Bacon's Rebellion

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More Facts, Less Alarmism, Please, Regarding Offshore Drilling

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by

James A. Bacon
in ,

Coal Oil Point in California

I don’t know much about offshore drilling for oil and gas. But, then, I’m not sure that many vociferous opponents of drilling off the Virginia coast know much about it either.

A case in point is a quote, reported in today’s Richmond Times-Dispatch, by Rep. A. Donald McEachin, D-4th:

As we learned from the Deepwater Horizon catastrophe, accidents can be unimaginably destructive, devastating the marine environment, wrecking entire industries and potentially affecting the health of local residents.

McEachin said he would resist offshore drilling “every step of the way.”

Yes, Deepwater Horizon was an environmental disaster. But is that catastrophe a useful comparison for offshore drilling in Virginia? Deepwater Horizon was drilling a deep exploratory well at a depth of about 5,100 feet. The drilling took place in conditions of massive water pressure that would be absent on the continental shelf of the Virginia coast where the average water depth is about 200 feet.

An appropriate comparison would be with offshore drilling operations taking place on the continental shelf in the Gulf of Mexico. According to LiveScience, 1.3 million gallons of petroleum are spilled into U.S. waters from vessels and pipelines in a typical year. Between 1971 and 2000, U.S. Outer Continental Shelf offshore facilities and pipelines accounted for only 2 percent of the volume of oil spilled in U.S. waters.

Compare that to the volume of oil that naturally seeps from the seafloor. A single seep, Coal Oil Point on the California coast, releases about 10,000 gallons per day — about 3.6 million barrels yearly — according to the Stop Oil Seeps California website. Has that turned the coastline into an ecological disaster zone?

Here’s what the Coal Oil Point Reserve website has to say about the wildlife there:

One of the best remaining examples of a coastal-strand environment in Southern California, the Coal Oil Point Natural Reserve protects a wide variety of coastal and estuarine habitats. Largely undisturbed coastal dunes support a rich assemblage of dune vegetation and rare wildlife, including the dune spider, the globose dune beetle and the threatened Western Snowy Plover. …

Thousands of migratory birds visit throughout the year. Coal Oil Point Reserve is part of Audubon’s Important Bird Area (IBA) and it is visited daily by birders. …

Vernal pools host a number of rare and endemic species.  At low tide, the intertidal and subtidal zones at the reserve provide an opportunity to observe the rich assemblage of invertebrates and algae living on the rock formations.

Not exactly a toxic hellhole.The conditions in Virginia are not the same as in California; they aren’t the same as in the Gulf of Mexico. 

Maybe a sober-minded analysis would show that offshore drilling would pose a genuine threat to Virginia’s precious coastal environment. I await that study. In the meantime, I’m not paying much heed to politician’s heated rhetoric regarding topics about which they know nothing.

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33 responses to “More Facts, Less Alarmism, Please, Regarding Offshore Drilling”

  1. TBill Avatar
    TBill

    The interesting question might be if there is natural gas out there? then that could be less concern for oil spills. I do not really know if off-shore nat gas is of any interest to the developers.

    Overall, we could also be putting wind turbines on the shore, but that is out for political reasons, maybe eco-reasons too, but mainly sea shore is hot button politically.

    One philosophical issue might be, there may be ways to safely identify the off-shore resources without actually drilling for the resources. But there is enormous concern that one thing automatically leads to other (especially given the obvious tendency of the GA to favor campaign donators).

  2. LarrytheG Avatar
    LarrytheG

    I don’t know much about oil spills either other than some other famous spills at Santa Barbara and the Exxon Valez…and while it’s true the Chesapeake Bay area is not very deep – it’s also true that one major “oops” in that constricted area would not be anything like a seafloor leak in the middle of the ocean.

    And don’t look just at those pesky “alarmists”… check out the Governors of most all the Eastern Coastal states….. don’t want oil spills off the outer banks.. not at Myrtle Beach.nor in Miami or Tampa or Pensacola…

    Like demand side on electricity – we “save” far more oil when cars are more and more efficient so unless we are running out of oil…. why go to places like this at least until there is a real need?

    If cars are going to electrify at the rate they predict – we may be seeing a gradual decline in the demand for oil in the next 50-100 years..and that’s a problem because the tougher the price differential on oil…. the more tempting it is to cut corners or environmental protections.

    We talk about how tough the economics are for wind turbine equipment offshore… the problem is no easier with oil rigs… it’s the same harsh environment that tends to corrode and break things…

    I’m not opposed to it flat out but I’m mighty suspicious of those who want to do it – as we have a clear history of “oops” and the economics of it – encourage trying to do it on the cheap.

  3. V N Avatar
    V N

    Me either.

  4. djrippert Avatar
    djrippert

    How important is oil anymore? How important will it be ten years from now? I suspected that the number of gas stations in the US was decreasing so I checked the numbers. My suspicions were right. Extracting oil in a near shore environment seems like one of the most environmentally risky was to extract oil. What happens if we don’t?

    https://www.fueleconomy.gov/feg/quizzes/answerQuiz16.shtml

    1. TBill Avatar
      TBill

      …but what does number of gas stations tell us? Because I believe we are record levels of gasoline use in the USA…I guess it only means we are selling more gallons per station.

      Per article:
      New Records Abound

      In June, the Renewables 2017 Global Status Report and the 2017 BP Statistical Review of World Energy were both released. The reports showed new record consumption numbers for major renewables like wind and solar power, but also new records for oil and natural gas production. Global carbon dioxide emissions also reached a new record. The EIA also reported that despite record sales for electric vehicles, U.S. gasoline consumption reached a new all-time high.

      1. djrippert Avatar
        djrippert

        You may be right. However, your figured are world figures while mine were US. I am sure Americans are driving more miles per year but I suspect the improvements in engine efficiency are more than making up for that. My 2011 F-150 has a six cylinder engine, moves along just fine and gets better gas mileage than any full size pickup should expect.

  5. LarrytheG Avatar
    LarrytheG

    actually gasoline consumption looks like this:

    http://www.energymatters.org/wp-content/uploads/2013/08/US-Annual-Gasoline-Consumption-1994-to-2012.jpg

    and this is confirmed by the drop in gas taxes

    ” Why Gas Taxes Aren’t Paying the Bills Anymore
    Revenue has been in decline for decades as electric cars, better mileage and driving less cut fuel consumption. What’s next?

    As has been widely noted, the infrastructure spending plan unveiled by the White House this week doesn’t include a lot of federal spending on infrastructure. This is not just a matter of ideology or timidity on the administration’s part. It’s also a reflection of the fact that the biggest source of money for federal infrastructure spending — the motor fuel tax revenue that flows into the Highway Trust Fund — has been shrinking in real terms for almost two decades.”

    1. TBill Avatar
      TBill

      What are you saying, Larry, 5 years ago there was a demand drop with the economic down turn of 2008 and associated high gasoline prices? Guess what, the trend has apparently has not continued on that old trend line, especially as gasoline prices have dropped since then. Demand is up, as are miles driven per year.

      1. djrippert Avatar
        djrippert

        Here’s more current data …

        https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=a103600001&f=m

        1. TBill Avatar
          TBill

          Nope we are not there yet.
          That is what the refineries are making, not including what the farmers are making. The refinery output downtrend you are seeing there is the 10% E10 ethanol mandate kicking in (the Bush years made the mandate) and refineries had to stop making MTBE.

          We need to look at total gallons of gasoline used which is growing and at all time highs.

          Yes the gov’t ethanol mandate did take some large amount 10% of market away from oil industry and gave it to farmers by mandate. My guess is electric cars will similarly be mandated to maybe another 10% of the market. I do not see electric vehicles naturally taking market, but I do expect mandates to force it.

