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Energy Insecurity: Liability Caps and Drilling Moratoriums

By | Briefly Legal, Energy | One Comment

The House has just started debating the rule for H.R.3534, the Consolidated Land, Energy, and Aquatic Resources Act, i.e., the House “energy” bill. Or was that Waxman-Markey?

The National Association for Manufacturers just sent a “Key Vote” letter to the House, acknowledging that the bill has been made less economically damaging than earlier versions, but would still do too much harm to the jobs and American energy security.

From the “Key Vote” letter:

Manufacturers believe it is critically important to understand the causes of the Gulf of Mexico accident and its long-term environmental impacts before enacting policies that could make a serious problem much worse. While we appreciate efforts made earlier this week to improve H.R. 3534, NAM members continue to oppose the bill, as it would, in its current form, drive up energy costs, create uncertainties in the availability of supply and adversely affect U.S. jobs.

While there appears widespread agreement in the industry and on Capitol Hill that the $75 million liability cap needs to be updated, requiring an unattainable level of insurance coverage for domestic energy producers on the Outer Continental Shelf is not the solution. By eliminating the cap, H.R. 3534 would effectively retain the moratorium on offshore drilling for all but a handful of the world’s largest international companies, forcing the vast majority of American companies out of U.S. waters.

NAM’s key vote letters are developed and approved through a committee of representatives of manufacturing companies of all sizes. The NAM uses the votes to assess a member of Congress’ record on manufacturing issues.

On the House floor, Rep. Jim McGovern (D-MA) just characterized the upcoming debate: If you support the bill, you support the American people. If you oppose the bill, you’re an apologist for Big Oil.

That’s politics, not persuasion.

UPDATE (9:58 a.m.): Rep. Pete Sessions (R-TX) just read the NAM letter on the floor, noting that the NAM represents “jobs creators.” Thank you, Congressman.

Judge Blocks Drilling Moratorium as Ill-Founded, Capricious

By | Briefly Legal, Energy, Regulations | No Comments

U.S. District Court Judge Martin L.C. Feldman today blocked the Obama Administration’s moratorium on deep water drilling. His ruling is here. Excerpt:

The Deepwater Horizon oil spill is an unprecedented, sad, ugly and inhuman disaster. What seems clear is that the federal government has been pressed by what happened on the Deepwater Horizon into an otherwise sweeping confirmation that all Gulf deepwater drilling activities put us all in a universal threat of irreparable harm. While the implementation of regulations and a new culture of safety are supportable by the Report and the documents presented, the blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.

On the record now before the Court, the defendants have failed to cogently reflect the decision to issue a blanket, generic, indeed punitive, moratorium with the facts developed during the thirty-day review. The plaintiffs have established a likelihood of successfully showing that the Administration acted arbitrarily and capriciously in issuing the moratorium.

On May 28, the National Association of Manufacturers issued a statement from NAM President John Engler raising concerns about the overbroad moratorium.

(Hat tip: Michelle Malkin.)

UPDATE (4:40 p.m.): (Reuters) – A majority of Americans still support offshore drilling on the U.S. coastline despite the devastating oil spill in the Gulf of Mexico, according to a Reuters/Ipsos poll released on Tuesday.

UPDATE (4:50 p.m.): A statement from John Engler, president of the National Association of Manufacturers:

Today’s decision by Judge Feldman is appropriate and important for manufacturers and the entire supply chain. The moratorium immediately shut down 33 deepwater rigs in the Gulf of Mexico and cost thousands of men and women their jobs. Estimates show that the six-month moratorium would result in lost wages ranging from $165 million to $330 million and cost tens of thousands of additional jobs.

Manufacturers throughout the country who make and supply equipment, services, engines, boats and materials such as steel and concrete also would suffer massive economic consequences as a result of the President’s overly broad moratorium.

Today’s ruling is vital to our future energy independence and a step in the right direction for the health of the economy.

A Drilling Moratorium, Killing Jobs

By | Economy, Energy | No Comments

John Engler, president of the National Association of Manufacturers, has an op-ed in today’s Washington Times, “Drilling moratorium is a jobs moratorium“:

As economic woes continue to mount, the Obama administration now says it will work quickly to reopen some exploration and development of offshore oil and natural gas. Unfortunately, this is not enough. I believe our national priorities are the following: The oil spill in the Gulf of Mexico must be contained and the damage cur- tailed. The causes of the accident need to be understood and corrected so that future episodes can be prevented.

