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Houston Chronicle: Let’s cut off the subsidies to profitable oil companies

By WILLIAM H. MEADOWS
HOUSTON CHRONICLE

April 28, 2011, 8:56PM

There was an oil spill on Capitol Hill this week, when the truth about tax giveaways to the oil industry spilled from House Speaker John Boehner’s mouth. Asked why the oil industry should continue to receive $4 billion in tax giveaways while Congress cuts programs for people in poverty and the House prepares to vote next week on legislation to expedite offshore development without new safety requirements, the speaker sprang a leak. Oil and gas producers are “gonna pay their fair share in taxes and they should,” Boehner told a reporter for ABC News, opening the door to ending subsidies that have benefited the oil companies at taxpayers’ expense since the 1920s.

This is the same industry that fights safety inspections, complains about environmental safeguards critical to protecting wildlife refuges and community water supplies, pressures Congress to gut environmental laws and blocks attempts to ensure that the taxpaying public gets fair value through royalties when they exploit our public lands.

President Barack Obama was right to seize on the momentum of Boehner’s remarks, calling on Boehner and Senate Majority Leader Harry Reid to “take immediate action to eliminate unwarranted tax breaks for the oil and gas industry,” while instructing the Justice Department to investigate price gouging from oil companies.

Reid has stated his intent to hold a vote on the subsidies once the Senate returns to work after the Easter recess.

The case to end the subsidies is hard to ignore, especially when the oil companies’ quarterly profits are announced, as they were over the last few days. In the first three months of the year, oil and gas companies have raked in billions in profits. Exxon Mobil led the pack, earning more than $10 billion in the quarter, followed closely by Shell with nearly $9 billion. BP, scarcely a year after being partly responsible for the worst oil spill disaster in U.S. history, made more than $7 billion in earnings, despite trying to hold back research money into how extensively the shellfish industry has been harmed by the spill.

While the global price of oil is skyrocketing because of unrest in the Middle East and speculators on Wall Street, oil companies are pulling massive profits by taking oil from American lands.

According to the federal government’s Energy Information Administration, the average cost to produce a barrel of oil in the United States is approximately $30.

So when oil companies sell a barrel for triple the cost – $100 or more, as they have been for months – the oil industry is pocketing at least $70, and passing the cost on to the consumers.

To add to the case against oil subsidies, look no further than Capitol Hill, where the ongoing budget battle is putting critical spending at risk. In that environment, where severe cuts to environmental protection programs, education and programs like Medicare are being threatened, there’s no place for the oil industry giveaways that cost taxpayers $40 billion each decade.

These subsidies cannot be defended. With the evidence against them piling up and oil companies reporting huge profits, the tide finally may be turning against the subsidies. Let’s hope that as momentum builds to end giveaways to big oil, it will be the beginning of an energy policy that relies less on an industry that rakes in huge profits while it takes from Americans on their tax returns and at the pump.

Meadows is president of The Wilderness Society.
Special thanks to Richard Charter.

ABC News: President Obama Urges Congress to Eliminate Oil Company Subsidies

http://abcnews.go.com/Politics/obama-urges-congress-eliminate-oil-company-subsidies/story?id=13462559

House Speaker John Boehner talks exclusively with ABC’s Jonathan Karlin Hamilton, Ohio.ABC News

AUTO START:ON|OFF

By JONATHAN KARL (@jonkarl) and BENFORER
April 26, 2011

President Obama sent a letter toCongressional leaders today, saying he was “heartened” byHouse Speaker John Boehner’s statement that he was willing to considercutting multi-billion dollar subsidies to oil companies, and urginglawmakers to act.

The president said Congress should “take immediate action toeliminate unwarranted tax breaks for the oil and gas industry and usethe dollars to invest in clean energy.”

Boehner had stunned Washington on Monday when he told ABC News thatcutting the subsidies to oil companies is “certainly something weshould be looking at.”

“We are in a time when the federal government’s short onrevenues. We need to control spending, but we need to have revenues toget the government moving,” Boehner said. “They ought to bepaying their fair share.”

Congressional Democrats pounced on the issue today. Sen. ChuckSchumer, D-N.Y., applauded Boehner for “see[ing] the light”on the “insanity of providing subsidies to profit-soaked big oilcompanies.”

The topic dominated the White House press briefing.

“Immediate action means what it says,which is when Congress comes back, let’s take action legislatively toeliminate those subsidies,” White House spokesman Jay Carneysaid. “[It’s] hard to argue that given where the price of oil isnow that there’s a need for subsidies of the oil and gasindustry.”

