A free-market energy blog
Random header image... Refresh for more!

Category — Offshore drilling

Ecological Oil Drilling: Addressing Oil Seepage in California

“How much oil seeps out from the ocean floor — and into the environment — around the Santa Barbara area? SOS California identifies offshore Santa Barbara as having “the second largest marine oil seeps in the world.” Centered around an area referred to as Coal Oil Point, some 10,000 gallons of crude oil seep from approximately 1,200 fissures in the ocean floor in any given 24-hour period.”

- Sylvia Cochran, “Natural Oil Seeps Harm Birds off California Coast, March 8, 2012.

This April 25, 2013 Wall Street Journal article, “Chilly North Sea Comes Back to Life: New Technology Is Set to Liberate Natural Gas That for 25 Years Was Trapped Beneath Sea Floor,” tells the story of significant advances in deep sea drilling technologies.

If companies can discover, drill, and deliver oil from stormy North Sea locations, why can’t firms similarly find and drill oil from Santa Barbara and other offshore California oil fields?

But environmentalists, as well as average citizens, fear offshore oil spills and oil-drenched sea birds–and that gets back to the Santa Barbara oil spill (1969), the third largest in history after the Deepwater Horizon (2010) and Exxon Valdez (1989) spills.

Natural Oil Seeps

Yes, it is a tragedy when seabirds and other animals are caught in manmade oil spills. But what about natural oil seeps? [Read more →]

June 13, 2013   4 Comments

‘Hidden Victims’ of Gulf Drilling Slowdown (Obama’s Negative Employment Multiplier)

Small business owners who depend upon the economy in the Gulf of Mexico are still victimized by the ripple effects of the moratorium Team Obama put into place after the BP oil well explosion in April 2010, documents Greater New Orleans, Inc. after surveying approximately 100 Louisiana-based companies directly involved in the offshore oil and gas industry, led by marine services and ship owners/operators.

The Impact of Decreased Drilling Permit Approvals on Gulf of Mexico Businesses found that 41% of businesses are not making a profit. Other statistics of decline:

* 76% have lost cash reserves

* 27% of businesses have lost more than half of their cash reserves

* 50% of businesses have laid off employees as a result of the moratoria

* 39% of businesses have retained workers but reduced salaries and/or hours

* 46% of businesses have moved all or some of their operations away from the Gulf of Mexico

82% of business owners have lost personal savings as a result of the permit slowdown

* 13% of business owners have lost all of their personal savings as a result of the slowdown

Even if the current administration’s anti-energy policies are reversed, this study demonstrates that there is an opportunity cost in terms of lost business that will never be recovered. As the Pelican Institute has previously reported, over 10 oil rigs have already left the Gulf and more could leave soon in the absence of a reasonable regulatory environment that allows for robust energy production on the part of those companies with a proven safety record.

Additional information was given in yesterday’s press release: [Read more →]

January 31, 2012   No Comments

Twenty More Gulf Rigs at Risk: ‘Mikhail Obama, Tear Down This Wall’

[Editor note: Mr. Mooney's Collateral Damage: Lost Rigs from Obama Obstructionism appeared last month at MasterResource. His reports originally appear at the Pelican Post, Louisiana news and commentary from the Pelican Institute for Public Policy.]

Up to 20 oil rigs could leave the Gulf of Mexico, in addition to the 11 that have already left, since the Obama Administration imposed a moratorium on deepwater oil and gas drilling in May 2010, a new report from FBR Capital Markets has concluded.

Unless the permitting process is accelerated, FBR analysts anticipate that anywhere from eight to 20 rigs could depart the deep waters within the Gulf. The moratorium was imposed in response to the explosion of British Petroleum’s (BP) Macondo oil well on April 20 of last year. The accident resulted in the death of 11 workers and caused an estimated five million barrels of crude oil to spill into the Gulf.

De Facto Moratorium

Although federal officials announced they were lifting the restrictions last October, a “de-facto moratorium” remains in effect that stifles energy production and undermines large and small businesses in the Gulf region, industry officials have argued.

“I don’t think the people in Washington D.C. who implement these policies have an understanding of how much this has impacted our economy, especially in Louisiana,” Renee Baker, the state director for the National Federation of Independent Business (NFIB), has observed. “We can’t just look at the large businesses to understand what’s happening, there are small businesses that do a lot of services for the rigs and they have been set back.”

Although the Department of Interior (DOI) has been issuing permits with “relatively few political barriers,” according to the report, there are “limited bureaucratic resources” available to meet existing demands.

