Obama’s Energy Plan’s Dirty Secrets

By Karla Fetrow

Searching Safe Energy

The world is in a quandary.  Never before has it been so acutely aware of its energy needs and the environmental consequences for supplying them.  While Japan continues to battle with radiation leaks spreading into the sea and polluting the air, Germany forms anti-nuclear protests.  While the Gulf of Mexico continues to produce a dead zone for marine life, U.S. President Obama maintains off shore drilling is both vital to the economy and necessary as a means of transition to the use of low-environmental impact, renewable energy resources.  The problem, many people suspect, is not with the energy usage as much as with the companies themselves.

Japan’s inability to contain its nuclear reactors once they had been damaged and deadly radiation began to escape, illustrated clearly the dangers of nuclear power.  The lesson learned was though they had built a plant strong enough to withstand an earthquake, it could not withstand a tsunami.  This has caused cities with nuclear power plants built along coastlines to be more uneasy about their placement and to openly criticize the judgment that placed them there, but have not yet confronted the biggest problem; there is still no safe way to dispose of nuclear waste.

Nor does the development of nuclear power plants come cheaply.  In economic terms, it costs an estimated two-three billion dollars to build one.  In environmental terms, it means uranium mining.  In the nineteen seventies, radiation poisoning was found in the bellies of dead sheep kept on Navajo land close to the mines.  By the late nineteen eighties, most of these mines had been closed, but no clean up had been done and the mines still emit a health hazard for the inhabitants.  Despite this irresponsibility in protecting the eco-system, the Crownpoint Uranium Project, applied for and received a permit to begin mining once more for uranium on Navajo land in 2010.  The Navajo people along with the New Mexico Environmental Law Center, who have outlawed uranium mining  since 2005, are understandably very unhappy about the decision.

Radiation fears carry more impact than fears about oil development.  Radiation enters the air, the water, the food and has immediate long term effects on our health.  Because we can’t see it or taste it, we can only guess at how much damage radiation has done to us unless we’re in direct circumference with radioactive emissions, and produce primary symptoms such as burns, rashes, nausea and unusual bleeding.  EPA guidelines, like its reports on carbon emissions, is entirely dependent on a norm associated with urbanized living conditions, and not with actual detail on how much or how little is harmful.

Oil spills are the mistakes we can see with our eyes.  We can see their effect on wildlife, on the landscape, on the lives lost to oil explosions, but they are secondary consequences.  We do not see oil as a major threat to our daily lives.

Petroleum facilities such as oil and gas wells, compressor stations and storage tanks produce an estimated 2 to 3 percent of the greenhouse gasses within the United States.  In addition to carbon dioxide, the oil and gas facilities produce large amounts of methane — a natural gas component that is about 21 times more effective than CO2 at warming the atmosphere. Emissions from the oil and gas sector have the same effect as 40 million cars, according to EPA estimates.  Combine these emissions with the vehicles, the industries and the installations that are using oil and gas as their source of energy, and you have a rather substantial degree of oil induced emissions.  The invisible effects of oil produce as much endangerment to our daily lives as escaping nuclear radiation.  What is to be done?

The Future of Natural Gas

The truth is, the world isn’t quite ready to wean itself away from oil.  Despite subsidies, grants and programs to encourage the use of alternate resources, the results have been somewhat discouraging.  The main problem is, the initiative has been taken up on the individual and small company scale, while oil companies insist the endeavor is too expensive.

Their favored alternative is natural gas.  Natural gas first gained widespread popularity as a cheap, efficient source for heating.  Manufactured natural gas, produced from coal (as opposed to naturally occurring gas) was first brought to the United States in 1816, when it was used to light the streets of Baltimore, Maryland. However, this manufactured gas was much less efficient, and less environmentally friendly, than modern natural gas that comes from underground.

In 1938, the U.S. government first regulated the natural gas industry. At the time, members of the government believed the natural gas industry to be a ‘natural monopoly’. Because of the fear of possible abuses, such as charging unreasonably high prices, and given the rising importance of natural gas to all consumers, the Natural Gas Act was passed. This Act imposed regulations and restrictions on the price of natural gas to protect consumers.