However, our country cannot afford to use this accident as an excuse for an overbroad moratorium that stops progress to the detriment of our economic and national security. We do not need to choose between energy security and environmental safety. We need to continue to strive for both.

The Wall Street Journal editorialized on the issue Wednesday, “A Second Oil Disaster: The deep water drilling moratorium threatens Gulf state economies.”

In Gulf of Mexico, Perdido Means Energy Found, Produced

By | Energy | No Comments

Seems like we’re always writing about Chevron’s legal dispute with the left-wing government of Ecuador and the combine of U.S. trial lawyers/activists/media. Chevron is an energy company, after all, and it works with other major energy companies like Shell and BP to meet consumer demand in some of those most astonishing places in the world.  From last week, a news release, “Chevron Confirms First Oil From Perdido Development.”

SAN RAMON, Calif., Mar. 31, 2010 – Chevron Corporation (NYSE: CVX) announced today that the Perdido deepwater project, located in the U.S. Gulf of Mexico, has started crude oil and natural gas production. Production from the Great White, Silvertip and Tobago fields utilizing the Perdido hub is expected to reach full capacity of 130,000 barrels of oil-equivalent per day after the drilling of additional wells…

“Perdido represents the industry’s first production from the Lower Tertiary, where Chevron has made multiple discoveries and is a leading leaseholder. This project’s success paves the way to develop further opportunities in this important new area,” said Gary Luquette, president, Chevron North America Exploration and Production Company.

Shell deserves equal billing, at least.  Shell designed and operates the Perdido host spar, the floating production facility, which is jointly owned by Shell (35 percent), Chevron (37.5 percent), and BP (27.5 percent). From a news release, “Shell starts production at Perdido – world’s deepest offshore drilling and production facility“:

Shell today produced its first oil and natural gas from the Perdido Development, the world’s deepest offshore drilling and production facility. Located in an isolated, ultra-deep sector of the Gulf of Mexico, Perdido marks a new era in innovation and safely unlocks domestic sources of energy for US consumers. The facility sits in approximately 2,450 metres (8,000 feet) of water, which is roughly equivalent to six Empire State Buildings stacked one atop the other, and will access reservoirs deep beneath the ocean floor. Perdido smashes the world water depth record for an offshore platform by more than 50%. Read More

Including the Negative Reaction to President’s Energy Plan

By | Energy, Global Warming | No Comments

Heritage Foundation, The Foundry blog, “Don’t Fall For Obama’s Energy Shell Game“:

In fact, if anything, the policies announced by President Obama yesterday will actually decrease and delay future U.S. oil production. The President actually canceled four lease sales off the Alaska coast that were planned to begin producing oil within the next two years, delayed a planned lease off Virginia until at least 2012, and placed some areas off limits for at least seven years. Go back and look at President Obama’s actual announcement again: he only promised new exploration off the Atlantic coast. There is absolutely no guarantee that any new drilling will ever occur. Secretary Ken Salazar’s Interior Department still has full discretion to never allow a single drop of oil to be harvested from these waters. And that doesn’t even begin to address the court challenges the enviro-left will employ to attack and delay the entire process.

Will Yeatman, Competitive Enterprise Institute, “OCS Sleight of Hand“:

[While] all the talking heads are chattering about Obama’s supposed pragmatism, the EPA will release today its final rule to allow California to regulate greenhouse gases from automobiles under the Clean Air Act. That’s the real story, because once a “pollutant” (remember, we are talking about carbon dioxide, the stuff we exhale) is regulated under the Clean Air Act, it becomes subject to further and further regulation. The President will have the power (the obligation, according to well funded environmental lawyers) to regulate anything larger than a mansion — your small business, your office complex, your apartment building.

Thomas J. Pyle, Institute for Energy Research, “Obama Energy Announcement: More Imported Oil, Less Domestic Production, Fewer Jobs“:

America’s offshore energy resources belong to the American people. Not a company, not a special interest, and not a single administration. And a clear majority of the American people supports the commonsense strategy of producing more oil and gas here in America. Unfortunately, today, and to our economic detriment, the President once again ignored the will of the American people. Read More

Including the Positive Reaction to President’s Energy Proposal

By | Energy, Global Warming | No Comments

The National Association of Manufacturers’ statement from Executive Vice President Jay Timmons, “Manufacturers Urge Continued Expansion of Offshore Development.”