But Bonner Cohen, a senior fellow with the National Center for Public Policy Research (NCPPR), does see a political agenda at work: [Read more →]

September 14, 2011   4 Comments

Subsoil Privatization: The Ultimate Post-BP Spill Reform

Editor Note: This post complements a previous entry at MasterResource by Guillermo Yeatts,
Subsoil Oil and Gas Privatization: Private Wealth for the Common Good.]

Government intervention in free markets is prefaced on market failure. But no such rationale explains why federal and state governments have owned and managed hydrocarbon-bearing onshore and offshore lands. Government involvement can be explained by little more than the historical precedent of sovereign ownership of unowned property and of habit.

In a private property world, surface and subsurface areas would be unowned until the positive acts of discovery and intent to use. Under the “homestead” theory of first property title, the state of nature (unowned area) would not be the property of government but the first resource entrepreneur who, in the immortal words of John Locke, “tills, plants, improves, cultivates and can use the product of” the surface or subsurface to “enclose it from the common.”

Sovereign ownership would be displaced by a rational ownership system within the private sector, and individual accountability and economic incentives would reign over the inherent land-use conflicts on behalf of “all of the people.” The privatization process can follow many forms–such as a Cato Policy Analysis by Terry Anderson, Vernon Smith, and Emily Simmons, “How and Why to Privatize Federal Lands,” espousing a 20–40 year transfer. But other things equal, the sooner the transfer the better, so long as meeting the basic criteria as outlined by Anderson et al.: 

  • Allocation to the Highest-Valued Use
  • Low Transactions Costs
  • Broad Participation in Divestiture Proceedings
  • Recognition of Squatters’ Rights

As it is now, government ownership of a resource transforms authorities into central economic planners to answer the questions of who does what, when, where, and how much. Such is the position of the Department of the Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement (formerly the Minerals Management Service) in regard to offshore leasing and publicly owned onshore development.

If all subsoil rights had been socialized in the United States, a severe economic calculation problem would have existed for the Department of Interior. But a coexisting (and much larger) private lease market, at least on dry lands, has provided crucial information that Interior over many decades has used to make decisions.

Nonetheless, political control over swaths of mineral-bearing subsoil for over a century has led to administrative problems at Interior such as: [Read more →]

September 17, 2010   2 Comments

DeepWatergate: Administration Modifies Peer-Reviewed Report After it was Reviewed by Scientists

[This important press release from the Institute for Energy Research yesterday is reprinted for MasterResource readers this weekend.]

Politics, not science drove offshore drilling ban, 40K jobs sacrificed

Washington, DC – In the days following the Gulf oil spill, President Obama requested that the Secretary of the Interior conduct a 30-day review of the offshore drilling program in the United States and issue a report with recommendations. This report was to be “peer reviewed” by a team of seven engineers recommended by the National Academy of Engineering.  

The team of engineers reviewed, approved and signed off on a version of the 30-day review that was presented to them by the Administration. However, after they signed their names to this document, a significant change was made – a change that led to the 6-month suspension of deepwater exploratory drilling. Click HERE and HERE to view the section of the report that was modified after the scientists signed off on the report.

William LaJuenesse, a reporter with the Fox News Channel filed this report earlier today on this very topic:

Click HERE to watch this report
June 11, 2010
3 minutes, 5 seconds

What They’re Saying About Deepwater-Gate: [

June 12, 2010   2 Comments

The BP Spill: Self-Regulation, Public Property, and Political Capitalism

[Editor note: Some important facts are emphasized in this post: the Gulf oil spill occurred on property owned and managed by the federal government, and the operator-at-fault (BP) has been the most politically active in its industry. Sheldon Richman is editor of The Freeman magazine and www.thefreemanonline.org, where this article first appeared.]

With some 7,000 barrels of oil spilling into the Gulf of Mexico each day from BP’s exploded Deepwater Horizon well, offshore drilling and oil-industry regulation have returned to the front pages.

The familiar old trap is set: Do you want unfettered markets and oil spills or government regulation and safety?  The implied premise is that the oil industry operates in a free market. So, the argument goes, the only alternative is government regulation.

On first glance that story is plausible.

From USA Today:

The company that owns the offshore well spewing crude oil in the Gulf of Mexico and other major oil companies spearheaded a campaign to thwart a government plan to impose tighter regulations aimed at preventing similar disasters, according to government records.