Carney was referring to a statement earlier this year by former ShellCEO John Hofmeister, in which he said: “In the face of sustainedhigh oil prices, it was not an issue for large companies of needingthe subsidies to entice us into looking for and producing moreoil.”

In all, the tax breaks, many designed to encourage moreexploration, cost taxpayers more than $4billion a year in lost revenue — enough for 1.4 million Americans tobuy a tank full of gas every week for an entireyear.

However, the oil companies do have friends in Congress and thePresident’s letter demanding immediate action hit with a thud. Boehnerand Senate Republican Leader Mitch McConnell rejected the proposal.Boehner’s spokesman said the plan was insufficient because it would”only raise taxes and increase prices at thepump.”

ABC News asked the 10 members of Congress who received the mostcampaign contributions from the oil industry in the last election ifthey’d be willing to cut the tax breaks. Most have yet to respond, andSen. David Vitter, R-La., told ABC News that he’d only be open toeliminating tax breaks if tax rates were also lowered.

“I’m open to ending most tax exemptions, deductions and creditsif we use the resulting revenue to lower all rates, much as thepresident’s deficit commission suggested,” Vitter said in astatement. “Part of the reason for these provisions is that wehave the highest corporate tax rate in the world, which kills Americanjobs.”

House Speaker JohnBoehner Weighs in on Gas Prices Watch Video

Boehner: GasPrices Could Cost Obama Election Watch Video

Barack Obama on Howto Bring Down Gas Prices Watch Video

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http://www.csmonitor.com/Commentary/the-monitors-view/2011/0426/High-gas-prices-and-oily-political-rhetoric-don-t-mix

Christian Science Monitor

Editorial

The Monitor’sView

High gasprices and oily political rhetoric don’t mix

President Obamaand Republicans eye rising gasoline prices and think 2012. Too many oftheir responses aren’t aimed at weaning America offoil.

By the Monitor’s EditorialBoard / April26, 2011

Trying to tank up less often? GOP andDemocratic leaders are doing the opposite – filling up on politicalrhetoric to score points or deflect criticism at a time of risinggasoline prices.

Like a desert-highway mirage, the political back-and-forth couldmislead Americans as to what lies ahead.

Republicans, focused on gains to be made in 2012, see prices in the$4-a-gallon range as a reason to blame President Obama – just asDemocrats blamed President Bush for the record high price at the pumpin 2008, when the national average hit $4.11 in July.

One “mirage” lies in three House billspassed by the Republican-controlled Natural Resources Committee. Thelegislation expands offshore oil drilling. But backers convenientlyoverlook the fact that more offshore drilling wouldn’t change gasprices for at least 10 years, and even then marginally – by perhaps3 cents a gallon, according to studies by the Energy InformationAdministration.

In March, Republicans launched an attack ad against Rep. Nick Rahallover gas prices. The Democrat from West Virginia used to head theNatural Resources Committee, and last year pushed safety andenvironmental improvements for offshore drilling. He opposes theGOP’s three drilling bills.

House Speaker John Boehner says higher gas prices could cost PresidentObama his office, and this is not lost on the president. Mr. Obama’sratings have dropped as gas prices have risen. Seven in 10 Americanssay high gas prices are a financial hardship, according to aWashington Post/ABC News poll this week. Looking toward Obama’s 2012reelection bid, 53 percent of those who feel serious hardship from gasprices say they definitely won’t vote for Obama.

In the president’s weekly radio address on Saturday, he said he hadappointed a task force to root out fraud or manipulation in the oilmarkets. He pushed ending the almost $4 billion in annual tax breaksto the oil and gas industry – a populist idea that Mr. Boehnersuddenly embraced this week. Obama also blasted Republican plans tocut investment in clean energy by 70 percent.

But, sorry America, despite the promises of politicians, neitheroffshore drilling, nor a fraud investigation, nor an end to bigoil’s tax benefits will relieve gasoline prices any time soon, if atall.

Those are insignificant when you look at some of the causes of theprice surge, such as Middle East turmoil and global economic recovery.The Great Recession and slow recovery gave the world a three-yearreprieve from the broad trend that will inevitably sustain higherprices: emerging, gas-guzzling economies such as China and India vyingfor a limited supply of oil.

Neither the president nor Congress have much influence over thesetrends. The best thing to do, then, is for the country’s leaders tochange America’s fuel diet by encouraging less demand for oilthrough conservation and efficiency, and by supporting investment innonoil fuels.

President Obama got at this when he said “there’s no silver bulletthat can bring down gas prices right away.”

The harder truth is that high prices are likely to continue. They willactually help speed the coming and necessary transition from oildependence, because high prices make the status quo souncomfortable.

America’s drivers, especially those on a fixed income,understandably have a hard time with this truth. They want immediaterelief. There is a sure-fire way to get that, though: Drive less, evenbuy a more fuel-efficient vehicle.

Admittedly, that’s not possible for everyone. Yet 6 in 10 Americanssay they are cutting back on driving, according to the WashingtonPost/ABC poll. As a result of the last gas-price surge, Americanstelecommuted more, rode bikes more often, and used more publictransport – often with the assistance of their employers. Fromdriving more slowly to moving closer to work, there are many ways tocut fuel use.

Drivers can take these steps, while higherprices do their work to change the longer-term fuel mix.

Special thanks to Richard Charter

Bloomberg: U.S. Must Safeguard Environment in Ocean Drills, Activists Urge Court

http://www.bloomberg.com/news/2011-04-26/u-s-must-safeguard-environment-in-ocean-drills-activists-urge-court.html

By Laurel Brubaker Calkins and Allen Johnson Jr. – Apr 26, 2011 12:29 PM PT

Environmentalists urged a New Orleans appellate court today to require U.S. offshore-drilling regulators to enforce safeguards for wildlife and water quality that they claim were routinely ignored before last year’s BP Plc (BP/) oil spill.

Lawyers representing the Sierra Club, the Gulf Restoration Network,the Center for Biological Diversity and other activist groups asked the court to force the Interior Department to rescind several deep-water drilling permits regulators approved last April, just before and after the worst offshore oil spill in U.S.history.

The activists complain that the relationship between the oil industry and its regulators has been too cozy, resulting in lax oversight and environmental damage. They claim that five drilling permits were awarded last April without completion of the full environmental-impact assessments required by law.

“What the agency did was rubber-stamp the plans,” Monica Reimer, an attorney for Earthjustice, said during today’s hearing at the 5th U.S. Circuit Court of Appeals in New Orleans. “We believe they need to be reopened, and that those plans must come before the court after the agency has done a complete environmental assessment.”

Seeking Change

The activist groups sued Interior Secretary Kenneth Salazar and his agency seeking multiple changes to U.S. drilling regulations following the Deepwater Horizon disaster last April. The rig exploded while drilling a BP well off the Louisiana coast, killing 11 workers. The subsea gusher spewed more than 4.1 million barrels of crude into the Gulf of Mexico.

Much of the Gulf’s fisheries were closed, wildlife was injured or killed, and hundreds of miles of shoreline was fouled by the drifting oil.

The environmental groups challenged the agency’s actions directly at the appeals court, which is permitted under U.S. law. Related offshore-drilling policy lawsuits filed by some of the activist groups in lower federal courts were subsequently consolidated into the appellate actions. A three-judge appellate panel heard arguments on the challenges in back-to-back sessions today.

The Bureau of Ocean Energy Management, which regulates offshore drilling, awarded one of the five permits the activists have complained about six days after the Deepwater Horizon exploded. The groups say that permit was based on an exploration plan that didn’t take into consideration the possibility of a deep-water spill like the one then spreading across the Gulf.

Agency Decisions

Government lawyers today urged the appeals court not to interfere with agency decisions that regulators made according to rules that were in place at the time the permits were granted. Regulators notified oil companies in November 2010 that the agency would beef up existing environmental-impact assessment requirements “to consider the implications of the Deepwater Horizon oil spill,” government lawyer Ignacia Moreno said in a court filing.

“The petitioners’ attempt to have this court rule that the agency should have started that process within days of the Deepwater Horizon initial explosion should be rejected,” Moreno said in the filing.

Environmentalists told the judges the agency’s practice of using of so-called categorical exclusions, which let regulators arbitrarily exempt companies from fulfilling certain permit requirements, violated the law.

Risky Process

“There were all kinds of risks that were not being disclosed to the Department of Interior or by the industry,” Reimer said of the five permits the bureau approved in April 2010, during an interview after the hearing.

“Deep-water drilling is an inherently risky process, and the industry knows it,” she said. “There is major potential for significant environmental impact,” and regulators should be forced to factor that into their permit approval decisions, she said.

The lead cases are Gulf Restoration Network v. Salazar, 10- 60411, and Center for Biological Diversity v. Salazar, 10-60417, both in the 5th U.S. Circuit Court of Appeals (New Orleans).

To contact the reporters on this story: Laurel Brubaker Calkins in Houston atlaurel@calkins.us.com; Allen Johnson Jr. in New Orleans.

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Special thanks to Richard Charter

E&E:More questions than answers on dispersants a year after spill

(04/22/2011)

Paul Quinlan, E&E reporter

One word could describe U.S. EPA’s oversight of BP PLC’s decision to
pour 1.84 million gallons of oil-dispersing chemicals into the Gulf of
Mexico during the Deepwater Horizon oil spill: uncertain.

Responding to growing public unease last year over BP’s strategy of
fighting a massive chemical spill with more chemicals, EPA flexed its
regulatory muscle. The result was not confidence-inspiring: a shoving
match between the world’s largest environmental regulator and one of
the world’s largest oil companies that showed how little the regulators
understood about oil dispersants.

One year later, scientists say little has changed.

Decision making about the use of dispersants to combat the oil pouring
out of the Macondo well 5,000 feet below the Gulf surface were driven
more by politics, circumstances of supply and availability, and
educated guesswork than by informed science, experts say.

Some questions posed during the spill have been answered. For example,
the chemical constituents of the dispersant used has been published by
EPA and shown in rudimentary tests to be no more toxic or less
effective than competing alternatives.

But since the Obama administration has resumed issuing drilling permits
in the Gulf of Mexico, the most important questions remain unanswered:
How much did dispersants — as opposed to simple physics –contribute
to keeping oil underwater and out of Louisiana’s marshes? How effective
was underwater injection of the dispersants onto the wellhead? And what
long-term effects will the lingering chemicals and the dispersed oil
have on the Gulf of Mexico ecosystem?

“There are so many data gaps and uncertainties with the use of
dispersants and their effects,” said Carys Mitchelmore, an
environmental chemist and toxicologist at the University of Maryland’s
Center for Environmental Science and co-author of a 2005 National
Research Council report on oil dispersants. “Why hasn’t there been the
funding available to look into some of these things?”

After last year’s spill began, regulators seemed confused. Twenty days
after the rig explosion, on May 10, EPA told BP to monitor and assess
its use of oil dispersants. Ten days later, the agency ordered the oil
giant to switch from Corexit-brand dispersant to one of several others
believed to be “less toxic and more effective.” BP declined and
defended its choice. EPA criticized the company’s response as
“insufficient” and ordered BP to “significantly scale back” dispersant
use. BP did not (Greenwire, June 24).

EPA Administrator Lisa Jackson now defends her agency’s call to allow
BP to fight the spill using dispersants. “The chemicals helped break up
the oil,” Jackson told The New York Times in a recent interview.”It
was the right decision to use them.”

If that is the case, then on what basis did EPA decide to order BP to
ramp down dispersant use on May 26, two months before the well was
capped? EPA officials declined to comment. But other experts have
speculated.

“My view is that I think EPA was responding a bit to public concern and
pressure,” said Ron Tjeerdema, an environmental toxicologist and oil
dispersants expert at the University of California, Davis.Tjeerdema
was one of 50 scientists, engineers and spill responders that the
National Oceanic and Atmospheric Administration assembled during the
spill to decide whether to continue using dispersants. The panel
concluded that dispersant use should continue.

At that point, questions lingered over whether a better alternativet o
Corexit existed. A table listing 19 dispersants alongside crude
measures of the toxicity and effectiveness of each — part of the
National Contingency Plan (NCP) Product Schedule on file at EPA —
indicated that two Corexit formulas, 9500A and 9527A, might be among
the most toxic and least effective formulas in breaking up South
Louisiana crude oil (Greenwire, May 13).

The table became the basis of EPA’s decision, under pressure from
Congress and the public, to order BP to switch to one of the listed
alternatives. Mitchelmore said she later found problems and
inconsistencies in the testing methods that produced the data listed in
the NCP product schedule table’s toxicity and effectiveness ratings.

By then, EPA had already ordered BP to switch to something other than
Corexit. Upon BP’s refusal, EPA launched its own tests to see if a
better alternative existed. The results came back two months later on
Aug. 2, around the time the well was capped. To the agency’s chagrin,
BP was shown to be right. EPA’s tests showed Corexit 9500A was no more
toxic or less effective than any of the competing products, all of
which were stockpiled in vastly smaller and ultimately insufficient
quantities (E&ENews PM, June 30).

