1999
Posts: 4989

PostPosted: Fri Jul 22, 2011 4:50 pm    Post subject: Exxon in California Reply with quote

The actions of Exxon in California deserve a separate posting. I’ll start with a disclaimer—I never worked on an Exxon project, either as a developer or a regulator. However, I know many of those who did, and I‘ve followed the story for a long time. Much of this may be old news and Exxon may well have cleaned up their act since the Exxon Valdez spill. Most accounts of the Gulf spill identified BP as having the poorest safety record among the oil companies. Yet the aggressiveness with which Exxon tried to avoid all forms of regulation, and used political and litigation approaches rather than technical approaches, has much to do with why California has had a moratorium on offshore oil for many years.

Development of offshore oil in the Santa Barbara Channel raises a number of important issues, and both Congress and the State of California created administrative review processes to try to develop a rational approach to regulating that development rather than multiple rounds of litigation. Transport of oil by tankers is substantially more risky than transport by pipeline, the area is seismically active and the offshore has many subsurface features that are prone to slumping, or sliding. Both transport by tankers and processing of oil (separation of oil from water) generate emissions in one of the highest populated regions in the Country, with substantial air quality problems. But the most substantial battle over oil development revolves around revenues. Resource extraction is generally of limited duration and doesn’t represent a permanent or sustainable economic sector. Workers come for a while to build things and then leave. There are active debates over whether they pay more taxes than are required to service them, but the local governments along the Channel have seen large swathes of the coast occupied by oil facilities that prevent development that is more along the goals of those communities. The fact that lease decisions are made in Washington, and nearly all of the lease revenues go to Washington, with little to local governments to pay for services, means that offshore development in the Outer Continental Shelf has been much more controversial than development within California’s tidelands.

My own view is that offshore oil development should be a part of the US energy portfolio. But as publicly owned resources, it should provide a strong return to the public which owns it, and it should be carefully regulated so that existing users aren’t displaced. I have the same attitude about access to the coast for recreation. Congress enacted the Coastal Zone Management Act in an effort to try to resolve concerns over matters like offshore oil leasing administratively, with the State’s having a strong role. Exxon made every effort to avoid such review with a combination of political efforts and litigation.

The first offshore development in California following the National Environmental Policy Act in 1972 was the Exxon Santa Ynez unit. Environmental studies started in 1972. In 1976, the California Coastal Commission denied Exxon a permit for an onshore processing facility in Flores Canyon, whereupon Exxon threatened to move offshore. But California’s coastal program was certified by NOAA in 1978, giving them some degree of review over Federal activities. The Commission objected to Exxon’s plans, and their objection was sustained by the Secretary of Commerce. Ultimately the Supreme Court ruled that the Coastal Zone Management Act was not intended to cover leases outside of State waters—whereupon Congress amended the Act to make it clear that leases were to be covered, as long as lease and development affected the States’ Coastal Zone.

Exxon’s insistence on transport of oil by their existing fleet of tankers rather than by pipeline was a major element of the underlying dispute between the state and California. Most of the oil was destined for Texas refineries, and taking it by tanker through the ports of Long Beach and Los Angeles would increase risk of soills and air emissions substantially.

Exxon argued that tankers were safe enough, but they were overtaken by events. In 1987, the bulk carrier PacBaroness went down with a load of copper and fuel, causing a major spill off of Point Conception; illustrating the navigational hazards in the channel. In 1989, Exxon’s Valdez hit a reef in Alaska, spilling 257,000 barrels.

Exxon was equally aggressive in resisting any regulation of air emissions. First they claimed that the State of California had no authority over their ship emissions, or any processing emissions that occurred beyond the 3 mile limit. They then sued the Environmental Protection Agency, arguing that even though the emissions occurred on Federal lands, and blew to California where they exacerbated air quality problems, EPA had no authority to regulate those emissions because EPA was empowered only to regulate emissions when the State of California failed to do so. California’s Congressional delegation finally got fed up and established a moratorium on offshore oil in 1982.