During the 1980’s and on into the 1990’s, many of these regulations and restrictions were relaxed.  Natural gas proponents hailed this as a turning point event for healthy competition in the ability to develop and offer natural gas services.

To all appearances, natural gas has a very bright future.  There are natural gas deposits all over the world.  Estimates are that the natural gas reserves are plentiful, although there is uncertainty as to how plentiful as the estimate includes unconventional, unproved and undiscovered natural gas deposits.  Proven reserves consistently take up one tenth of the estimate given in cubic trillion feet, with shale gas and coal bed methane at 493 cubic trillion feet doubling the conventional amount in the United States.

Shale gas involves fracturing shale rock to release the gas lying below it.  The method, called fracking, is done under hydraulic pressure.  As the gas rises to the surface, so do a variety of air pollutants, such as benzene, xylene and carbon disulfide (neurotoxicants), along with naphthalene (a blood poison) and pyridines (potential carcinogens).  The town of DISH (formerly Clark) near Fort Worth Texas, sits at the heart of a pipeline network that turned to exploiting the Barnett Shale, a geologic formation more than two kilometers deep and more than 13,000 square kilometers in extent, holding as much as 735 billion cubic meters of natural gas.  In 2010, EPA conducted a test of seven samples throughout the town with findings that the amount of toxins at all seven sites were at least 55 times higher than the Texan Commission on Environmental Quality deemed safe.

The Promises of a Natural Gas Pipeline

Thousands of miles worth of natural gas pipeline exists in the United States alone.  Canada provides twelve percent of the natural gas consumption, making it the Nation’s largest importer of this reserve.  Among the proposals considered for development by the energy commission is a natural gas pipeline that would begin in the North Slope, Alaska, and extend its way down through Canada to connect with the existing pipeline network.  At 266 trillion cubic feet, Alaska’s conventional proven natural gas reserves are higher than the combined assets of the Continental United States conventional reserves by nearly thirty trillion cubic feet.  This should make Alaskans happy, but it doesn’t.

The proposed natural gas pipeline has been bogged down by a number of complications, including who is going to pay for and maintain the pipeline that extends through Canada, approval from the Native Communities over which much of the pipeline would pass through, and the guarantee that the venture would be profitable.

There are three different visions for the physical configuration of the Alaska natural gas pipeline. One vision—the southern route—supports the construction of a pipeline that would serve lower 48 natural gas markets exclusively, following the TransAlaska Pipeline System to Fairbanks and then the Alaska Highway into Canada. A second vision—the northern route—as proposed by the North Slope producers, advocates a pipeline route going east along the Alaska’s north coast to the Mackenzie Delta in Canada and then proceeding south to the lower 48 States. In 2002, the producers estimated that the northern route would cost approximately $800 million less to build than the southern route, because it would be about 338 miles shorter and would traverse less mountainous terrain. In 2001, Alaska enacted legislation to foreclose the northern route. A third view—the south central design—supports the construction of a pipeline that would transport natural gas to south central Alaska, both to serve local consumers and to provide LNG to overseas consumers.

The three pipeline proposals are based on fundamentally different priorities. The northern and southern routes are premised on the notion that an Alaska natural gas pipeline would be economically feasible only if it captured the greatest possible economies of scale (the greatest pipeline throughput), thereby ensuring the highest possible wellhead price for North Slope natural gas and the greatest State royalty collection. The south central design is premised largely on the idea that, because natural gas reserves in the Cook Inlet region are declining, North Slope production should be transported to south central Alaska to ensure the future availability of natural gas to that region’s consumers.

After 40 years of opposition from Canadian Indian and Eskimo groups and from environmentalists, a pipeline to carry Arctic gas to southern Canada has won support of native groups and been given federal approval.

The 1,200-km-long pipeline was first proposed in the 1970s, but was opposed by native and environmental groups who claimed the pipeline, which is expected to be built above the ground, would disrupt the migration of caribou herds. Natives living in the region said they depended on these animals for food.

If the pipeline is built, it will involve ownership by aboriginal people in the Mackenzie Valley, a groundbreaking approach to aboriginal partnership. The Indians and Inuit of the western Arctic are expected to have a 3-billion-Canadian-dollar (2.95-billion-U.S.-dollar) stake in the 16-billion-dollar (15.7-billion-dollar) pipeline.