Tighter regulations would have required that drillers perform independent audits and hazard assessments designed to reduce accidents caused by human errors, but the federal Minerals Management Service (MMS) has so far not imposed the rules in the face of near unanimous opposition from oil companies.

Oil executives — including BP, which leased the rig that exploded April 20 — argued that the industry had a solid environmental record and most companies had voluntarily adopted similar safeguards to protect against a major spill. They also said the new rules would have been too costly.

So: the MMS wanted to regulate, but the industry said it could regulate itself at lower cost, insisting it was a good steward of the environment. This is not to say that MMS was right and the companies wrong. For reasons provided below, government regulation is fatally flawed. Further, this is not just a simple matter of regulation. More fundamentally it’s a matter of ownership. The government has proclaimed itself the owner of the offshore positions where oil companies drill. In a free market those positions would be homesteaded and managed privately with full liability. In the absence of a free market and private property, built-in incentives that protect the public are diminished if not eliminated. Bureaucrats and “political capitalists” are not as reliable as companies facing bankruptcy in a fully freed market. [Read more →]

May 27, 2010   5 Comments

Turning Tragedy into Triumph (BP Gulf oil spill)

April saw two devastating disasters in the energy industry: a methane explosion at the Upper Big Branch mine in Montcoal, West Virginia that claimed 29 lives, and another explosion at the Deepwater Horizon drilling rig in the Gulf of Mexico, which took 11 more.  The latter incident, because of the tens of thousands of gallons of oil now pouring from the ocean floor each day, will impact the Gulf region for years if not for decades to come. 

These tragedies are a terrible reminder of the trial-and-error nature of life.  Humans have accomplished many wonders over the millennia – wonders that ended the vicious cycle of crushing poverty that has been mankind’s lot throughout most of history.

But these accomplishments have often come at a very high price.  Because it is in our nature to strive to better our condition and that of our children, life will never be without risk.  As terrible as the consequences of failure can be, it brings with it the seeds of hope.  Hope that we can learn from our mistakes and, if not succeed next time, at least not fail in the same way.  From such tragic lessons come knowledge and strength. [Read more →]

May 3, 2010   10 Comments

New Oil and Gas Study: Robust Oil and Gas Resources Could Be Developed for Consumers and Taxpayers (big opportunity for decision makers!)

At the NARUC Winter Meeting in Washington D.C. last week, a Study Group composed of regulatory commissioners, consultants, government and university economists, and non-profit association sponsors released their energy research report: ANALYSIS OF THE SOCIAL, ECONOMIC AND ENVIRONMENTAL EFFECTS OF MAINTAINING OIL AND GAS EXPLORATION AND PRODUCTION MORATORIA ON AND BENEATH FEDERAL LANDS
(Assessment of the Combined Relative Impacts of Maintaining Moratoria and Increased Domestic Onshore and Offshore Oil and Gas Resource Estimates).

The just released study, prepared by Science Applications International Corporation (SAIC) and subcontractor Gas Technology Institute (GTI), makes a resounding case for the federal government to consider exploration and production on land and offshore for the common good.  And far from being an ‘industry group’, the ‘Moratoria Study Group’ represented a formidable national body of public and private energy experts whose study found that consumers, the national economy, vast new employment potential  and national defense could benefit from plentiful, affordable and reliable domestic energy resources.

The study makes several important findings and public-policy points.

1. Increased Estimates of Domestic Oil and Gas Resources

The report increased government estimates of the U.S. domestic natural gas resource base from 1,748 Trillion Cubic Feet (Tcf) to 2,034 Tcf, and increased the estimate of crude oil resources from 186 billion barrels of oil (Bbo) to 229 Bbo.   It also revealed that a multi-trillion dollar impact on American citizens of not developing resources could result in increased energy imports; increased gasoline, natural gas and electricity prices; along with decreased jobs, gross domestic product and family disposable income.

2. Congress and President Removed Moratoria, but Resources Still Unavailable

“The previous Administration and Congress removed oil and gas moratoria on public lands over one year ago,” Study Group chair O’Neal Hamilton said, “but required actions to access the energy resources thought to exist there have not been taken.” (Hamilton is past Chairman of the South Carolina Public Service Commission and Chairman of the National Association of Regulatory Utility Commissioners’ NARUC Committee on Gas, which initiated the study in 2007.)

“Whether additional Federal lands should be leased for energy development–and under what conditions leasing should occur–is a matter for national energy policy decision makers,” Hamilton said.  “Our research allows policy makers to know the extent of the resource base and the effects that maintaining the restrictions would have on the country. Our public interest work is dedicated to giving decision makers information upon which they can rely in developing America’s national energy policy.”