  6. Steve Haner Avatar
    Steve Haner

    Last time I was in Santa Barbara the oil wells off the coast didn’t seem to be hurting the tourist trade, but at the same time I doubt I’d have made the side trip if the pier was fouled with oil from a spill, or I could smell oil from the mission. Drilling in the coastal waters is not my first choice, given the resources still available from the land (and the techniques that allow you to reach offshore from a land-based rig with directional drilling.) I understand why the coastal regions don’t want drilling off the VA shores.

    You do make the valid point (always forgotten) that oil is (ahem) a fully natural product and already is getting into the sea by fully natural processes, where it then biodegrades with no human intervention required. You don’t get more organic than oil!

    1. djrippert Avatar
      djrippert

      “Drilling in the coastal waters is not my first choice, given the resources still available from the land … ”

      I agree with that. My follow up question is how important is oil or how important will oil be in 10 years? If the move to electric cars lessens the demand for oil (at least in the US) then why drill in ecologically risky areas?

    2. Acbar Avatar
      Acbar

      Oil is just as “organic” and “natural” as a block of coal. Or a block of chalk, for that matter. Perhaps we should sell foodstuffs made from fossil organics under the Nature’s Way label. [Oops — one of the large grocery chains already does]

  7. TooManyTaxes Avatar
    TooManyTaxes

    I get the environmental concerns, but I also remember the days when Democrats supported working people — you know those traitors who refused to vote for Hillary Clinton. America needs energy and, while we are in a big transition to using much more renewable energy, we aren’t there yet. We need to continue to look at reliable sources of fossil fuels.

    1. djrippert Avatar
      djrippert

      Fossil fuels? Yes. Oil? Maybe. Oil from nearshore drilling? I don’t see the need. Frack the gas, use the gas to generate electricity and use the electricity to power electric cars. Where is the urgent need for offshore drilling?

  8. Peter Galuszka Avatar
    Peter Galuszka

    A few responses to this bit of apologia.

    First,the Santa Barbara spill, the Grandmother of all spills, involved water depths of less than 200 feet which makes it roughly comparable to the waters off Virginia where oil production might occur. Although it is old (1969) that spill remains No. 3 in the U.S. Of course, it’s impact has been mitigate since the late 1960s. Not sure hat the point is. Bu Deepwater still has impacts.

    Second, speaking of Deepwater, BP and company didn’t bother deploying the latest technology in blowout preventers.Yet you hear the oil companies and their supporters always talking about how advanced they area. Norway and Brazil are ahead of the U.S. in deepwater safety.

    Thirdly, why risk the Navy, beach-related tourism and the seafood industry to get energy whose future is cloudy? What happens when electric cars become common? We’ll get stuck with offshore oil that many interested parties do not want with an uncertain market. They’d probably end up exporting the oil to countries farther behind in transitioning to renewables. It’s sort of like Dominion, realizing that its big pipeline project might have a diminishing market in Virginia, suddenly announces new markets in South Carolina as it tries to take over that state’s major utility.

    Hmmmm.

    1. James A. Bacon Avatar
      James A. Bacon

      Peter, all the points you raise here should go into any comprehensive analysis on offshore drilling in Virginia.

      I’m not advocating for offshore drilling — I’m advocating for not dismissing the idea out of hand by invoking the ridiculous scenario of a Deepwater Horizon disaster occurring in shallow water off the Virginia coast. I get the sense that opponents of offshore drilling are opposed to the idea no matter what the facts, and will never be convinced otherwise. But a majority of Virginians are open minded. Show us the facts. Let’s weigh the evidence.

    2. djrippert Avatar
      djrippert

      “We’ll get stuck with offshore oil that many interested parties do not want with an uncertain market. They’d probably end up exporting the oil to countries farther behind in transitioning to renewables.”

      Exactly my suspicion.

      1. TBill Avatar
        TBill

        Off-shore drilling is a political choice, and the choice is probably “hell no”.

        But your suspicion that fossil fuel demand is falling is wrong. Yes in the USA we have to legislative power to force more ethanol and electric vehicles if we want to politically force people to use alternatives. But the overall trend is steady growth in population, plus more use of fossil fuels per person globally, as less developed countries develop.

        We need renewables to help cope with the growth, because I do not think there is desire, even on the part of oil industry, to meet the volume increases required by the growth. But the notion that renewables are replacing fossil fuels is wishful thinking to date.

  9. Steve Haner Avatar
    Steve Haner

    The end of oil was predicted widely during my college years and I predict my grand kids will live their lives entirely in a world still using oil and even gasoline and diesel. It is a highly efficient and convenient source of energy for all kinds of activity. But given other options, I’m still not a fan of drilling off the coast. Neither am I going to lie down on the VA Beach Expressway to block the trucks…..

  10. TBill Avatar
    TBill

    @DJR @Larry
    Here is the plot you are looking for….
    https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFUPUS1&f=A

    Shows we are at record levels of gasoline use in America, and it does not yet include the most recent years, which are up and up. See my further comments about ethanol mandates above.

    1. LarrytheG Avatar
      LarrytheG

      thanks for the chart Tbill.. but what explains the fact that gasoline is almost half what it used to cost – and gas taxes that fund roads are also falling behind?

      You’d think if gasoline had a strong demand it would be back to $4 a gallon and gas taxes would be flush.

    2. CleanAir&Water Avatar
      CleanAir&Water

      Demand is more complicated than that. The average vehicle being driven on U.S. highways is becoming steadily more fuel efficient, but turnover takes time. The average age of passenger cars and light trucks on U.S. roads is more than 11 years old.

      Tougher fuel economy standards started to phase in from around 2010 and the boom in auto sales in recent years has accelerated fleet turnover. The improvement in fleet-wide fuel economy is now starting to blunt demand for gasoline despite increased driving AND … in spite of increased consumption in recent years, the EIA forecasts gasoline consumption will decline by about 40,000 bpd in 2017.

  11. CleanAir&Water Avatar
    CleanAir&Water

    Not sure what any of you think would make the risk of damage to our coast worth taking. The blog talks of proving that accidents will be bad, an impossible idea, and several of you have put out facts that do indeed show that oil demand is actually going down, but evidently not significantly enough.

    Demand issues from WoodMackenzie …. “Demand for gasoline in the United States, which accounts for a tenth of global oil consumption, is expected to peak next year as engines become more efficient”. Wood MacKenzie isn’t alone in this prediction.

    Global demand for gasoline, which accounts for more than a quarter of the world’s oil consumption, is set to peak as early as 2021 even in the face of relentless growth in the vehicle fleet, according to an Edinburgh-based consultancy.

    About EVs from BNEF … . “35% will have a plug by 2040”… “ The growth of battery-powered cars could be as disruptive to the oil market as the OPEC market-share war that triggered the price crash of 2014, potentially wiping hundreds of billions of dollars off the value from fossil fuel producers in the next decade. About 2 million barrels a day of oil demand could be displaced “
    Shell itself says that oil demand will likely peak within the next five years followed by precipitous declines as electric vehicles come on-line en masse while Exxon, the company that hid their scientists warnings of climate change in the 70’s, predicts less than 10% of cars will be EVs in 2040 … Who do you trust?

    Major energy companies are seriously underestimating low-carbon advances with a business-as-usual approach — and that stranding of fossil fuel assets is likely as the low-carbon transition gathers pace. The Carbon Tracker Initiative and Grantham Institute report indicates the market for oil could be flat from 2020 to 2030, before falling steadily to 2050.

    High cost oil and gas projects — including oil sands, deepwater operations, U.S. and European gas, and liquified natural gas are the most likely doomed to un-profitability. ExxonMobil has allocated 40-50 percent capex (capital expenditures) to these and other “uneconomic” projects, based on “clear signs” that peak oil demand will occur some time early in the next decade, according to Carbon Tracker. Continuing to drill offshore seems to be a case of ‘make hay while the sun shines’. Certainly not a reason to risk our coast.

    Market profitability is not the only determinant for the choice to drill our coast. U.S. federal and state governments hand the fossil fuel industry more than $20 billion each year in subsidies to sustain and expand their operations. Will the proponents of drilling give up those bottom line ‘fixers,’ and let the market play a REAL role?

    Then there are the environmental costs. Taxpayers are being forced to pick up a significant share of the bill – at least $3.5 billion per year in 2015-2016 – for lasting harm to the environment, workers, and local communities caused by oil, gas, and coal operations.

    And while we are at it … what about Norfolk and the rising seas of climate change? Norfolk received a $1.8 billion proposal from the Army Corps of Engineers’ to protect the city from rising seas. Some experts consider the estimate low. It doesn’t include the Navy’s largest base, which lies within city limits and likely needs at least another $1 billion in construction.

    Our beaches are also affected. States, localities and the federal government have spent more than $6.5 billion since 1990 pumping sand onto beaches to fight erosion.
    Will 2018 be a turnaround year for Virginia where “climate change” can actually be linked to emissions from fossil fuel use?

  12. LarrytheG Avatar
    LarrytheG

    thanks for the chart Tbill.. but what explains the fact that gasoline is almost half what it used to cost – and gas taxes that fund roads are also falling behind?

    You’d think if gasoline had a strong demand it would be back to $4 a gallon and gas taxes would be flush.

    1. TBill Avatar
      TBill

      Gaso price is down now due to nature of oil business: long term boom and bust cycles. As supply gets tight, prices go up, then it takes industry 5-10 years to ramp up new sources of oil, and then oil price crashes until the next shortage materializes, and so on.

      Who is saying gaso tax is falling behind? Virginia has a very low gaso tax so the answer there is to increase it somewhat, in my view.

      On the Federal level it is 18.4 cents/gal so if we sell more gallons, they are whole – not counting inflation.

      Northern Virginia set gas tax as a 2.1% of pump price, but we got nailed when the gaso price went down, because we had set no “floor” on it. I think just this GA session they are finally adding a floor to the NoVA gaso tax. If it was me I’d go for a high “floor”.

  13. LarrytheG Avatar
    LarrytheG

    re: who says gas tax is falling behind?

    Motor gasoline consumption expected to remain below 2007 peak despite increase in travel

    https://www.eia.gov/todayinenergy/images/2016.02.23/main.png

    Based on estimates in the most recent Short-Term Energy Outlook (STEO), vehicle travel in the United States in 2015 was almost 4% above its 2007 level, but motor gasoline consumption has not exceeded its previous peak in 2007. Improvements in light-duty vehicle fuel economy are largely responsible for this outcome.

    STEO forecasts motor gasoline consumption to average 9.23 million barrels per day (b/d) in both 2016 and 2017, about 0.6% below its 2007 level. In contrast, vehicle travel is expected to grow to levels 5% and 7% above the 2007 level in 2016 and 2017, respectively.

    Lower gasoline prices and changes in the economy affect growth in vehicle travel. Projected growth in vehicle travel remains consistent with increases in macroeconomic indicators such as nonfarm employment and real disposable income. The combination of an increasing share of the baby-boomer generation reaching retirement and continued increases in vehicle fuel economy is expected to limit growth in motor gasoline consumption for the forecast interval and beyond.

    1. TBill Avatar
      TBill

      Those STEO data seem to be 2015 projections for the future, and apparently they were wrong, because gaso use has in fact exceeded that 2007 max.

      In my comments to date, I am always talking about actual gaso use history, and I am *not* talking about projections. Leveling off of future demand is possible…I do not claim to know the future.