Alaskan legislators are still not convinced the project will be profitable.  On April fourth of this year, they introduced a bill that would remove them from continuing to reimburse the TransCanada Corporation for a feasibility report they say they haven’t received.  The state has reimbursed TransCanada $50 million so far and anticipates spending about another $75 million by July.

TransCanada’s Palmer said his company’s legal department won’t put out an opinion of the bill before it passes. But he said that, as a businessman, he sees it as a breach of the contract.

TransCanada did miss a self-imposed deadline to have signed agreements with gas shippers by the end of 2010. Palmer said his company is still working to complete the deals, called precedent agreements.

Palmer said the agreements haven’t happened yet because the shippers requested changes that are being negotiated. He said other factors are uncertainty over the disputed Point Thomson field on the North Slope and how much the state will tax.

Roger Marks, an oil and gas consultant working for the Legislature, told the House Finance Committee he believes it is not economically feasible to commercialize North Slope natural gas in the near future.  The markets have changed enormously since the state awarded TransCanada the AGIA license in 2008, he said. The main reason is the huge shale gas reserves in the Lower 48, Marks said.

Monopolizing for Profit

The underlying message in the entire debate addressing practical energy use is not over the degree of environmental impact or the beneficial applications to the inhabitants, but the amount of profit involved with development.  The McKenzie route, which would carry the natural gas pipeline directly to Canadian transport into the United States would bypass the bulk of the Alaskan population who live in Southeast/ South Central Alaska, giving them no direct benefits.  Although knowledge of the uses for natural gas has been with us for a long time, investors took no real interest in its development until price and environmental controls were deregulated.

The problem is with the companies.  President Obama’s announcement that he would cut back more on imported oil to develop more of our domestic resources did not worry the oil companies so much as it did the world trade market.  Canada, the largest importer of oil to the United States, supplies the US with nine percent of its total energy demand for crude oil and petroleum products, eighty-seven percent of the natural gas imports, and one third of its uranium.

The U.S. initiative comes after Secretary of State Hillary Clinton delayed a decision on TransCanada Corp’s $7 billion Keystone XL pipeline, which would ship more than half a million barrels a day of Canadian crude as far south as the U.S. Gulf Coast.

Environmentalists and some U.S. politicians, who oppose the pipeline’s route across many states as well as increased oil sands development, have called for its rejection. TransCanada contends it would create U.S. jobs and boost energy security.

Even Russia was a bit uneasy about the announcement, feeling that a reduction in America’s spending spree with foreign oil could drive down global oil prices to $10 – $20 a barrel.  They reasoned however, that this was no time to panic.  America’s refusal to import oil could take ten years to finalize.  The practical application for Russia would be to use Obama’s plan as a stimulus for modernization and diversification of their own economy.

President Obama’s contention is that development of our own domestic resources will lead to new jobs, which is reasonable.  However, his development plan is raising the hairs on the environmentalists who banded behind his green energy wagon.  His focus was primarily on increased off-shore drilling and shale natural gas, both of which are far more environmentally hazardous than surface drilling and tapping conventional natural gas deposits.

Fighting Big Oil; An Alaskan Legacy

Another question arises; while domestic oil and natural gas production would generate more jobs, would it bring down the gas and oil prices?  Most oil rich states would say, probably not.  The heating costs, fuel prices and petroleum products aren’t any cheaper in an oil rich state than they are anywhere else; sometimes more expensive.  Nor is taxing the companies going to alleviate the working man’s expenses.  In 2007, Alaska instated a twenty-five percent tax base and surcharge that triggered when the company’s net profit hit $30 a barrel.  The companies promptly added the tax costs to the price of gasoline at the pumps, so that the consumer was essentially paying the oil company taxes.

Alaskan Governor Parnell plans to cut the oil tax rate as a means of attracting new production.  The oil companies say the surcharge cuts too deeply into their profits.  Over the last few years, oil production has declined and companies have been accused of sitting on their leases.  Many of the constituents feel bitter and frustrated.  While the companies say they want lease holdings in the Chukchi Sea and ANWR, they have not begun to develop North Slope oil, whose leases they have held since the 1070’s.  It’s not a matter of Alaska running out of oil.  It’s a matter of the oil companies wishing to monopolize Alaska’s energy resources.