American Petroleum Institute, a statement from President Jack Gerard:

The announcement by President Obama and Secretary Salazar is a positive development. We look forward to reviewing the details of the proposal, and we stand ready to work with them to make this a reality. We appreciate the administration’s recognition of the importance of developing our nation’s oil and natural gas resources to create jobs, generate revenues and fuel our nation’s economy.

Exploring for and developing our nation’s offshore resources could help generate more than a trillion dollars in revenues and create thousands of jobs to add to the already 9.2 million jobs supported by today’s oil and natural gas industry.

As we move forward, we hope that consideration can be given to other resource-rich regions, such as the Destin Dome area of the Eastern Gulf and areas off the Pacific Coast and Alaska. We also need to ensure that the permitting processes are handled in an expeditious way. The oil and natural gas industry has a proven track record of safe oil and natural gas development and the majority of the American people recognize this by supporting greater offshore development for the benefit of their communities, their states and their nation.

Virginia Gov. Bob McDonnell, “White House Decision Ensures Virginia will be First State on Eastern Seaboard to Produce Natural Gas and Oil Offshore“:

I thank the President and Secretary of the Interior Ken Salazar for ensuring Virginia will be the first state on the East Coast to explore for and produce energy offshore. The President’s decision to allow energy exploration off Virginia’s coast will mean thousands of new jobs, hundreds of millions in new state revenue and tens of billions of dollars in economic impact for the Commonwealth. It will also help our nation take a further step towards energy independence. Environmentally-safe offshore energy exploration and production is good for Virginia workers, the Virginia economy and national security. Just this session the General Assembly passed, with bipartisan support, legislation I requested to authorize offshore oil and gas exploration and drilling and to allocate 80% of revenues to transportation and 20% to green energy research and development. Read More

Brazil, Where Energy Flows (Alberta, Too), In Contrast To…

By | Energy | No Comments

From Slate.com, boiling down Bloomberg, “BP Spends Billions To Hunt for Oil off Brazil“:

BP, the largest oil and gas company in Europe, has finalized a deal to fork over $7 billion in cash for a chunk of Devon Energy Corp.’s assets. BP will buy U.S. deepwater sites in the Gulf of Mexico, sites in Azerbeijan and, most notably, 10 sites off the coast of Brazil, home to some of the largest deepwater oil fields in the world. “This strategic opportunity fits well with BP’s operating strengths and key interests around the world,” BP Chief Executive Officer Tony Hayward told Bloomberg. “As well as giving us a broad portfolio of assets in the exciting Brazilian deepwater, it will strengthen out position in the Gulf of Mexico, enhance our interests in Azerbaijan and enable us to progress the development of Canadian assets.” As part of the deal, Devon will take a 50 percent stake in BP’s Kirby oil sands in Alberta, Canada.

Wall Street Journal editorial, “An Energy Head Fake“:

President Obama used his January State of the Union speech to promise “a new generation of safe, clean nuclear power plants” and “new offshore areas for oil and gas development.” Judging by its recent decisions, we’d say his Cabinet hasn’t received the memo.

Congress’s ban on offshore drilling expired in September 2008, and a Bush Administration plan for leasing the energy-rich Outer Continental Shelf was due to begin this year. Yet within a month of taking office, Interior Secretary Ken Salazar halted leasing by extending the public comment period by six months. When that period ended last September, Interior said it would take “several weeks” to analyze the results. It has yet to release a summary.


State of the Union: Good Comments, Tough Decisions

By | Economy, Energy, Global Warming | No Comments

From the President’s State of the Union address:

[To] create more of these clean energy jobs, we need more production, more efficiency, more incentives. And that means building a new generation of safe, clean nuclear power plants in this country. (Applause.) It means making tough decisions about opening new offshore areas for oil and gas development. (Applause.) It means continued investment in advanced biofuels and clean coal technologies. (Applause.) And, yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America. (Applause.)


Very positive words on nuclear power. Now let’s see the permitting and political muscle from the Administration to move those “safe, clean nuclear power plants” to reality.

As for a comprehensive climate bill, passage seems increasingly unlikely in 2010. What is possible is a power play by the imperial EPA — the Administration — to impose a regulatory regime to limit greenhouse gas emissions, a policy decision that correctly belongs with Congress.

The President did not mention the EPA in his speech last night.

President Obama is certainly right in saying it’s time for “making tough decisions about opening new offshore areas for oil and gas development.”

And yet, the Minerals Management Service just signalled that the agency would delay action on Outer Continental Shelf energy development 50 miles beyond Virginia’s coast. From Reuters, “Virginia senators slam delay in offshore drilling:

WASHINGTON (Reuters) – Virginia’s two U.S. senators on Wednesday urged the Obama administration to carry out a previous plan to lease almost 3 million acres (1.2 million hectares) in federal waters off the state’s coastline to oil and natural gas companies.

The lawmakers said in a letter to U.S. Interior Secretary Ken Salazar that recent comments by a department official that the Virginia lease sale originally planned for late 2011 would be delayed until 2012 at the earliest are frustrating given that drilling creates jobs and needed energy supplies.

President Obama clearly acknowledged the critical economic importance of energy development in his State of the Union address on Wednesday. To demonstrate his seriousness, to stimulate economic growth and create jobs, it’s time to actually make and implement “tough decisions about opening new offshore areas for oil and gas development.”

UPDATE (5:15 p.m.): Jane Van Ryan at the American Petroleum Institute has reaction from Virginia Gov. Bob McDonnell and more on the possible delay of OCS energy development, “Will DOI delay Virginia’s offshore drilling?

Jobs, Yes, But Not THOSE Jobs

By | Economy, Energy | No Comments

Leading up to the State of the Union address…

David Holt, president of the Consumer Energy Alliance, issued a statement reacting to the news that the Interior Department will continue to delay the long-scheduled offshore energy lease sale in areas 50 miles off the Virginia coast:

When the governor of the commonwealth of Virginia asks the federal government to partner with his administration in an effort to convert the abundant reserves of energy off his shores into jobs, revenue and energy security for Virginians, you’d hope to see a sensible process move forward. If news today out of MMS is any indication, the federal government appears ready to delay that critical work for at least another year, meaning additional delays in creating jobs, reducing energy costs and getting the U.S. economy moving again.

The Administration should do more to show that it recognizes the tremendous economic opportunity that safe and responsible offshore energy exploration presents to the citizens of Virginia, and the nation at large.

We’re talking about thousands of high-wage jobs here, and billions in annual revenue that can be raised without imposing a single new tax. When it comes to promoting alternative energy resources offshore, the Administration has compiled an impressive record – and we applaud those efforts. This announcement signals that the Administration may not be looking to maximize our nation’s enormous oil and gas potential offshore with the same enthusiasm.  Those who support a balanced, commonsense national energy strategy look forward to continuing to work with the Administration to create jobs, improve our national and energy security and responsibly allow access to our abundant resources.

Dorgan: No Cap & Trade, Gulf Drilling OK with Military Activity

By | Energy | No Comments

Sen. Byron Dorgan (D-ND) participated in a conference call on energy and national defense issues today, and a strong case was made for policies that encourage U.S. energy security and economic growth. Reuters spots this news:

WASHINGTON (Reuters) – U.S. Senator Byron Dorgan said on Tuesday he did not think the Senate would pass climate change legislation this year, but instead would focus on separate energy legislation that would require more electricity supplies to be generated from renewable sources and expand offshore drilling into the eastern Gulf of Mexico.

This is newsy because Sen. Dorgan is making a prediction AND he’s a member of the Senate Democratic leadership. More coverage …

The impetus for today’s call was a new report issued by the group, Securing America’s Future Energy, “Eastern Gulf of Mexico Oil and Gas Exploration and Military Readiness.” The summary states:

The paper, produced in collaboration with Commonwealth Consulting Corporation, led by Col. Martin Sullivan, USMC (Ret.), concludes that there is no credible evidence that expanded oil and natural gas exploration and development in the Eastern Gulf would adversely affect military missions in that area.

Specifically, the report examines earlier claims of potential impacts (which were made prior to the Defense Department putting into place systems to evaluate such claims), assesses rates of usage by the United States military in the affected areas, explains current methods of controlling airspace and surface actions in the Gulf, and analyzes encroachment factors. It concludes that the Pentagon until very recently had no systematic tools for measuring the effect outside factors had on training and testing, and now that those tools are being put into place, they are clearly showing that oil and natural gas production will not encroach on the military missions in the Gulf.

The full report is here. Coverage: