Big Oil Rules Washington: White House Opens Doors to More Production and Industry Tax Breaks Will Likely Remain in Place


The White House is playing Russian roulette with offshore drilling, putting the environment and American livelihoods in jeopardy. With just over a year gone by since BP’s massive spill devastated the Gulf Coast, President Obama’s decision to boost U.S. oil production and exploration both in the Gulf of Mexico and off the Alaskan coast is ill-advised and presents a risk we simply can’t afford. Russian roulette is a potentially lethal game of chance – and the White House is gambling with our future.

And for what? The Administration’s efforts won’t have any impact on sky-high gas prices – at least not in the near term – as Americans get ready to hit the road for summer vacation. Today, the average price for a gallon of gas nationwide is nearly $4, with some city gas stations charging upwards of $5. But, as maddening as that is, just about everybody agrees that the new White House production push will not translate into savings at the pump for at least five years.

So what gives, Mr. President?

Even as observers sighted a large oil slick last week near the old Deepwater Horizon site (see link below) and re-oilings remain common up and down the Gulf Coast, President Obama is extending all leases in the Gulf of Mexico that were stalled by a temporary moratorium on offshore drilling put in place in the wake of last year’s spill. He will extend lease terms in Alaska for a year as well (oil leases typically run 10 years), giving companies more time to begin drilling and producing oil.

While the Republican “Drill, Baby, Drill!” crowd celebrates the president’s new pro-production stance, many Democrats are questioning his prudence and dedication to protecting the environment. Sen. Robert Menendez (D-NJ), an opponent of drilling off the coast of Alaska, wrote this in a statement: “I think it is disappointing he (President Obama) would pursue a strategy that comes with considerable risk while offering no hope of driving down gas prices.”

Considerable risk, indeed. A spill in Arctic waters could be even more catastrophic than the Gulf spill because logistical challenges make the response infinitely more difficult. This from an April 30 Associated Press report:

A year after the disastrous Gulf oil spill, the prospect of a major accident in oil’s next frontier – the icy waters off north Alaska – has experts even more concerned.

With no roads connecting remote coastal towns, storms and fog that can ground aircraft, no deep-water ports for ships and the nearest Coast Guard station about 1,000 miles away, it would be nearly impossible to respond on the scale that was needed last year to stop the runaway oil well and clean up the mess. That means the burden to respond would rest to an even greater degree on the company doing the drilling.

And this from the same AP article:

Booms, depending on the degree of ice cover, can freeze. Ice can also clog the suction devices used to mop up spills, diminishing how much oil can be collected. Depending on the time of year, even daylight can be scarce.

Based on the confused, slow-starting, poorly executed Gulf spill response, the prospect of an Alaskan disaster should keep President Obama up at night – not to mention the rest of us.

Pressure at the pump may have had an impact on the White House decision to embrace increased production, but the president could open up waters from here to Timbuktu and it wouldn’t change America’s most fundamental energy problem: Our demand for oil far exceeds our supply. America consumes 20 percent of the world’s oil but produces only 5 percent of it. Clearly, not a model of sustainability.

We must move much more quickly and decisively toward curbing our addiction to oil rather than taking enormous risks to feed it. We have long treated our energy policy like our monumentally unsuccessful policy on drugs, which centers on interdiction. We spend too much time and money on trying to keep drugs out of the country instead of trying to deal with the real problem of demand at home. If you cure the addiction, the demand withers away. Just ask any reformed junkie. Instead of assuming the huge risks that are inherent in deep-water drilling, we must treat the addiction through conservation and new forms of clean energy.

Until we get serious about renewable energy, Big Oil will continue to get exactly what it wants from Washington – and the public will suffer as a consequence. From Alter NOW, a blog covering industry trends:

The United States has fallen to third place – behind China and Germany – in the development of clean energy sources, according to a new report from the Pew Charitable Trusts.

“The United States’ position as a leading destination for clean energy investment is declining because its policy framework is weak and uncertain,” said Phyllis Cuttino, director of Pew’s Clean Energy Program. She said that the U.S. could lag behind even more as competitors adopt renewable energy standards and incentives for investing in solar, wind and other forms of clean energy. “We are at risk of losing even more financing to countries like China, Germany and India, which have adopted strong policies such as renewable energy standards, carbon reduction targets and/or incentives for investment and production,” Cuttino said.

Some may argue that Obama’s pro-production position is a political move to push through a Senate bill that would end billions in taxpayer subsidies for the oil industry – and help reduce the deficit. In the quid pro quo arrangement, the president would open doors to more production (and profits) and in return he would get the “no more subsidies” bill passed. I could almost live with that, but unfortunately that scenario seems unlikely at the moment.

According to a May 14 Associated Press article:

Obama on Saturday…reiterated his call on Democrats and Republicans to vote to eliminate $4.4 billion in taxpayer subsidies to oil and gas companies. Industry advocates, including most Republicans in Congress, have argued that doing away with the tax breaks will raise companies’ cost of doing business, crimp their investment in exploration and production and lead to higher gas prices.

The 41 U.S. oil and gas companies that break out their federal taxes said they paid Uncle Sam $5.7 billion in 2010, more than any other industry, according to data compiled by Compustat. Exxon alone paid $1.3 billion.

The industry’s federal tax bill would rise 70 percent without the subsidies, but it would remain highly profitable: Oil companies’ combined pre-tax profits could hit $200 billion this year.

According to President Obama (and I believe he speaks for most level-headed folks): “The American people shouldn’t be subsidizing oil companies at a time when they’re making near-record profits.”

Despite what seems to be no-brainer legislation – particularly when we are searching desperately for ways to bring down the deficit – all of my political contacts tell me the bill won’t pass and the tax breaks will stay in place.

The take-away from all of this is that Big Oil continues to hold sway in Washington – pretty much taking what it wants, when it wants. That position of power hasn’t changed from the flagrantly pro-oil Bush Administration, and it hasn’t changed since the BP oil spill. We’re back to business as usual, and it comes at a very high risk – racing headlong toward disaster.

I hate to pick on the president, because I think he’s doing a pretty good job under very difficult circumstances (most brought about by the poor stewardship of Bush II). However, when you want to find out exactly why a decision was made in Washington, you need to follow the money. Take a look at these numbers from a May 5, 2010 Politico article:

BP and its employees have given more than $3.5 million to federal candidates over the past 20 years, with the largest chunk of their money going to Obama, according to the Center for Responsive Politics. Donations come from a mix of employees and the company’s political action committees – $2.89 million flowed to campaigns from BP-related PACs and about $638,000 came from individuals.

On top of that, the oil giant has spent millions each year on lobbying – including $15.9 million last year alone – as it has tried to influence energy policy.

During his time in the Senate and while running for president, Obama received a total of $77,051 from the oil giant and is the top recipient of BP PAC and individual money over the past 20 years, according to financial disclosure records.

It’s clear that Obama is no stranger to contributions from Big Oil – and to survive in politics, you have to protect your donors.

The bottom line is this: The oil industry will continue to have its way in Washington – at the peril of the American people – until our elected officials get serious about alternative energy. In the absence of that sort of progressive leadership, we will take bigger and bigger risks to feed our addiction and offer bigger and bigger concessions to curry favor with Big Oil.

In our oil-fueled, high-stakes game of Russian roulette, it’s only a matter of time before another disaster rips through our national psyche. And that’s not pessimism, it’s just plain old realism.

Here’s an overview of the Obama Administration’s new pro-production push:

Catch up on the slick that was sighted out by the Deepwater Horizon site last week:

Read more about how risky it is to drill in Arctic waters:

Check in with Alter Group on how the United States ranks in developing clean energy sources:

See my previous post on how far we have to go before we get deep-water drilling under control in the Gulf:

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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