Daily Archives: April 19, 2011

Papua New Guinea: Developing independent policy for regional aid.


18 April 2011

Opposition deputy and foreign affairs spokesperson Julie Bishop‘s recent comments about the role of Chinese aid in the Pacific has opened a can of worms.

Her proposals are inspired by a Lowy Institute report China in the Pacific, which suggests Australia partner with China on aid delivery projects in the Pacific.

Bishop was quoted as saying:

“We’re not going to be able to crowd them out with aid, but what we could do is join with them and be part… of their push into places like PNG.”

The argument goes something like this:

China delivers aid in the region in an apparently haphazard way that undermines internationally coordinated responses to issues such as countering corruption, efforts to strengthen governance and develop local ‘capacity’.

In fact, China ignores internationally normative ‘governance’ questions such as corruption and human rights, delivering aid and malleable ‘soft loans’ in an effort to advance narrowly defined national interests.

The suggestion that Australia, as the most significant aid provider in the region, should engage the Chinese in established international norms of coordinated aid delivery is consistent with ideals about Australia being a good international and regional citizen.

But the proposal flies in the face of established conventions and practices of Australian foreign policy.

The Australian’s guardian of this ‘realist’ foreign policy mainstream, Greg Sheridan, for example, is appalled by Bishop’s statement. He has tarred Bishop’s ideas as a ‘nonsensical thought-bubble’ and laid responsibility for the ideas with the Lowy Institute which, in his view, has no place in the cut and thrust of international politics.

For Sheridan, Australia’s only role as a middle-power in the Pacific is to remain firmly and loyally wedded to the American imperium.

While I doubt we’ll hear Bishop repeat the Lowy Institute proposal, her contribution should be welcomed for opening a broader discussion about Australia’s role in the rapidly-changing region.

Bishop is right to suggest that Australian foreign policy should engage much more actively with the region and avoid the tragic distraction of US wars far away. Where Bishop, the Lowy Institute and the realist mainstream might be wrong, is in understanding what is already going on in PNG.

In particular, it neglects the deep unrest at the ‘grasruts’.

One source of grassroots unrest is the $US16.5 billion Exxon-Mobil led consortium bringing gas from the Southern Highlands to a processing plant in Port Moresby and on to energy-hungry markets in Asia. This is the big development story in PNG today.

The 30-year project is expected to generate $US5.6 billion in royalties, taxes and dividends lifting PNG from its lowly ranking at 148 (out of 182) nations in the UN Human Development Index. The hope is that it will bring quality schools, healthcare and infrastructure to people across the country.

The first indications are not good. Landowner groups are demanding transparency from the agency which distributes their royalties apparently at whim, and provides no accounts or explanations of hefty ‘management fees’.

At the local level, royalty disputes have already led to acrimonious community divisions with at least 15 reported shooting deaths at either end of the pipeline, and construction sabotage and stoppages at the well.

The consortium appears to have washed its hands of the royalty distribution issue, preferring instead to talk up its distribution of 14,000 anti-malarial mosquito nets to pipeline communities in glossy ‘social and environmental impact statements’.

Meanwhile, the Chinese-run Ramu Nickel mine has led to even deeper resentments. There is deep community unrest over the damage being done to the Ramu river catchment and the authoritarian and contemptuous response at the mine to local concerns. The regional capital Madang has seen big anti-Chinese riots, as have parts of the highlands where a new wave of small-scale Chinese entrepreneurs are bitterly resented.

As the US-China dynamic becomes more complicated and control of regional resources more crucial, ‘middle power’ Australia needs to make some principled, long-term choices. One of those would be recognising that Australia’s long-term national interest lies with supporting local communities and emergent civil society organisations which have the resilience to weather the approaching storms and perhaps call their governments to account.

This will mean stepping out of the shadow of whichever great power we habitually attach ourselves to, and having a truly independent foreign policy. I don’t think that’s a ‘thought-bubble’ Bishop, Sheridan or the Foreign Minister Rudd can even begin to imagine.

