Further reflections on where next for US Energy policy.

On the 28th March, I republished a powerful essay from Patrice Ayme under my Post title of Questions are never stupid.  In fact, Patrice’s essay was called Energy Question For The USA and concluded thus:

Total oil sales, per day are about 100 million barrels (in truth the cap is lower, see graph above), at, say $100, so ten billion dollars a day, 3.6 trillion a year. The USA uses about 25% of that. Some have incorporated the price of the part of the gigantic American war machine and (what are truly) bribes to feudal warlords insuring Western access to the oil fields, and found a much higher cost up to $11 a gallon.

Ultimately, and pretty soon, in 2016, specialists expect oil prices to explode up, from the exhaustion of the existing oil fields. Then what?

Moreover, in 2016, the dependence upon OPEC, or, more exactly Arab regimes, is going to become much greater than now. What’s the plan of the USA? Extend ever more the security state, and go occupy the Middle East with a one million men army? To occupy, or not to occupy, that is the question.

Is it time for a better plan? And yes, any better plan will require consumers to pay higher energy prices. As consumers apparently want the army to procure the oil, they ought to pay for it.

So when Michael Klare published an essay just two days ago on TomDispatch entitled, Welcome to the New Third World of Energy, the U.S. it seemed highly relevant to have that follow-on from Patrice’s essay.  Again I am very grateful to Tom Engelhardt for giving me permission to republish.  Readers may like to know a little of Michael Klare’s background, from here:

Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author of Resource Wars and Blood and Oil. Consider this essay a preview of his newest book, Rising Powers, Shrinking Planet: The New Geopolitics of Energy, which has just been published by Metropolitan Books. A brief video of Klare discussing key subjects in his new book can be viewed by clicking here.

So here is that essay.  I’m going to include Tom’s introduction because it’s fair to so do!

Tomgram: Michael Klare, Welcome to the New Third World of Energy, the U.S.

[Note for TomDispatch Readers:With today’s Michael Klare piece, you get your last chance to receive a signed, personalized copy of his new book, The Race for What’s Left: The Global Scramble for the World’s Last Resources, in return for a contribution of $100 or more to this website.  (Visit our donation page to check it out.)  The offer will end later this week.  Many thanks to those of you who have already given.  Klare’s book is little short of prophetic and the dollars you so generously send in really do help keep TomDispatch afloat! Tom]

Here’s a simple rule of thumb when it comes to energy disasters: if it’s the nuclear industry and something begins to go wrong — from Three Mile Island in Pennsylvania in 1979 to Fukushima, Japan, after the 2011 tsunami — whatever news is first released, always relatively reassuring, will be a lie, pure and simple.  And as the disaster unrolls, it’s not likely to get much better.  The nuclear industry is incapable of telling the truth about the harm it does.  So when the early stories appear about the next nuclear plant in trouble, whatever you hear or read, just assume that you don’t know the half, not even the quarter, of it.

When it comes to the oil and gas industry and disasters, a similar rule of thumb follows: however bad it first sounds, the odds are it’s going to sound a lot worse before it’s over.  (See BP, Deepwater Horizon.)  So when you first hear about an oil leak from a Chevron well off the coast of Brazil or from a natural gas well in the North Sea operated by the French oil giant Total and you getthose expectable reassurances, they, too, are likely to be nothing but gas.

And here’s the sad thing, you’re going to get all too many chances to test out these simple rules when it comes to bad energy news.  After all, as Michael Klare has been writing at this site for years, we’re entering the “tough energy” era.  The big energy companies are going to be extracting hydrocarbons in ever more hazardous, difficult-to-reach places like the Arctic and they’re going to be using ever uglier methods to do so.

It’s a guarantee that, however bad the environmental damage we’ve seen so far, it’s only going to get worse as the energy industry despoils various regions to give us our fossil-fuel fix and theirmega-profits.  As Klare points out, one of those regions is slated to be not in distant Africa, the Persian Gulf, or the Caspian Sea, but right here in the U.S.  Klare has been ahead of the energy curve ever since, in the late 1990s, he suggested that we would soon be on a planet embroiled in“resource wars.”  His new book, The Race for What’s Left: The Global Scramble for the World’s Last Resources, catches the nightmarish nature of the planet’s last energy boom in a way no one else has.  And don’t be surprised if that nightmare lands squarely in your backyard. Tom

A New Energy Third World in North America?
How the Big Energy Companies Plan to Turn the United States into a Third-World Petro-State 
By Michael T. Klare

The “curse” of oil wealth is a well-known phenomenon in Third World petro-states where millions of lives are wasted in poverty and the environment is ravaged, while tiny elites rake in the energy dollars and corruption rules the land.  Recently, North America has been repeatedly hailed as the planet’s twenty-first-century “new Saudi Arabia” for “tough energy” — deep-sea oil, Canadian tar sands, and fracked oil and natural gas.  But here’s a question no one considers: Will the oil curse become as familiar on this continent in the wake of a new American energy rush as it is in Africa and elsewhere?  Will North America, that is, become not just the next boom continent for energy bonanzas, but a new energy Third World?

Once upon a time, the giant U.S. oil companies — Chevron, Exxon, Mobil, and Texaco — got their start in North America, launching an oil boom that lasted a century and made the U.S. the planet’s dominant energy producer.  But most of those companies have long since turned elsewhere for new sources of oil.

Eager to escape ever-stronger environmental restrictions and dying oil fields at home, the energy giants were naturally drawn to the economically and environmentally wide-open producing areas of the Middle East, Africa, and Latin America — the Third World — where oil deposits were plentiful, governments compliant, and environmental regulations few or nonexistent.

Here, then, is the energy surprise of the twenty-first century: with operating conditions growing increasingly difficult in the global South, the major firms are now flocking back to North America. To exploit previously neglected reserves on this continent, however, Big Oil will have to overcome a host of regulatory and environmental obstacles.  It will, in other words, have to use its version of deep-pocket persuasion to convert the United States into the functional equivalent of a Third World petro-state.

Knowledgeable observers are already noting the first telltale signs of the oil industry’s “Third-Worldification” of the United States.  Wilderness areas from which the oil companies were once barred are being opened to energy exploitation and other restraints on invasive drilling operations are being dismantled.  Expectations are that, in the wake of the 2012 election season, environmental regulations will be rolled back even further and other protected areas made available for development.  In the process, as has so often been the case with Third World petro-states, the rights and wellbeing of local citizens will be trampled underfoot.

Welcome to the Third World of Energy

Up until 1950, the United States was the world’s leading oil producer, the Saudi Arabia of its day. In that year, the U.S. produced approximately 270 million metric tons of oil, or about 55% of the world’s entire output. But with a postwar recovery then in full swing, the world needed a lot more energy while America’s most accessible oil fields — though still capable of growth — were approaching their maximum sustainable production levels.  Net U.S. crude oil output reached a peakof about 9.2 million barrels per day in 1970 and then went into decline (until very recently).

This prompted the giant oil firms, which had already developed significant footholds in Indonesia, Iran, Saudi Arabia, and Venezuela, to scour the global South in search of new reserves to exploit — a saga told with great gusto in Daniel Yergin’s epic history of the oil industry, The Prize. Particular attention was devoted to the Persian Gulf region, where in 1948 a consortium of American companies — Chevron, Exxon, Mobil, and Texaco — discovered the world’s largest oil field, Ghawar, in Saudi Arabia.  By 1975, Third World countries were producing 58% of the world’s oil supply, while the U.S. share had dropped to 18%.

Environmental concerns also drove this search for new reserves in the global South. On January 28, 1969, a blowout at Platform A of a Union Oil Company offshore field in California’s Santa Barbara Channel produced a massive oil leak that covered much of the area and laid waste to local wildlife. Coming at a time of growing environmental consciousness, the spill provoked an outpouring of public outrage, helping to inspire the establishment of Earth Day, first observed one year later. Equally important, it helped spur passage of various legislative restraints on drilling activities, including the National Environmental Policy Act of 1970, theClean Water Act of 1972, and the Safe Drinking Water Act of 1974. In addition, Congress banned new drilling in waters off the Atlantic and Pacific coasts and in the eastern Gulf of Mexico near Florida.

During these years, Washington also expanded areas designated as wilderness or wildlife preserves, protecting them from resource extraction. In 1952, for example, President Eisenhower established the Arctic National Wildlife Range and, in 1980, this remote area of northeastern Alaska was redesignated by Congress as theArctic National Wildlife Refuge (ANWR). Ever since the discovery of oil in the adjacent Prudhoe Bay area, energy firms have been clamoring for the right to drill in ANWR, only to be blocked by one or another president or house of Congress.

For the most part, production in Third World countries posed no such complications. The Nigerian government, for example, has long welcomed foreign investment in its onshore and offshore oil fields, while showing little concern over the despoliation of its southern coastline, where oil company operations have produced a massive environmental disaster. As Adam Nossiter of the New York Timesdescribed the resulting situation, “The Niger Delta, where the [petroleum] wealth underground is out of all proportion with the poverty on the surface, has endured the equivalent of the Exxon Valdez spill every year for 50 years by some estimates.”

As vividly laid out by Peter Maass in Crude World, a similar pattern is evident in many other Third World petro-states where anything goes as compliant government officials — often the recipients of hefty bribes or other oil-company favors — regularly look the other way. The companies, in turn, don’t trouble themselves over the human rights abuses perpetrated by their foreign government “partners” — many of them dictators, warlords, or feudal potentates.

But times change.  The Third World increasingly isn’t what it used to be.  Many countries in the global South are becoming more protective of their environments, ever more inclined to take ever larger cuts of the oil wealth of their own countries, and ever more inclined to punish foreign companies that abuse their laws. In February 2011, for example, a judge in the Ecuadorean Amazon town of Lago Agrio ordered Chevron to pay $9 billion in damages for environmental harm caused to the region in the 1970s by Texaco (which the company later acquired).  Although the Ecuadorians are unlikely to collect a single dollar from Chevron, the case is indicative of the tougher regulatory climate now facing these companies in the developing world.  More recently, in a case resulting from an oil spill at an offshore field, a judge in Brazil hasseized the passports of 17 employees of Chevron and U.S. drilling-rig operator Transocean, preventing them from leaving the country.

In addition, production is on the decline in some developing countries like Indonesia and Gabon, while others have nationalized their oil fields or narrowed the space in which private international firms can operate. During Hugo Chávez’s presidency, for example, Venezuela has forced all foreign firms to award a majority stake in their operations to the state oil company, Petróleos de Venezuela S.A.  Similarly, the Brazilian government, under former President Luiz Inácio Lula da Silva, instituted a rule that all drilling operations in the new “pre-salt” fields in the Atlantic Ocean — widely believed to be the biggest oil discovery of the twenty-first century — be managed by the state-controlled firm, Petróleo de Brasil (Petrobras).

Fracking Our Way to a Toxic Planet

Such pressures in the Third World have forced the major U.S. and European firms — BP, Chevron, ConocoPhillips, ExxonMobil, Royal Dutch Shell, and Total of France — to look elsewhere for new sources of oil and natural gas.  Unfortunately for them, there aren’t many places left in the world that possess promising hydrocarbon reserves and also welcome investment by private energy giants. That’s why some of the most attractive new energy markets now lie in Canada and the United States, or in the waters off their shores.  As a result, both are experiencing a remarkable uptick in fresh investment from the major international firms.

Both countries still possess substantial oil and gas deposits, but not of the “easy” variety (deposits close to the surface, close to shore, or easily accessible for extraction).  All that remains are “tough” energy reserves (deep underground, far offshore, hard to extract and process). To exploit these, the energy companies must deploy aggressive technologies likely to cause extensive damage to the environment and in many cases human health as well.  They must also find ways to gain government approval to enter environmentally protected areas now off limits.

The formula for making Canada and the U.S. the “Saudi Arabia” of the twenty-first century is grim but relatively simple: environmental protections will have to be eviscerated and those who stand in the way of intensified drilling, from landowners to local environmental protection groups, bulldozed out of the way.  Put another way, North America will have to be Third-Worldified.

Consider the extraction of shale oil and gas, widely considered the most crucial aspect of Big Oil’s current push back into the North American market. Shale formations in Canada and the U.S. are believed to house massive quantities of oil and natural gas, and their accelerated extraction is already helping reduce the region’s reliance on imported petroleum.

Both energy sources, however, can only be extracted through a process known as hydraulic fracturing (“hydro-fracking,” or just plain “fracking”) that uses powerful jets of water in massive quantities to shatter underground shale formations, creating fissures through which the hydrocarbons can escape. In addition, to widen these fissures and ease the escape of the oil and gas they hold, the fracking water has to be mixed with a variety of often poisonous solvents and acids. This technique produces massive quantities of toxic wastewater, which can neither be returned to the environment without endangering drinking water supplies nor easily stored and decontaminated.

The rapid expansion of hydro-fracking would be problematic under the best of circumstances, which these aren’t.  Many of the richest sources of shale oil and gas, for instance, are located in populated areas of Texas, Arkansas, Ohio, Pennsylvania, and New York. In fact, one of the most promising sites, the Marcellus formation, abuts New York City’s upstate watershed area.  Under such circumstances, concern over the safety of drinking water should be paramount, and federal legislation, especially the Safe Drinking Water Act of 1974, should theoretically give the Environmental Protection Agency (EPA) the power to oversee (and potentially ban) any procedures that endanger water supplies.

However, oil companies seeking to increase profits by maximizing the utilization of hydro-fracking banded together, put pressure on Congress, and managed to get itself exempted from the 1974 law’s provisions. In 2005, under heavy lobbying from then Vice President Dick Cheney — formerly the CEO of oil services contractor Halliburton — Congress passed the Energy Policy Act, which prohibited the EPA from regulating hydro-fracking via the Safe Drinking Water Act, thereby eliminating a significant impediment to wider use of the technique.

Third Worldification

Since then, there has been a virtual stampede to the shale regions by the major oil companies, which have in many cases devoured smaller firms that pioneered the development of hydro-fracking. (In 2009, for example, ExxonMobil paid $31 billion to acquire XTO Energy, one of the leading producers of shale gas.)   As the extraction of shale oil and gas has accelerated, the industry has faced other problems. To successfully exploit promising shale formations, for instance, energy firms must insert many wells, since each fracking operation can only extend several hundred feet in any direction, requiring the establishment of noisy, polluting, and potentially hazardous drilling operations in well-populated rural and suburban areas.

While drilling has been welcomed by some of these communities as a source of added income, many have vigorously opposed the invasion, seeing it as an assault on neighborhood peace, health, and safety. In an effort to protect their quality of life, some Pennsylvania communities, for example, have adopted zoning laws that ban fracking in their midst. Viewing this as yet another intolerable obstacle, the industry has put intense pressure on friendly members of the state legislature to adopt a law depriving most local jurisdictions of the right to exclude fracking operations. “We have been sold out to the gas industry, plain and simple,” saidTodd Miller, a town commissioner in South Fayette Township who opposed the legislation.

If the energy industry has its way in North America, there will be many more Todd Millers complaining about the way their lives and worlds have been “sold out” to the energy barons.  Similar battles are already being fought elsewhere in North America, as energy firms seek to overcome resistance to expanded drilling in areas once protected from such activity.

In Alaska, for example, the industry is fighting in the courts and in Congress to allow drilling in coastal areas, despite opposition from Native American communities which worry that vulnerable marine animals and their traditional way of life will be put at risk. This summer, Royal Dutch Shell is expected to begin test drilling in the Chukchi Sea, an area important to several such communities.

And this is just the beginning. To gain access to additional stores of oil and gas, the industry is seeking to eliminate virtually all environmental restraints imposed since the 1960s and open vast tracts of coastal and wilderness areas, including ANWR, to intensive drilling. It also seeks the construction of the much disputed Keystone XL pipeline, which is to transport synthetic crude oil made from Canadian tar sands — a particularly “dirty” and environmentally devastating form of energy which has attracted substantial U.S. investment — to Texas and Louisiana for further processing. According to Jack Gerard, president of the American Petroleum Institute (API), the preferred U.S. energy strategy “would include greater access to areas that are currently off limits, a regulatory and permitting process that supported reasonable timelines for development, and immediate approval of the Keystone XL pipeline.”

To achieve these objectives, the API, which claims to represent more than 490 oil and natural gas companies, has launched a multimillion-dollar campaign to sway the 2012 elections, dubbed “Vote 4 Energy.” While describing itself as nonpartisan, the API-financed campaign seeks to discredit and marginalize any candidate, including President Obama, who opposes even the mildest version of its drill-anywhere agenda.

“There [are] two paths that we can take” on energy policy, the Vote 4 Energy Web site proclaims. “One path leads to more jobs, higher government revenues and greater U.S. energy security — which can be achieved by increasing oil and natural gas development right here at home. The other path would put jobs, revenues and our energy security at risk.” This message will be broadcast with increasing frequency as Election Day nears.

According to the energy industry, we are at a fork in the road and can either chose a path leading to greater energy independence or to ever more perilous energy insecurity. But there is another way to characterize that “choice”: on one path, the United States will increasingly come to resemble a Third World petro-state, with compliant government leaders, an increasingly money-ridden and corrupt political system, and negligible environmental and health safeguards; on the other, which would also involve far greater investment in the development of renewable alternative energies, it would remain a First World nation with strong health and environmental regulations and robust democratic institutions.

How we characterize our energy predicament in the coming decades and what path we ultimately select will in large measure determine the fate of this nation.

Michael T. Klare is a professor of peace and world security studies at Hampshire College, a TomDispatch regular, and the author of The Race for What’s Left: The Global Scramble for the World’s Last Resourcesjust published by Metropolitan Books.  To listen to Timothy MacBain’s Tomcast audio interview in which Klare discusses his new book and what it means to rely on extreme energy, click here, or download it to your iPod here.  Klare can be followed on Facebook.

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Copyright 2012 Michael T. Klare

Fascinating times indeed!