While there were certainly always opponents of offshore oil development, it is my opinion that Exxon’s relentless efforts to avoid reasonable regulation were a key reason that the moratorium effort succeeded politically. But then, what do I know?
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keycocker



Joined: 10 Jul 2005
Posts: 3230

PostPosted: Fri Jul 22, 2011 6:48 pm    Post subject: Reply with quote

Mac is hard to argue with. All those solid facts.....
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capetonian



Joined: 11 Aug 2006
Posts: 895
Location: Oahu

PostPosted: Sat Jul 23, 2011 11:07 am    Post subject: Reply with quote

Why is removing a tax loophole considered a tax increase? There is an inherent unfairness when a business that doesn't qualify for that specific loophole pays a higher level of tax than a business that does.

The oil and gas industry benefits from many tax loopholes thanks to their lobbying might. One of the topics du jour is the Intangible Drilling Credit (IDC). For example a well in the Eagle Ford oil play currently costs about $8 million to drill and will produce over 25 - 30 years (or more). The net present value (i.e. future net income from well less the cost of the well, all cashflows discounted back to today) of the well can be anything from $10 million to $20 million. At current oil prices many of these wells achieve cash on cash payout (i.e. cost of well is recovered in net income from well) in less than 1 year.

Yet the oil company can deduct the intangible cost of the well immediately. The tangible cost of a well is anything that can be removed when the well is plugged and abandoned, and is typically less than 20% of the cost of the well due to the current trend to deeper wells and more complex completion work (the frac'ing that the state of New York is so against). As a result a profitable oil company can delay paying cash taxes for as long as they are growing.

I bet that there are a bunch of businesses that would love the federal government to fund their required working capital growth funds needed.
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mac



Joined: 07 Mar 1999
Posts: 4989

PostPosted: Sat Sep 03, 2011 10:52 am    Post subject: Reply with quote

I got a letter from Harper's yesterday soliciting a subscription. It had this interesting observation about that paragon of virtue, Exxon:

Quote:
Amount of the $5 billion that Exxon was ordered to pay in punitive damages in 1994 for the 1989 Exxon Valdez Alaska oil spill that it has paid: 0

Estimated amount that Exxon has earned by investing this amount of money in the meantime: $5,000,000,000


Tell me again about how they got the message.
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isobars



Joined: 12 Dec 1999
Posts: 13835

PostPosted: Sat Sep 03, 2011 11:57 am    Post subject: Reply with quote

capetonian wrote:
The oil and gas industry benefits from many tax loopholes thanks to their lobbying might. ... I bet that there are a bunch of businesses that would love the federal government to fund their required working capital growth funds needed.


Such as the wind and solar industries, whose subsidies are comparably 50 times greater than that of the oil industry. A 2011 Congressional Research Service study finds that per unit of electricity produced, for every two cents of tax subsidy to Big Oil, Big Green (wind and solar) get closer to $1 in handouts.

Source: http://tinyurl.com/4ymrcls , which adds ...
• Obama is expected to seek another $250 billion in new stimulus funds next week, much for clean energy and the creation of so-called green jobs ... even though very few green jobs resulted from the original stimulus.

• The 2009 stimulus gave nearly $3.2 million in green-energy grants to one of the five wealthiest counties in America to save it $14,000 in annual electricity costs ... ditto 3,000 more counties ... yet the administration wants to expand this because "it's green".

• Wheeling, W.V. is booming because it sits atop the famous Marcellus shale formation—one of the biggest treasure troves of natural gas ever discovered in America. The White House acknowledges that the natural gas deposits in the Midwest and Texas contain potentially 100 years worth of cheap natural gas. Yet Obama has never even uttered the words "Marcellus shale" in a major speech.

• Exxon has made some of the largest oil finds in a decade, yet the fossil-fuel-hating Obama administration is holding up the leases and permitting process. An Obama-appointed U.S attorney has brought criminal charges against seven oil companies (with penalties of up to six months in prison) for causing the deaths of 28 migratory birds found in oil waste pits ... while windmills kill thousands of birds, including 80 eagles, every year..

• Big Oil, which the Obama Energy Department loathes, has had more growth in output than any other manufacturing industry in the U.S. from 2005 through 2011, so the administration is proposing $35 billion in new taxes on the industry -- i.e., its consumers -- to slow it down.

• The Democrats were all in favor of natural gas until America's abundant natural gas resources became fully known -- that's why T. Boone Pickens' windmill putsch ceased -- and opened up a superhighway to energy security and U.S. carbon emissions reduction.

• We now have a national energy policy directing our resources away from cheap, efficient and increasingly abundant fuels like coal, oil and natural gas while we channel billions of tax dollars to 500-year-old energy technologies like wind power that can't possibly scale up to power a modern-day industrial economy.
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mac



Joined: 07 Mar 1999
Posts: 4989

PostPosted: Sat Sep 03, 2011 2:03 pm    Post subject: Reply with quote

Sometimes it is impossible to tell those who are hopelessly corrupt from those who are willfully ignorant. Mike Fick's response here, to Capetonian's, not to mine, repeats claims made on a blog called "Hockey Schtick", essentially verbatim. (repeating without citation is called plagiarism, for those with ethics) That blog is, in turn, produced by Andrew Bolt, an Australian climate denier http://watchingthedeniers.wordpress.com/2011/01/17/andrew-bolts-hockey-schtick-australias-most-prominent-denier-inadvertently-posts-proof-of-climate-change/

who is careless with his facts.

Of course, Bolt works for a Murdoch newspaper in Australia. And his "facts" are reported by a Murdoch newspaper in America. Here's a brief comment about how laughably inept (dishonest?) his reporting on global warming is: http://johnquiggin.com/2006/11/11/more-amateur-climatology-from-andrew-bolt/

Now it would be nice to follow the track back to see how much carbon money flows to Bolt, or to Murdoch, or the shell non-profits that they set up to try to hide the sources of funding. But our Supreme Court not only allows unlimited business funding of political activities, the conservative hero Clarence Thomas thinks that the Constitution also allows anonymous speech. So we can't follow the money.

But underlying the Bolt comment, is of course, the issue of money that is paid for leases. Whether Mike Fick chooses to ignore this issue, or is terminally ignorant, is for the reader to assess on their own. If I were a cartoonist, a head in the sand cartoon (oil sands?) would seem appropriate at the moment.
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pueno



Joined: 03 Mar 2007
Posts: 2584

PostPosted: Sun Sep 04, 2011 7:22 am    Post subject: Reply with quote

mac wrote:
Whether Mike Fick chooses to ignore this issue, or is terminally ignorant, is for the reader to assess on their own. If I were a cartoonist, a head in the sand cartoon (oil sands?) would seem appropriate at the moment.

Don't be too hard on Mr. Fick-shun. Keep in mind that his government believes he's disabled and compensates him, that very same government that he loves to hate. His disabilities may distort his reality.
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stevenbard



Joined: 11 Nov 1993
Posts: 3958

PostPosted: Sun Sep 04, 2011 1:26 pm    Post subject: Reply with quote

Side note: When sailing Santa Barbara this spring, my board was covered in oil. A mess. I don't have that problem in Malibu.

Subsequently found out that this is natural seepage. The Chumash indians used this oil for their boats and waterproofing huts etcetera.

I also read an article that said if we drilled, the seepage would be greatly reduced. This seems reasonable for what it's worth. I think it will be an inevitable fact that we will drill there some day. It will have to be estetically and environmentally pristine I'm sure.
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swchandler



Joined: 08 Nov 1993
Posts: 5694

PostPosted: Sun Sep 04, 2011 3:44 pm    Post subject: Reply with quote

By chance Bard, when windsurfing in Santa Barbara, did you happen to look offshore? Seemingly, you missed seeing the many oil platforms off the coast. The oil companies have been drilling and pumping oil out of the channel here for years, but is there less oil in the water and on the beach? Well, no. So much for the credibility of your source, and your predictable gullibility.

I bet you're a NIMBY type your own neighborhood.
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jpbassking



Joined: 19 May 1998
Posts: 2354
Location: Leo

PostPosted: Mon Sep 12, 2011 5:55 pm    Post subject: Reply with quote

Actually SW...My son works on those rigs. Only one of them is drilling the rest are pumping according to him. Also, last week he was to take a boat out to Heritage but was bumped because they were ferrying a seal back to the platform that had been injured. Exxon paid for the animal to be transferred to a treatment facility and for it's return to the platform. My son has many stories of what a pain in the ass the seals can be because they think they own the place.
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