Peter Phipps

Dr Peter Phipps is a senior lecturer in Global Studies and a researcher with the Globalism Research Centre at RMIT University.

Original Article

LNG Project – Papua New Guinea – PART III


Financial Institutions involved


ANZ profile

  • approached/interest: (October 2009)
    source: Post Courier (Tuhome.htm)

Bank of Tokyo Mitsubishi UFJprofile

  • project finance: project finance: participating in syndicated loan of US$ 1.8 billion (December 15, 2009)
    source: Index.html

BNP Paribasprofile

  • approached/interest
    source: Finance International (November 04, 2009)

China Development Bankprofile

  • approached/interest
    source: Finance International (November 04, 2009)

Crédit Agricole profile

  • approached/interest: (November 11, 2009)
    source: Finance International

DnB NORprofile

  • approached/interest
    source: Finance International (November 04, 2009)

Intesa Sanpaoloprofile

  • approached/interest
    source: Finance International (November 04, 2009)
  • project finance: participating in sydicated loan of US$ 900 million (December 15, 2009)
    loan covered by SACE

Mizuho profile

Natixis profile

  • approached/interest
    source: Finance International (November 04, 2009)

Société Généraleprofile

  • advisory service
    Acting as Financial Advisor
    source: Reuters Basis Point (July 30, 2009)

Standard Chartered profile

  • approached/interest
    source: Finance International (November 04, 2009)

Sumitomo Mitsui Banking Corporationprofile

  • approached/interest
    source: Finance International (November 04, 2009)
  • project finance: participating in syndicated loan of US$ 1.8 billion (December 15, 2009)
    source: Index.html

UniCredit Groupprofile

  • approached/interest
    source: Finance International (November 04, 2009)
  • project finance: participating in sydicated loan of US$ 900 million (December 15, 2009)
    loan covered by SACE

Westpac Banking Corporationprofile

  • approached/interest
    source: Finance International (November 04, 2009)

multilateral development banks

Asian Development Bank (ADB)

export credit agencies

Export Finance and Insurance Corporation (EFIC)

Export-Import Bank of the United States (Ex-Im Bank)

  • approached/interest
  • corporate loan: US$ 3 billion (December 4, 2009)
    financing subsidies to Exxon

Italian Export Credit Agency (SACE)

Japan Bank for International Cooperation (JBIC)

French investment bank Societe Generale is acting as financial advisor. ADB provided some early on technical assistance.

In December 2008, ExxonMobil met with up to 70 representatives from credit agencies and banks. So far, it has been reported that up to $2 billion in financing will come from 17 interested banks, including four Australian banks (CBA, NAB, Westpac and ANZ). Read more.

JBIC, Ex-Im, EFIC along with other ECAs have pledged about US$8.3 billion in financing, with Ex-Im having announced its support for the same amount, making it the largest financing subsidy in its 75 year history.

applicable policies

Equator Principles should apply to this project.

LNG Project – Papua New Guinea – PART II


Dodgy Aspects

Social Impact

The project´s Social Impact Assessment (SIA) indicates that an estimated 80% of the construction workers will be expatriates, meaning a large influx of workers can be expected to pose the same risks as were manifested on other similar projects of this scale. The influx of thousands of mostly male workers who are necessary to construct the project can lead to an increase in violence and sexually transmitted diseases in local communities and an increase burden on community health, human services and other social infrastructure.

The impact of HIV/AIDS can be a two-way catastrophe, with increased exposure from expatriate workers to local people and from local people to expatriate workers who then move on to infect other people in other countries once they leave the project area.

The PNG LNG project will result in involuntary resettlement, including resettlement of indigenous people. Up to date an involuntary resettlement plan and a draft Indigenous Peoples Resettlement Plan has been completed, despite the fact that irreversible project decisions may have already been made and construction is soon to commence, if not already started.


Onshore pipleline impacts:
Construction of the onshore pipeline will have significant and irreversible environmental impacts on the existing environment. Environmental impacts from construction of pipeline Right of Way (ROW) include stripping of native primary forest and other vegetation of varying conservation value, exposure of top soil causing erosion and potential soil contamination from the construction process.

