Subscribe to our free, weekly email newsletter!


Andreoli on Oil & Fuel: Energy is a bipartisan issue

By Derik Andreoli
November 01, 2012

“Drill baby drill”
Rather than supporting investment in renewable energy research and development, the GOP has repeated the “Drill baby drill” refrain, and thus talking points have inaccurately painted Republicans as “pro” oil and gas and Democrats as “anti” oil and gas. This is not only false, but it’s counterproductive in that it needlessly creates division and animosity.

It will probably come as a surprise to many that the number of drilling rigs in operation has increased from 328 in January 2009 when Obama was inaugurated to 1,423 at last count. By comparison, the number of drilling rigs in operation under the George W. Bush Administration peaked at a relatively paltry 426.

It’s important to understand, however, that the vast majority of rigs in operation are drilling on private land, and the offshore drilling moratorium that emerged in the wake of BP’s oil spill in the Gulf of Mexico had an obvious impact on drilling activity on federally-owned offshore land. But a few points should be made here as well.

First, and most importantly, the Gulf spill shed light on a poorly regulated system, and while poor regulation was not to blame for the spill (blame falls squarely on BP’s shoulders), effective regulation could have prevented the spill and the negative environmental, social, and economic impacts that the spill brought to the fishing, tourism, and related industries.

Moreover, the low number of active drilling rigs is not only due to the offshore drilling moratorium. The number of active drilling rigs has been declining for years primarily because oil and gas producers chose to drill elsewhere in the world.

Roughly 175 offshore drilling rigs were in operation when George W. Bush was inaugurated in January 2001, but during his last full month as President, only 66 offshore drilling rigs were in operation.

By March 2010, the month before the spill, the offshore rig count had fallen further to 51, and of course the moratorium caused the number of rigs in operation to drop further—to just 15 by July 2010.

Since then, however, the number of rigs in operation has climbed back to 51, and is likely to continue to climb as the federal leasing system has been restructured.

This past summer, the federal government put up for lease 39 million acres in the Gulf of Mexico, and the highest bids totaled $1.7 billion. The total acreage leased (2.4 million acres) is now in line with the decadal average, and the income earned by these bids was higher in only two other years—2007 and 2008. Looking forward, the decision has been made under the Obama administration to put up for bid another 38 million acres of federal offshore land in the Gulf next March. At this point, it’s anyone’s guess as to whether the bids will be tendered under a Democrat or Republican administration.

These statistics fly in the face of partisan talking points. With the exception of the temporary drop that resulted from the spill-induced moratorium, politics and regulation had little to do with the decline of drilling activity, though one might argue that the restructuring of leases has paved the way for increased activity.

A similar story is told by statistics on pipeline construction. During Bush’s last year in office (2008) slightly fewer than 51,000 miles of domestic crude oil pipelines were constructed, despite the fact that oil prices had reached record highs, and the financial system had not yet collapsed. Under Obama, slightly less (55,000 miles) were laid in 2010, which is the last year that data are available.

Of course neither Bush nor Obama had much to do with these pipelines, and when pipelines are brought up as talking points, what is really being referred to is the particularly contentious northern section of the Keystone Pipeline extension. This section of the pipeline will transport Canadian Syncrude produced from oil/tar sands to Cushing, Okla., and on to refineries in Port Arthur, La., and Houston, Texas.

It has widely been reported that Obama rejected the pipeline, but this statement is misleading. Obama rejected an expedited plan for the northern section only, citing the need for further research into the risks associated with the particular route that had been proposed. Obama has, in fact, pushed to have the southern section approved.

But Obama is not alone in his concern over the routing of the northern section. In August 2011, Nebraska’s Republican Governor, Dave Heineman, sent a letter to both President Obama and Secretary of State Hillary Clinton asking that the federal permit be denied because the proposed route traverses a critical aquifer. Here we have a Republican pleading on environmental grounds to a Democrat who has supported drilling and pipeline projects elsewhere.

The truth is that large pipeline projects are always contentious. As a case in point, in 1973, Senator Bob Dole broke with the Republican Party to stand beside then-Senator Joe Biden in opposition to the Trans-Alaska Pipeline System.

With the benefit of hindsight, it’s fair to say that the Alaska pipeline has been a great success, but had there been a significant accident, our perception would certainly be less positive. But just because an accident didn’t happen doesn’t mean that the risk of an incident affecting the Alaska pipeline or the Keystone pipeline has been reduced to zero.

In short, we need to recognize that there is a long history of bipartisan support for important environmental regulations, funding for solar and wind energy research and development, funding for conventional and unconventional oil and gas production, and support for pipeline development to distribute natural gas and oil to end users.

About the Author

Derik Andreoli

Derik Andreoli, Ph.D.c. is the Senior Analyst at Mercator International, LLC. He welcomes any comments or questions, and can be contacted at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Carload volumes were up 2.8 percent at 304,276, and intermodal volume for the week ending August 16 was up 5.4 percent at 270,316 containers and trailers.

Even though this data can be viewed as “old” in the sense that there is not a whole lot new to report about the port labor talks, it does a good job of looking into the mindset of shippers as talks continue.

Company officials said this service will be provided without any type of additional cost for customer shipments traveling from Ohio, Michigan, and Indiana, with expedited services available to customers outside of this area.

FTR says both spot rates and contract rates are heading up in a full capacity environment and with the fall shipping season rapidly approaching, it explained conditions for shippers could further deteriorate.

Read how others are using Business Process Management to achieve ERP success with Microsoft Dynamics AX. Download the free white paper now.

Article Topics

Columns · November 2012 · Global Logistics · Oil · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA