OGJ Washington Pulse Blog by Nick Snow
NICK SNOW has covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He began writing about energy in 1975 at the Deseret News in Salt Lake City, where he worked for seven years. He was a Professional Journalism Fellow specializing in energy at Stanford University in 1977, and earned a bachelor’s degree in journalism from the University of Utah in 1971.
Posted on 4/29/2011
US Sen. David Vitter (R-La.) has raised questions about the Export-Import Bank of the United States making loans totaling billions of dollars to Brazil and Colombia’s national oil companies while the Obama administration seemingly discourages access to and development of domestic resources.
“Domestic energy policy cannot be based on crippling access, stifling permitting, and increasing taxes on production – as [US President Barack] Obama has recently proposed – while at the same time loaning billions to foreign government-owned entities to produce abroad,” Vitter said on Apr. 30. “These loans may well create numerous jobs domestically for US businesses to sell product overseas. However, there is no doubt that domestic production creates domestic jobs that cannot be shipped overseas.”
Vitter first mentioned this to Ex-Im Bank President Fred Hochberg in a Mar. 17 letter when he referred to an August 2009 letter he wrote Obama about a $2 billion loan to Petrobras which produced a response from the Ex-Im Bank suggesting there would be a significant return on the investment from interest on the loan as well as an increase in the growth of US manufactured products used by Brazil’s offshore industry.
Noting in his Apr. 29 letter to Hochberg that the bank subsequently approved a $1 billion loan to Ecopetrol, Colombia’s national oil company, Vitter said: “I was very specific about the information I requested from Ex-Im more than a month ago. I requested the particulars of the return on investment the American taxpayer can expect from these loans as well as the US businesses intended to benefit from the financing arrangements. Is it safe to assume that Ex-Im does preliminary analysis before issuing loans that evaluates the return on these loans to the US government and US businesses? Is it also safe to assume that Ex-Im should readily be able to provide that information to Congress upon request?”
The senator noted that while the Ex-Im Bank is an independent federal agency, it also is congressionally authorized and responsible to the US taxpayer. “I would appreciate a full accounting of the return on these ‘investments’ Ex-Im has been making as we develop domestic energy policy in a period when [gasoline] prices are above $4/gal and American families and businesses suffer,” he said. “These loans may well create numerous jobs domestically for US businesses to sell product overseas. However, there is no doubt that domestic production creates domestic jobs that cannot be shipped overseas.”
While most eyes are on Japan or Libya, the President has been on tour in South America, visiting Brazil, Chile, and EL Salvador. Because the purpose of these trips seemed unclear in the face of world events, many have criticized the President’s choice in priorities.
But this morning, I ran across an article that finally explains for me the real objective– OIL.
The Wall Street Journal reported that, “The U.S. government’s export credit agency has authorized $3 billion in financing for Brazil, including $2 billion for the Brazilian government-run oil company, Petroleo Brasileiro SA, or Petrobras.” Somewhere investor George Soros must be smiling.
In an OP-Ed with the USA Today the President said, “We’ll also work to strengthen our relationship when it comes to energy. Brazil holds recently discovered oil reserves that could be far larger than ours, and as we seek to increase secure-energy supplies, we look forward to developing a strategic energy partnership. We’ll also continue our shared leadership in green economic growth and clean energy, including everything from biofuels to renewables such as wind and solar power.”
In fact Obama said he was looking forward to importing oil from Brazil. The President said “We want to work with you. We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers.”
Running up our deficit so we can be more dependent on foreign oil? The President goes on, “At a time when we’ve been reminded how easily instability in other parts of the world can affect the price of oil, the United States could not be happier with the potential for a new, stable source of energy.”
So there you have it.
As many have asserted, Libya is about oil, and so too, apparently, was the President’s trip to Brazil.
There was also this in the news:
US, Brazil expand biofuels co-operation to aviation sector
In Brazil, President Obama and newly inaugurated Brazilian President Dilma Rousseff expanded a Memorandum of Understanding on Biofuels, and agreed “that the two countries have converging interests in energy-related matters, including in oil, natural gas, biofuels and other renewables. President Obama stated that the United States seeks to be a Strategic Energy Partner of Brazil. They praised the Working Group on Energy and the Memorandum of Understanding to Advance the Cooperation
on Biofuels and decided that their work will be carried out under the umbrella of a bilateral Strategic Energy Dialogue.”
To the four year old MOU, the leaders added language on aviation biofuels development, including support for the Commercial Aviation Alternative Fuels Initiative (CAAFI) and the Brazilian Alliance for Aviation Biofuels. The leaders did not release any language related to the disposition of the 54 cent per gallon ethanol tariff, which shields US corn ethanol, from competition from lower cost sugarcane ethanol.
Prior to becoming president of Brazil, Rousseff had served in past years as Brazilian minister of energy.
So why haven’t you really heard about any of this?
I’m assuming because of the ‘bigger’ stories, but also because the President knows he’ll face serious domestic criticism for his efforts.
See, for example:
State of Play: Republicans and the oil industry are working to translate President Obama’s weekend comments in support of Brazilian oil development into political ammunition in their battle against the White House’s U.S. drilling policies.
The American Petroleum Institute, the country’s most powerful oil and gas trade association, and Republicans, including House Speaker John Boehner (R-Ohio), said Monday that the administration should be doing more to develop U.S. oil-and-gas reserves.
Here’s Sen. David Vitter (R-La.), who is among the lawmakers pushing for wider U.S. offshore drilling: “It’s ridiculous to ignore our own resources and continue going hat-in-hand to countries like Saudi Arabia and Brazil to beg them to produce more oil,” Vitter said in a statement. “We need to get serious about developing our resources here at home and working toward lower gas prices and long-term energy independence.”
But President Obama said Saturday during his visit to Brazil that an energy partnership with the nation will offer major benefits for the United States. Obama, in announcing a “Strategic Energy Dialogue” with Brazil, noted that the country has nearly twice the oil reserves as the United States and lauded its stability compared to some other oil-exporting countries.
“We want to work with you. We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers,” Obama told a group of business leaders Saturday. “At a time when we’ve been reminded how easily instability in other parts of the world can affect the price of oil, the United States could not be happier with the potential for a new, stable source of energy.”
Under the Strategic Energy Dialogue, the United States will work with Brazil “in the environmentally responsible and technologically advanced development” of Brazilian oil resources, according to a White House summary of the plan.
Administration officials also say they are working diligently to expand U.S. oil-and-gas development. The Interior Department has recently issued three deepwater drilling permits for the type of projects halted after last year’s Gulf oil spill. And the department on Monday approved an exploration plan that paves the way to expanded Gulf drilling.
So it got me to thinking, what was the purpose of the President’s trip to Chile? Surprising, this is what I found:
Among the “urgent events” that President Obama said he discussed Monday with Chilean President Sebastián Piñera was the unfolding nuclear crisis in Japan that began March 11 when a magnitude 9.0 earthquake and resulting tsunami along the northeast coast.
While the crisis only appeared to be mentioned in passing during a press conference in Santiago during Mr. Obama’s five-day regional tour, it has set off a firestorm of criticism against Mr. Piñera and caused a major rethink over energy policy here.
Yesterday, some 2,000 people marched through the capital to protest a new US-Chile nuclear power cooperation agreement signed Friday as radiation leaked from Japan’s Fukushima nuclear plant. The agreement promises cooperation in operating research reactors, handling civilian nuclear training and safety measures. It seemed a natural extension of Piñera’s steady push for nuclear power to ensure electricity for Chile’s world-leading copper industry.
Copper. So is this another strategic resource play? Fascinating…
- “The stimulus is being reflected in the copper numbers,” said Larry Young, president of Covenant Trading LLC in Chicago.
- “Plans are going forward that will require more copper.”
- President Barack Obama proposed a six-year $50 billion infrastructure plan to revamp highways, rails and airport runways in an effort to create more near-term jobs and improve the long-term U.S. transportation network.
The article also notes:
China is the world’s largest consumer of copper.
And here is another interesting tid-bit:
So what happened on the last leg of Obama’s South American trip, in El Salvador?
I couldn’t find much, but here was one headline:
It seems Santa Claus was very busy over the weekend after all…
Now the timing of the trip makes sense to me.
Does it for you?
Published: Sunday, April 24, 2011 at 6:01 a.m. By Kathrine Schmidt Staff Writer
HOUMA — A safe ride should be close by if something goes wrong offshore.
That’s the goal of a bill introduced last week by U.S. Rep. Jeff Landry, R-New Iberia, which would require that a “standby vessel” be within 12 miles, or a one-hour range, of manned offshore platforms or drilling rigs in the Gulf.
Even though there were life boats and life vests aboard the Deepwater Horizon, when the rig went up in flames some still had to make the “unimaginable” decision to jump overboard in hopes of saving their lives, Landry said.
Had it not been for a supply vessel that happened to be nearby and a fishing boat that helped rescue workers, the death toll could have been higher, he said.
“We could end up with fatalities for no reason,” said Landry, who announced the bill earlier this week and said it would be considered by the House Natural Resources Committee, of which he is a member. “I felt the industry could use a little nudge.”
The bill could mean a big economic benefit for the local offshore vessel industry.
That could translate into valuable support as Landry fights to keep his seat after the redistricting session carved up his 3rd Congressional district, forcing him to run against U.S. Rep. Charles Boustany, R-Lafayette, in a district that favors Boustany.
A spokesman for Landry, Millard Mulé, rebuffed the suggestion that the bill intends to curry favor.
“Saving lives is not political at all,” he said. “That’s what this legislation is about.”
Landry said he intends the latest legislation, H.R. 1572, to be a “common-sense” solution improving worker safety, but is also willing to work with industry and be flexible on the specifics.
The fate of the bill is still uncertain: Landry doesn’t have any cosponsors yet, and Louisiana Sens. David Vitter and Mary Landrieu didn’t respond to requests this week about whether one of them would introduce a corresponding bill in the Senate.
“The most valuable resource in the Gulf of Mexico is not the oil and gas underneath the Gulf; it is the men and women who are willing to risk their lives to extract America’s energy,” Landry said in a release this week.
But some contend the bill as written would be impractical and redundant, given the thousands of manned platforms in the Gulf, high level of service traffic already present and response capacity from the Coast Guard.
“You can’t put a policeman at every corner,” said Don Briggs, president of the Louisiana Oil and Gas Association. As for safety response, he said, “I think we have those practices in place.”
Others say Landry’s bill is a step in the right direction when it comes to planning for the worst, particularly if a platform is especially remote or inaccessible by air because of bad weather.
Jim Adams, CEO of the Offshore Marine Service Association, said the group has not taken an official position on the bill.
“One of the lessons learned from a year ago is that the industry, in a comprehensive fashion, needs to have better contingency planning for safety,” he said.
“There is a role for an identified vessel to provide emergency response. The particulars of what that capacity would be, and the proximity, needs to be developed in a collaborative matter.”
Published: Tuesday, April 19, 2011, 7:00 AM By Times-Picayune Staff
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.
“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.”
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.”