Fighting the big oil companies is no easy task, and perhaps no state knows this better than Alaska.  The negotiation for the Alaskan Pipeline not only insured the State would receive a hefty portion of revenue, but that each and every citizen of Alaska would benefit from the proposal.  In a stroke of genius, the acting Governor Jay Hammond at the time, passed a bill in which a separate fund would be placed aside for the citizens, making them stock holders in the oil market, and receiving a yearly dividend.

Alaskan environmental rules are strict.  When the Exxon Oil Spill occurred off the Coast of Valdez in 1989, the State petitioned for and won a five billion dollar lawsuit for the punitive damages to fishermen, Alaskan Natives, and businessmen.  In  2006 Exxon appealed, the damages were cut in half.  In 2009, another appeal dwindled the damages to $507.5 million.  Not only did Exxon shirk their financial responsibility; they didn’t clean up their mess.  Local volunteers did; among them, the fishermen, Alaskan Natives and businessmen who had taken such heavy losses.

Recent years have seen increased hostilities toward the two leading oil producers, Exxon and British Petroleum.  The pipeline they built is aging and is beginning to corrode.  Each year, the line springs another oil leak, adds another spill into the tundra.  This year, the flow of oil stopped twice, due to the faulty machinery.  The State of Alaska has ordered the companies to upgrade the pipeline, but they have failed to do so.  These two producers, Exxon and British Petroleum, are also the ones who have said they would invest in a natural gas pipeline.  Alaskans are very dubious they wish to place their valuable resources into these hands again.

Ten Years for America to Take Back Its Resources

America will not benefit from depending on the same companies to increase its domestic production as are  supplying the current domestic oil and natural gas.  These giants have already illustrated their wanton disregard for environmental safety, State laws and fair service rates. Their tactic is to monopolize the land use leases, the energy supply contracts and permits to control the price of energy and to create artificial shortages that warrant new exploration for development that may or may not come.

This tactic is solely to present the illusion that we need them more than they need us so we will accept high prices, negligence and the dangerous release of toxins.   This tactic is used as an excuse for hazardous but cheap drilling, for not adding safety features or monitoring plants and refineries for faulty equipment.  This tactic is used to renege on State contracts, to circumvent clean air and water laws, and to escape responsibility for environmental damages.  After all, we can’t boycott our energy usage.

With a little effort, we can boycott the major companies.  Individual states could work with independent companies that will agree to work within state guidelines, giving something back to the inhabitants for the privilege of developing their natural resources.  They could abolish the mentality of highest bidder and take into consideration the ones most compliant with paying state taxes and maintaining a healthy environment.

President Obama expresses at least a superficial concern for the plight of the worker whose gasoline consumption and energy use take at least half the paycheck.  He could implement and enforce laws against price gouging.  He could realize what the companies apparently do not; that by allowing the companies to control the prices set on energy development and service, they are affecting the entire business and industry sector.  Higher energy prices increase the costs of production and transportation.  When workers use over half their checks simply for gasoline and utilities, they have only enough left over for their basic needs.  They cannot afford vacations, new automobiles, dining once a week at restaurants.  Hotels, recreational facilities, product manufacturers suffer.  Businesses shut down, decreasing energy consumption but adding more unemployed workers to the streets.

The energy companies need us as much as we need them.  They need our permission to use our natural resources.  They need consumers for their supply.  The big companies do not hold the exclusive knowledge for production and refinement.  In the State of Alaska, there are many among the constituents and law makers who are seriously considering buying back the leashes or letting them expire without renewing them so they can finance their own development.

President Obama has given ten years for the increased development of our own natural resources; development that essentially relies on off-shore drilling and natural gas shale fracturing, with contracts going out to the biggest natural resource offenders.  We can sit silently, waiting as the final nails are hammered into our coffins, or we could energetically search for our own alternatives.  We have ten years to find companies that will not gouge us with obscene profit margins, that will use low impact environmental technology and will directly benefit the true owners of the natural resources; the inhabitants.  We have ten years to tell the ones who pollute our coastal plains, destroy our marine life and release toxic gasses into the environment, sorry we don’t need them.  We were given a better offer.