From the early days of the spill, BP’s purchase of Corexit represented
a third of the world’s supply. After the spill, in November, the
federal government’s Oil Budget Calculator report said of dispersant
use: “… were it a spill by itself, it would be one of the larger
spills in U.S. waters.”

But the scarcity of Corexit alternatives made the decision about
whether to switch to some other brand “a moot choice,” according to
Tjeerdema.

“The oil industry generally only stockpiles one at a time,” he said.
Tjeerdema recalled chuckling to himself over news reports that BP began
dispersing oil using Corexit 9527, an older formula that dates back to
the 1980s, before switching to 9527A.

“Right away, I understood they were getting rid of their old stockpile
that they hadn’t used for 20 years,” Tjeerdema said.”They’re kind of
efficient in wanting to get the most out of their stockpiled
dispersants.”

Breaking up is hard to do

Dispersants are frequently compared to dish soap — and in fact, share
some of the same ingredients. The chemicals break up oil — which
otherwise tends to cluster and float — into tiny droplets that can
sink and diffuse into the water column, so that bacteria and marine
organisms can more easily consume them.

Given the shortage of equipment available during the Deepwater Horizon
spill to burn, skim or otherwise dispose of the oil at the surface, the
question becomes one of environmental tradeoffs: Should the oil be
sunken with dispersants, at possible risk to deepwater marine
ecosystems, or be allowed to surface on its own and float onto beaches
and into marshes?

Tjeerdema, who served on the NOAA panel that recommended continued
dispersant use for the spill last June, stands by the group’s consensus
that dispersing the oil was “less environmentally harmful” than
allowing crude to migrate into the coastal marshes and wetlands along
the Louisiana coast, which act as nurseries for economically important
fish and shellfish and can be almost impossible to clean.

“If you take dish detergent and squirt it to your aquarium, it will
certainly kill your fish,” Tjeerdema said. “If you can put 2 million
gallons of dispersant into the environment in a way that it will mix
and bind with the oil to reduce overall toxicity, maybe that’s nots uch
a bad thing.”

But the chemicals do not just disappear. In the most comprehensive
study on the fate of oil dispersants used in the Gulf spill, Liz
Kujawinski, an associate scientist of marine chemistry at the Woods
Hole Oceanographic Institution, found that a key ingredient in the
dispersants — dioctyl sodium sulfosuccinate, or DOSS — remained
trapped in the underwater plume of oil that had spread 180 miles from
the well by September, even as it became almost undetectably dilute.

“There was sort of a public perception that the dispersant was just
going to go away,” Kujawinski said. “We concluded that dilution was
really the primary process.”

But Kujawinski reserves judgment on whether or not dispersing the oil
was a good idea. For one, she says, not enough data exists to show what
effect, if any, dispersants sprayed deep underwater had on breaking up
the oil gushing from the wellhead. She and other researchers note that
simple physics may have done more to keep the oil trapped in underwater
plumes.

Rather than second-guess the response, Kujuawinski says research should
be devoted to answering the most important questions: Did dispersants
play a significant role in breaking up the oil at the wellhead and
should sinking the oil have been the goal at all?

“We need to take a step back and say it’s happened and then say whether
or not it did what it’s supposed to do,” she said, noting that
responders had limited equipment for skimming and burning oil that rose
to the surface.

“The known negative impact of swamping the marsh with oil –that’s a
known problem,” Kujawinski said. “The big question is whether or not
they caused a different problem.”

Answers may not be forthcoming soon. As dolphins and sea turtles
continue to wash up mysteriously on the Gulf Coast, only $40 million of
the $500 million BP has committed to Gulf research has been disbursed
so far because of organizational delays. EPA has proposed additional
research into oil dispersants toxicity and effectiveness in 2012,
although the agency has come on the chopping block and already faces
$1.6 billion in cuts under the budget deal approved last week –likely
the first of many such spending fights.

For now, the puzzle surrounding dispersants remains unsolved, said Lisa
Suatoni, senior scientist with the Natural Resources Defense Council.

“In the end, we would hope that the government and BP would have a will
to put together that puzzle, and it’s not all clear from the research
that’s coming out that they do have that will,” she said. “It’s a
little discouraging if the interest in oil spill response research
lasts only as long as the oil spill response.”

Special thanks to Richard Charter