3. Dramatic Negative Effects from Not Developing U.S. Resources [Read more →]

February 25, 2010   1 Comment

China Secures Oil and Gas Resources: U.S. Fiddles with ‘Green’ Energy

Around the world, China is investing in oil and gas resources to fuel its booming manufacturing industries and transportation sector to continue its sky-rocketing economic growth. China is not endowed with very much oil and gas resources of its own. Thus, it needs to partner with countries around the world to ensure availability of future supplies of oil and natural gas that it will need to keep up its current pace of economic growth.

The U.S., which does have oil and gas resources, is not following China’s lead in investing in these resources. Instead, the U.S. is looking toward wind and solar technologies to fuel its economy. However, wind and solar power are generating technologies and will not help where oil is needed in the transportation and industrial sectors.

Further, wind and solar power have capacity factors that cannot compete with those of fossil fuel generating technologies, and they can create instability issues with the electrical grid. They are also more expensive technologies and must have government support through tax credits to compete at all with fossil-fuel generating technologies.

China’s Investment in Oil and Gas

China has seized on the global recession to gain access to oil and gas resources and supplies. The atmosphere is ripe for Chinese firms to invest in these resources because:[i]

  • Acquisitions are now more favorable than they were in early 2008, due to lower oil prices and, hence, lower asset prices.
  • China is less constrained than many of its international counterparts in terms of where they can invest (e.g. Iran).
  • Financing is not a problem, because Chinese banks are willing and able to provide needed funds.
  • Competition for these assets in some areas has lessened.

Not only is China investing in places like Iran, Iraq, Kazakhstan, Nigeria, Venezuela, and Argentina, but it is in the U.S.’s backyard, looking towards usurping the U.S. supply of Canadian oil sands.  China is a good customer for Canada, as Canada fears that the U.S. may introduce a low carbon fuel standard[ii] or other legislation that would restrict our purchases of oil sands from Canada[iii].  China is also looking at a possible purchase of leases in the Gulf of Mexico where Devon Energy is looking to sell its U.S. leases.[iv] The sale of these offshore leases requires the approval of the Mineral Management Service in the U.S. Department of Interior. China is willing and able to be at the forefront of any misstep other countries make to gain a foothold and secure oil and gas supplies, and the U.S. seems to be giving it elbow room.

China is also investing in oil and natural gas pipelines to ensure access to its investments and to divert some of its oil imports from the Middle East away from the Straits of Malacca. [Read more →]

December 21, 2009   2 Comments

Tribute to Tiber: "Oil is Found in the Minds of Men"

[This piece, which originally appeared in the (Canadian) National Postcan be read in conjunction with MasterResource posts on "peak oil" here and here. A brief bio of Mr. Foster appears at the end of this post.]

The great petroleum geologist Wallace Pratt famously said that “Oil is found in the minds of men.” Discoveries depend on visionary theory, technical innovation and commitment to risky drilling. Plus luck. Peak Oil theory, by contrast -which asserts that global oil production has, or soon will, peak, and that this has powerful policy implications — is found in the limitations of the minds of men. It is less geological theory than unevolved intellectual shortcoming, although it certainly has its political uses.

The fruits of the “greatest resource,” as economist Julian Simon dubbed the human mind, appeared yet again this week with the announcement by BP that it had found a “giant” field at unprecedented depth in the Gulf of Mexico, an area that twenty years ago was regarded as played out. By contrast, the limitations and conceits that characterize Peak Oil were nicely summed up by a report on BP’s find in the leftist British newspaper, The Guardian.

According to that report, BP’s Tiber well, and another recent huge find in Iran, “have encouraged skeptics of theories which say that peak production has been reached, or soon will be, to hail a new golden age of exploration and supply.”

Note how the use of the term “skeptics” suggests that Peak Oil is the mainstream view, which it is not. The word also links unbelievers to beyond-the-pale climate change “skeptics.” Finally, the report suggests that these people are suggesting a “golden age of exploration and supply” although in fact the only relevant quote is from Peter Odell, professor emeritus of international energy studies at Erasmus University in Rotterdam, who merely says, “It’s an amazing turnaround from the gloom of the last 10 years. All these finds will take a long time to bring on stream, but it shows the industry is capable of finding more oil than it uses and shows we have not come to any peak.”

Peak Oil theory represents a combination of economic ignorance and moral rejection of markets as greed-driven and shortsighted. [Read more →]

September 9, 2009   5 Comments