In order to install the onshore pipeline a total of approximately 2,809 ha of land will be cleared, half in areas not previously disturbed by oil and gas developments. A Right Of Way (ROW) of 30m to 60m will be required and the pipeline will cross 26 major water crossings, 138 minor water crossings and will cross the Kutubu Wildlife Management Area.
A 10m ROW will be retained for access road to the pipeline after completion of the pipeline. 1055 hectares of primary tropical forest will be cleared and an estimated 86% of primary tropical forest losses and 82% of losses in Classes A1 and A2 (1,220 ha) are concentrated in five broad vegetation groups.
Erosion is specifically an issue in areas of step grades (20%-50%) and may result in increased sediment in waterways and erosion.

Offshore pipeline impacts:
The PNG LNG project also proposes a 407 km offshore pipeline from Omati River Landfall to Caution Bay and a new LNG facility in Port Moresby. The pipeline will traverse the Gulf of Papua. Impacts from the laying, testing and operation of the pipeline include increased sedimentation rates resulting from trenching. Increased sedimentation reduces light penetration and stunts growth of marine biota.

Plant and Infrastructure impacts:
LNG liquefaction plants typically rely on their own supply of gas as a source of power to supercool gas for export. The use of this gas as a power source results in pollution emissions of NO2, SO2 and PM10.

The PNG LNG project is anticipated to have significant greenhouse gas emissions, contributing to climate change.

Human Rights

Security concerns:
Papua New Guinea (PNG) landowners and other non-state actors have increasingly expressed frustration over the PNG LNG project’s potential impacts and lack of adequate benefits sharing. The recent incident of landowners commandeering a gas plant obviously raises the potential for similar or more direct action aimed at PNG LNG that the company and the PNG government could perceive as a security risk. Invariably, under such circumstances private or public security services will be retained to protect perceived assets. Unfortunately, there is a long history of such security forces committing severe human rights abuses, especially on extractive industry projects, including by some of the corporate actors associated with this project. Such a potential for violence and human rights abuses also greatly increases a diverse set of risks for potential public and private financiers.

Other Issues

Corruption concerns:
Recently, a front end engineering and design contract was awarded to Eos, which is a joint venture of the Australian firm, WorleyParsons, and the US firm, Kellogg, Brown and Root (KBR). On September 3, 2008, Mr. Stanley, a former CEO of KBR, pleaded guilty to helping orchestrate a scheme involving $182 million in bribes paid to secure engineering, procurement and construction contracts for the Nigeria LNG project, Bonny Island, Nigeria. In February 11, 2009, KBR pled guilty and agreed to pay jointly with Halliburton $579 million in penalties in the second largest Foreign Corrupt Practices Act criminal fine in history.

Now, KBR is playing a similar contractor role on PNG LNG. Potential funding of the project will benefit KBR and will send a message that corruption is being rewarded, rather than punished.

PNG is already one of the most corrupt countries in the world, and the oil and gas sector is, along with the forestry sector, beset with corruption. So far, the PNG government has steadfastly refused to sign the Extractive Industries Transparency Initiative (EITI), the international standards that require signatory governments to publicly report revenues from oil, mining and gas ventures so as to decrease the opportunity for corruption and waste by state officials. By remaining a non-signatory of these standards, the PNG government officials are keeping themselves outside of any requirements to be transparent about how to spend the windfalls that will be coming to PNG.

Oversight for the LNG Project is in the hands of Arthur Somare, Public Enterprises Minister and son of the Prime Minister Michael Somare. In theory, the PNG Governement’s 19% stake in the deal is supposed to be controlled by the state-controlled oil and gas corporation Petromin.

However, control of the PNG LNG project has been handed over to the Independent Public

Business Corporation (IPBC). The IPBC, it is alleged, is controlled by Arthur Somare, who will therefore be able to control be able to direct the dispersal of the revenues once they start to flow into the country. Somare was able to raise the PNG Government’s stake in the project by securing a billion-dollar loan from the Abu Dhabi Government, for which he has been criticised.