      1. LarrytheG Avatar
        LarrytheG

        well.. my bad… if they are old projections.. but it still seems counter-intuitive if today’s gas prices are substantially lower than they were that there is higher demand. You’d think if there were higher demand that the prices would be headed back to $3-4 a gallon.

        And no.. this conversation is not straying that far from offshore drilling because the risks of offshore – in terms of environment and as well as profit margins make it a a tougher place to get oil.

        If we were running out of oil land it was hitting $ 5, 6, 7 a gallon.. people would be more inclined to agree to offshore drilling but if oil is seems still plentiful and cheap – people are less inclined to support offshore drilling in part – because they are convinced that inevitably there will be spills…

  14. TooManyTaxes Avatar
    TooManyTaxes

    How about getting the fees for overweight truck permits to cover the costs and to eliminate the exceptions from the permits before we nail somebody making $35K a year with even higher gas taxes? These sweetheart deals are no different from what Dominion does.

    1. TBill Avatar
      TBill

      Well you have a good point that gaso tax can be regressive. I suppose we are getting too far off the offshore drilling topic. I tend to feel pump price is a combination of profit+taxes. In some cases it may be possible to take more tax bite and it comes out of the excess profit instead of pump price. It is a little like Dominion, they have low cost in Va. so they take a higher profit margin. Same idea on gaso, by keeping gaso taxes low in Va., we give an opportunity (especially in NoVA) for high profit margins (because the marketers are basically holding to a certain regional pump price status quo in the DMV) .

      1. LarrytheG Avatar
        LarrytheG

        re: the profit in gasoline –

        “Who gets rich off $3 gas – who doesn’t
        The guy running the service station makes just a few cents, while crude oil producers take the biggest chunk.

        Gas stations: A surprisingly small amount goes to the guy who runs the station.

        Most service stations are independently owned and operated and take in between 7 and 10 cents for every gallon they sell, according to the U.S. Energy Information Administration.

        That 7 to 10 cents going to the gas station isn’t even profit. Out of that, station owners still have to pay leases, workers, and other expenses – leaving them with a profit of just a few cents. For the service stations, most profit comes from selling coffee, cigarettes, food and other amenities.”

        I did find this on a search:

        “Do Trucks Pay Their Own Way?
        Heavier vehicles do far greater damage to highways than lighter vehicles. It stands to reason, therefore, that freight trucks should pay higher highway user fees. Generally they do—heavy truck owners must pay an annual federal Heavy Vehicle User Tax corresponding to the vehicle’s weight as well as other federal and state user fees.60 But the taxes and fees paid by truck owners may not cover the full cost of the damage they cause to roads. A 2000 Federal Highway Administration study estimated that combination
        trucks paid only 80 percent of the federal-scale costs they imposed on highways via user fees, with the largest trucks paying only half of their cost responsibility.”

        I’d be in favor of assessing trucks whatever is the true damage they do and/or reduce their weights… but just point out that whatever increased costs that get put on them – basically get passed on to whoever buys products delivered by trucks which is virtually all of us.

        It’s sorta like pay me now or pay me later although if lower weights actually lead to lower maintenance costs.. probably should do.

        I’d be curious to know how much on a per gallon basis the higher tax on fuel would be – are we talking a nickle or a dollar and would allowing off shore drilling result in lower price gasoline. I seriously doubt it – right now the reason the price of gas has gone on is because OPEC finally got agreement from it’s cartel to hold back additional shipments to keep the price higher after Iran was allowed to start shipping also.

        I think most folks are not convinced that we have no choice but to drill offshore – given the consequences of a spill. That may change if gasoline becomes scarce… but until then it’s probably a no go.

  15. TooManyTaxes Avatar
    TooManyTaxes

    Just to refresh the record on overweight trucks and taxpayer subsidies, go back to January 1, 2009′ “Weight Matters.” It’s easiest to find by going to the archives for January 2009. Go to the bottom of the page and then click “older posts.” Search for weight.

    TMT

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