Part III

LNG Project – Papua New Guinea – PART I

Ongoing Campaign Effort

last update: Apr 14, 2011


Proposed LNG liquefaction and Storage Facility


Liquified Natural Gas (LNG) is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume for transportation by ship to destinations not connected by pipeline.

The PNG LNG project aims to exploit gas resources of the PNG Southern Highlands and sell the resulting LNG (Liquified Natural Gas) on the open market, particularly to Asia. This will be the largest industrial/development project in PNG’s history – it is projected to completely transform the PNG economy. It is one of the largest, if not the largest, development project in the Pacific region, excluding Australia. The official economic impact survey commissioned by the project sponsors claims that it will double the size of the PNG’s Gross Domestic Product.

The project will draw on the gas resources of the Hides, Angore, Juha, Gobe, Moran and Utubu fields. It is expected to have a life-cycle of 30 years with production beginning in 2013. The US$15 billion project involves construction of:

  • A gas pipeline running onshore from Juha to Hides, then to the coast near Kopi, then offshore to the LNG plant site.
  • New onshore production facilities in the highlands, including a production facility at Juha and a conditioning plant at Hides where the condensate from the gas will be collected and transported by pipeline to Kutubu.
  • A LNG processing and liquefaction plant near Port Moresby, plus a nearby export jetty and numerous marine offloading facilities.

Full construction in planned to commence early 2010 and first LNG sales are due early 2014. Long-term supplies have been secured to CPC Corporation in Taiwan, Osaka Gas Limited Company, Tokyo Electric Power Company Limited, and Unipec Asia Company Limited, a subsidiary of China Petroleum and Chemical Corporation. The project will have a capacity to produce 6.3 million metric tons of the fuel a year.

Current Status (Jun 10, 2010)

The final deal between the project sponsors and the PNG government was signed on 8 December 2009, the day of the Final Investment Deadline (FID). After completion of the financing arrangements in March 2010 the project moved into a full execution phase. The overall PNG LNG scheme is now at an early stage of a four-year construction period. At the current time design, pre-mobilisation and early site works are underway.

Approximately 60,000 landowners are estimated to be directly affected by the project. PNG law mandates that all investment deals include benefit sharing agreements between landowners, the government and the company. One week before the FID, hardly any landowner groups had signed benefit sharing agreements.

Brief History

On December 15, 2009 the Italian export credit agency, SACE agreed to cover 900 million Euro for contracts to Saipem and Nuovo Pignone, which are financed by Banca Intesa and Unicredit. Thus SACE is financing the project through the project finance component.

On December 15, 2009, The Japan Bank for International Cooperation (JBIC) signed a loan agreement in the aggregate amount of up to 1.8 billion US dollars to be implemented in Papua New Guinea (PNG) with its project company, Papua New Guinea Liquefied Natural Gas Global Company LDC. The loan, provided in project financing is co-financed with a commercial bank syndicate (including Sumitomo Mitsui Banking Corporation, Mizuho Corporate Bank, Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd.) and overseas export credit agencies (including The Export-Import Bank of the United States, The Export-Import Bank of China, SACE S.P.A. in Italy, Export Finance and Insurance Corporation in Australia) and Nippon Export and Investment Insurance (NEXI).

On December 8, 2009, the Australian goverment agreed with a $US500 million loan. The loan is to be provided to the project sponsors through Australia’s Export Finance and Insurance Corporation (EFIC).

On December 8, 2009, the final deal between the project sponsors and the PNG government was signed, the day of the Final Investment Deadline (FID).

On December 4, 2009 the U.S. Ex-Im Bank’s approved the project and the provision of $US3 billion in financing subsidies to Exxon. Read more…

Companies Involved



BAM Clough Joint Venture


Esso Highlands Limited


Mineral Resources Development Corporation

Oil Search



The project has four major sponsors: ExxonMobil through its subsidiary Esso Highlands (33.2%); the Australian companies Oil Search (29%) and Santos (13.5%); and, the combined s take of PNG state corporation Petromin Holdings Ltd (0.2%) and the Minerals Resources Development Corporation (2.8%).The final deal between the project sponsors and the PNG government was signed on 8 December 2009, the day of the Final Investment Deadline (FID).

In June 2009 Esso Highlands Ltd (a subsidiary of Exxon Mobil Corporation) awared the Eos Joint Venture (an unincorporated joint venture comprising WorleyParsons and Kellogg Brown & Root) an agreement covering Project Services for the PNG LNG Project. The agreement commenced in March 2009 and extends to the end of 2014. Read more.

The banks consultant, D´Appolonia, an Italian engineering consulting company, served as the Independent Environmental and Social Consultant (“IESC”) to the lenders.

Part II

Ex-Im Bank Financing for Papua New Guinea LNG Project to Generate Significant Revenue for Island Nation, While Employing Workers at Dozens of American Companies

December 14, 2009

WASHINGTON, D.C. The Export-Import Bank of the United States (Ex-Im Bank) has approved the largest financing transaction in its 75-year history — $3 billion to support U.S. exports for a liquefied natural gas (LNG) project in Papua New Guinea. Workers at over 55 U.S. companies will provide goods and services for the project.

Ex-Im Bank, the official export credit agency of the United States (ECA), five other ECAs and 17 commercial banks will provide financing for the project. Total project costs are estimated to be $18.3 billion.

The project has the potential to double the gross domestic product of Papua New Guinea.

“Our approval of this project is yet another demonstration of how Ex-Im Bank is achieving its mission to provide financing for U.S. exports, and supporting U.S. export-related jobs, by supplementing what commercial lenders are able or willing to provide” said Ex-Im Bank Chairman and President Fred P. Hochberg.

The ECAs and commercial lenders involved in financing the project conducted extensive research into the potential impacts of the project. The resulting study found that the production and export of LNG from this project will represent a net reduction in global greenhouse gas emissions compared to the case where customers were to meet their energy requirements by coal, fuel oil or diesel commonly used in the regional market, even though the project will add to Papua New Guinea’s total emissions of greenhouse gasses.

At the ceremony announcing the investment, Papua New Guinea Prime Minister Sir Michael Somare said, “ExxonMobil and our other private sector development partners have shown significant confidence in our nation. Cooperation between the public and private sectors will create value for the Papua New Guinea society as a whole and grow our economy in the future.”

The project will involve development of upstream natural gas fields, a 692-kilometer onshore and offshore pipeline, a 6.3 million metric-tons-per-year liquefaction plant near Port Moresby, the capital of Papua New Guinea, and marine facilities from which the LNG will be shipped to foreign buyers. The project will sell the LNG in the large Asia-Pacific market.

In fiscal year 2009, Ex-Im Bank authorized more than $21 billion in support of U.S. exports overall, the highest level in the Bank’s 75-year history, to help ease tightened liquidity during the economic crisis. Ex-Im Bank also set a record for financing of small business exports at $4.36 billion in fiscal 2009.

The Bank, an independent, self-sustaining federal agency, helps to create and maintain U.S. jobs by financing the sale of U.S. exports, primarily to emerging markets throughout the world, by providing loan guarantees, export-credit insurance and direct loans. More information is available on the Bank’s web site at www.exim.gov.

Original Article

U.S. Gov’t Agency Plans $2.84 Billion Loan for Oil Refinery—In Colombia

Monday, April 18, 2011
By Terence P. Jeffrey

(CNSNews.com) – The U.S. Export-Import Bank, an independent agency of the federal government, is now planning a $2.84-billion loan for a massive project to expand and upgrade an oil refinery–in Cartagena, Colombia.

The money would go to Reficar, a wholly owned subsidiary of Ecopetrol, the Colombian national oil company.

“This is part of a $5.18 billion refinery and upgrade project in Cartagena, Colombia supplying petroleum products to the domestic and export markets,” the Export-Import Bank said in a statement.

The U.S. government-controlled bank says the $2.84-billion in financing it plans to undertake will be the second largest project it has ever done. The largest was $3 billion in financing for a liquid natural gas project in Papua New Guinea.

The statement released by the bank said that on April 7 the bank’s presidentially-appointed board of directors had “voted to grant preliminary approval for a $2.84 billion direct loan/loan guarantee” for the Colombian refinery project.

Export-Import Bank Spokesman Phil Cogan told CNSNews.com that the bank could not say at this time how much of the $2.84 billion would be directly loaned to the Colombian refinery company and how much would be in loans guaranteed by the bank–although he expected it to be a combination.

“It is conceivable it could be all a direct loan,” said Cogan. “Right now it is set up so that the board could do either a complete direct loan or a combination of direct loan and guarantee. That hasn’t been determined yet.”

Since December, the bank has also approved almost $880 million in other loans and loan guarantees to Reficar’s parent company, Ecopetrol. So, in total, if the new $2.84 billion in loans is finalized, the Columbian national oil company and its wholly owned subsidiaries will have received $3.72 billion in financing backed by a U.S.-government-controlled entity within a span of five months.

“Just last February and December the Bank approved nearly $880 million in export financing to help finance the sale of goods and services from various U.S. exporters to Ecopetrol S.A., Colombia’s national oil company,” Export-Import Bank President Fred P. Hochberg said in the bank’s statement announcing preliminary approval of the refinery loan.

Export-Import Bank Spokesman Cogan stressed in an interview that although Reficar is wholly owned by Ecopetrol it remains a separate entity, and is considered as such for Export-Import Bank financing purposes

In its 2009 annual report, Ecopetrol says “we became 100% owners of Reficar, the company in charge of carrying out the Cartagena Refinery modernization plan.”

In its ordinary procedure for financing projects of this magnitude, the board of the Export-Import Bank votes its preliminary approval, notifies Congress of that preliminary approval, then waits five weeks before voting final approval of the deal. This allows members of Congress to comment on the planned financing project.

“The Reficar transaction is subject to congressional notification, with a final vote anticipated approximately 35 days following the expiration of the notification period,” says the bank’s press release on the loan.

When asked if Congress can veto the loan, Ex-Im Spokesman Cogan said, “No.”

The public-policy rationale for the $2.84 billion loan for the Colombian oil refinery project is the same as the rationale for all Export-Import Bank loans to foreign interests: to create jobs in the United States.

“The transaction will help create or sustain over 15,000 American jobs for a total of four years,” says the bank’s statement about the loan.

Spokesman Cogan says the bank calculates the jobs created or sustained by a loan or loan guarantee by using a formula that estimates how much money spent buying U.S. exports in a particular industry it takes to create a job.

If the $2.84 billion loan to Reficar to expand and upgrade its Colombian refinery creates or sustains the 15,000 jobs in the United States that the bank believes it will create or sustain that would work out to $189,333 per job.

According to the National Petrochemical & Refiners Association (NPRA), 95 percent of the gasoline purchased by U.S. consumers is refined inside the United States, meaning that expanding the gasoline refining capacity of Colombia is unlikely to have a significant impact on the supply of refined gasoline in the Untied States.

Also according to NPRA, the last time a new oil refinery was built in the United States was 1993, when a small facility was built in Valdez, Alaska.  The last time a new large oil refinery was built in the United States was 1976, says NPRA. Older U.S. refineries, however, have been upgraded and expanded in recent years.

Original Article

IER Presents the American Energy Act

Tom Pyle

Posted April 19, 2011

Over the last year, we have continually and appropriately criticized the Department of Interior for dragging their feet with respect to the issuance of permits for both shallow water operations and deep water operations in the Gulf of Mexico in the wake of the tragic, idiosyncratic Macondo spill last April.

That criticism was warranted by the immediate set of circumstances.  But it is also important to recognize that the bureaucratic delay that has been on display for the last year or so at Interior is emblematic and symptomatic of a larger problem.  The simple truth is that virtually the entire federal energy and environmental permitting regime is designed to enrich lawyers and environmental activists, empower federal bureaucrats, and impoverish the United States and her citizens.

To correct this, and to help ensure that the United States can access, use, and derive benefit from what is the world’s largest reserve of energy resources (see what we mean here), the Institute for Energy Research has crafted the American Energy Act of 2011.  This model energy legislation will:

  • Allow the United States and her citizens to access, use, and derive benefit from all of its energy resources, which constitute the largest supply of energy in the world;
  • Put the United States back in charge of its own energy destiny and improve our energy security;
  • Encourage innovators and entrepreneurs to create jobs (including manufacturing jobs) throughout the nation;
  • Lower the price of energy for Americans and American businesses by producing more of our own energy;
  • Improve our ability to compete globally;
  • Generate hundreds of billions of dollars in taxes to federal and State governments, helping to pay down the record deficits; and
  • Reduce reliance on lawyers and increase reliance on scientists and engineers in making decisions related to energy and the environment.

This model legislation is a dramatic departure from the current regulatory approach, which is characterized by glacial permitting processes, endless rounds of litigation, and bureaucratic indifference to potential job creation, tax revenue, or reduced pressure on energy prices.  In case you doubt that, take a look at the Obama Administration’s record (here and here).

In contrast, the American Energy Act will provide transparency, reduce bureaucratic and legal delays, ensuring that those who care about projects (one way or the other) will get prompt and meaningful decisions and limit litigation.

You can find a copy of the model energy legislation here and a section-by-section summary of it here.

For many in Louisiana, the real disaster of 2010 wasn’t the oil spill but the drilling moratorium

Published: Tuesday, April 19, 2011, 7:00 AM
By Times-Picayune Staff 

WASHINGTON — Wednesday marks the first anniversary of the deadly blowout of the Macondo oil well, but there’s another day of infamy for the Louisiana congressional delegation: May 27.

Oil and water

JOHN MCCUSKER / THE TIMES-PICAYUNE  A shrimp boat drags skimmers through the oil slick in the Gulf Of Mexico Thursday, May 6, 2010,That was the day when President Barack Obama imposed a six-month moratorium on deepwater drilling, which the state’s lawmakers said was, from an economic standpoint, “worse than the spill itself.”

“Within days of the disaster — when oil was still gushing into the Gulf — Barack Obama and his environmental extremist allies began using the tragedy to try to advance their anti-drilling agenda,” said Sen. David Vitter, R-La.

BP was to blame for the spill and the rightful target of wrath and punishment, state officials said, but the rest of the industry and Louisianans who work for it should not be made to suffer.

In the context of Louisiana politics, it was an unsurprising stance, with the greatest tension in the delegation being who could be the most caustic and creative in their attacks on the moratorium.

Oil spill logo.jpg

“They’re probably reading their constituency pretty well,” said LSU political scientist Kirby Goidel, director of the Louisiana Survey, which in late June found that “people saw it as a BP problem; they didn’t see it as an oil and gas industry problem.”

Campaign contributions

Margaret Susan Thompson, an associate professor of history and political science at Syracuse University’s Maxwell School, has studied the Gilded Age, the post-Civil War period when American industry was growing and lawmakers were grasping for subsidies for railroads that would benefit their communities.

“The question is, how do you draw the line? Is this going to benefit the people in my district or my state — or just a big campaign contributor?” Thompson said.

For Louisiana lawmakers the answer could be yes on both counts.

Vitter and Sen. Mary Landrieu, D-La., have been among the biggest recipients of oil and gas money in their campaigns. Oil and gas interests also were among the top contributors to of Rep. Jeff Landry, R-New Iberia, the freshman Republican who has assumed the mantle of the industry’s most aggressive advocate on the Hill.

But, Landry said, “the insinuation that we are in bed with the oil and gas industry is absurd. Right now, the people we are in bed with are middle-class Americans who are paying $5 a gallon for gas.”

Landry, like other members of the delegation, bristled at the conclusion of the Oil Spill Commission that the Deepwater Horizon disaster indicated a “systemic” problem with the industry. He doesn’t support giving regulators more money, even though they say they need it to process permits the industry — and its legislative backers — are clamoring for, and he certainly doesn’t support increasing fees on industry to pay for more regulation.

Landry said he is preparing his own legislation to ensure safer conditions for rig workers, a version of which, he said, was killed by the industry — particularly BP — a few years ago.

Devotion to oil industry

The problem in Louisiana, said Rice University historian Douglas Brinkley, who is writing a book on the history of the environmental movement, is that there is no countervailing political pressure in the state.

“I’m looking at all 50 states — and the most abused ecosystem is this ragged boot of Louisiana,” Brinkley said. But there has never been an effective environmental movement in Louisiana, he said, to call out the state’s political leadership when it toes industry’s line.

With the world watching the BP disaster, some observers wonder if the Louisiana delegation overplayed its hand.

“I was struck by it at the time, how much of their focus was on getting the drilling started again,” said Norman Ornstein, a scholar of Congress at the American Enterprise Institute.

Obviously, Ornstein said, there were reasons to worry about losing even more jobs in a perilous economy and after suffering the loss of jobs in fishing and tourism as a result of the spill. And there were concerns that the industry’s enemies in Congress and the environmental movement would seek to use the disaster to try to shut down drilling altogether.

But their single-minded fervor to resume drilling even amidst the “massive devastation” seemed off, said Ornstein, who said it called to mind the devotion of the Michigan delegation to the auto industry as it rode to ruin.

Don Boesch, a New Orleans native who served on the Oil Spill Commission, worries that devotion to the oil industry could come back to haunt the state when Congress weighs whether to direct 80 percent of the fines BP will have to pay for the spill to coastal restoration.

Boesch, president of the University of Maryland Center for Environmental Science, said that the Louisiana narrative “that we should just say it’s BP’s fault and go back to an aggressive drilling situation without applying the lessons of the Macondo blowout is seen by many people in the rest of the country as quite inconsistent” with the demand for coastal restoration money, a commission recommendation that Boesch strongly backs.

Changing the state psyche

Boesch said he heard even sympathetic members of Congress muse aloud that “these people don’t take care of their environment like we do — why should we give them the money?”

Boesch believes a more tempered reaction from Louisiana’s leadership could have positioned the state as a locus for new jobs in regulation and safety that instead set up shop in Houston.

Aaron Viles, deputy director of the Gulf Restoration Network shares Boesch’s analysis.

“Our cause is just,” said Viles of the play for the coastal restoration money, but the stance of the states’s political leadership is off-putting to many natural allies beyond its borders.

“Our leaders’ track record of doing everything possible to support and boost the oil industry — most of the world looks at that as totally inconsistent and crazy,” Viles said. “I know folks in Louisiana don’t see it as inconsistent but we need to have an acknowledgement of how we got where we are and we haven’t seen that from the political leadership.”

To Patty Whitney, a community activist and director of the Bayou History Center in Terrebonne Parish, this is all too facile.

“The rest of America has no concept of how badly Louisiana has been used by the rest of America for the last century, since oil drilling began,” said Whitney, who said that America demands the energy Louisiana produces while ignoring the destruction it leaves behind.

Whitney also believes that, bit by bit, in the wake of the spill, some Louisianans are rethinking their relationship with oil. But, she said, the nation also doesn’t appreciate how hard that is.

“The rest of America doesn’t understand how seriously enveloped the economic and political structure are in one industry,” she said. “They’re involved in every aspect of the state psyche.”

Or as Chris John, a former Democratic congressman who now heads the Mid Continent Oil and Gas Association, put it recently in presenting an award to ExxonMobil: “The history of Louisiana and ExxonMobil has been inextricably intertwined for more than 100 years and, quite frankly, it is hard to imagine one without the other.”

Original Article

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