Ep. 192: How to Nationalize US Oil and Gas

afd oil and gas nationalization

Like the single-payer healthcare fight, but for the entire global climate…

 
The beginner’s guide to a pragmatic government purchase of the US oil and gas industry to wind down fossil fuel production rapidly in the global public interest.
People: Bill and Nate Produced: Aug 13th, 2017.

Episode 192 (51 min):
AFD 192

You can find a complete list of our reference materials here.

You might also want to listen to Ep. 178, on climate austerity in a state of emergency, which originally aired in April 2017.

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Russia is making Ukraine pay for gas it donates to rebels

Russia’s Gazprom, the country’s main oil and gas exporter, claims Ukraine has used up its prepaid natural gas allotment, and will be cut off within days. This claim results from the fact that they’re counting unfunded exports to Russian-backed separatists in eastern Ukraine under Ukraine’s national account. This probably stings, in addition to being extremely inconvenient:

Ukraine says it has already paid for all the gas it requested for this year, and for an additional 287 million cubic meters not yet ordered. Kiev is now accusing Russia of violating an agreement reached in October, under which Ukraine paid $3.1 billion in past gas bills and Gazprom resumed supplies on a prepaid basis. That agreement was expected to keep Ukraine fully supplied with gas through the winter.

The dispute seems to hinge at least in part on the gas that Russia has delivered to the breakaway regions in eastern Ukraine, which it says counts toward the total Kiev bought in advance. Earlier this month, Gazprom said it would supply natural gas directly to the regions, which are largely controlled by separatists, because it said the Ukrainian government had shut off supplies. Gazprom said that it would charge Ukraine for that gas, and that the amount of gas supplied to the east would be deducted from Ukraine’s prepaid allotment.

[…] separatist leaders went on local television to thank Russia and Mr. Putin [for gas deliveries]. “We thank the Russian Federation and Vladimir Vladimirovich, as Russia is again extending its hand to help, giving warmth,” said the leader of the Luhansk People’s Republic, Igor Plotnitsky. “Thank you, Russia.”

 
This is yet another example of how the Ukrainian central government is being forced to subsidize essential services for the very rebels they are trying to suppress. Previous measures included maintaining ATM services, pension payouts, salaries, utilities, and more within the rebel-occupied territories — putting the lie to the separatist claims of having their own self-sufficient governments. Kiev ended most of those services in November.

gazp

Hope and concern over new East African gasfield discoveries

Tanzania Daily News, December 30, 2014, “Tanzania, Mozambique Top Africa’s Oil, Gas Table“:

Africa’s energy industry could boom in the coming years, with Mozambique and Tanzania set to emerge as new frontiers if they can attract enough badly needed investment, a report said recently.

Six of the top 10 global discoveries in 2013 were made in Africa, with more than 500 companies now exploring across to the continent, according to a study by PriceWaterhouseCoopers.

Large gas finds in Mozambique and Tanzania would make the world “take note of east Africa as an emerging player in the global industry,” said the report’s advisory leader, Chris Bredenhann.

The boom has brought investment opportunities, despite the lingering challenges of corruption, lack of infrastructure and regulation.

Transactions worth some $1 billion occurred every 17 days in Africa’s oil and sector last year, the report said. Still, the continent faces fierce competition for vital investment from other parts of the world, the PWC report cautioned.

 
As noted above, public theft of revenues remains a huge challenge if ordinary Africans are to receive any benefits from this expansion of the resource extraction industry — rather than simply being exploited once again. Moreover, it is always critical to avoid becoming economically and societally dependent on the export revenues of a single natural resource.

However, there are other challenges too. Gideon George, several days earlier in the Tanzania Daily News, had already published a piece warning Tanzanians not to get their hopes up for (or prematurely fear the effects of) big revenues and investments flooding the country, quite yet, because of the economics involved:

Reports from the Tanzania Petroleum Development Corporation (TPDC) show that gas deposits have now reached 50.4 trillion cubic feet (tcf), increasing anxiety among the population which now thinks Tanzania is on the way to becoming another ‘Dubai’.

Experts term this as ‘extremely high expectations of super earnings’ and no wonder the Parliamentary Public Accounts Committee (PAC) was so adamant that it set its eyes on the 26 PSAs that have been signed between the Government through the TPDC and the exploration companies.

Ask anyone on the prospects and the answer would be trillions of dollars in super earnings. However, according to oil and gas experts, the expected high earnings could remain a dream because of a number of factors including more gas discoveries being made elsewhere around the globe which could lower prices due to stiff competition.

These include discoveries in other countries of the region such as Mozambique which has proven reserves of gas amounting to 150 million tcf, discoveries from other continents discoveries from unconventional sources such as shale gas. Shale gas in the United States is rapidly increasing as an available source of natural gas.
[…]
“Discovering gas deposits is one thing and extracting them and selling them is quite another. You can have large deposits if cannot you to extract the gas or get markets to sell the gas the dream of super earnings would easily evaporate,” said a Denis Maringo Founding Director of the Oil, Natural Gas & Environmental Alliance (ONGEA), adding that “there is no need to be over ambitious.”

The view has been strengthened by a Dar es Salaam University Don, Dr. Alex Hepelwa who has asked Tanzania to tow a precautionary line over expected gas earnings, emphasizing the need to develop a strong internal market through increased use of gas for domestic and industrial purposes.

 
Simply put, the more unconventional fields discovered and opened around the world, the lower the wholesale oil and gas prices will fall due to competition, and some of the more difficult reserves (both technically and governmentally) to develop will continue to remain just out of reach.

As always, establishing transparent governance and enforcing the rule of law are prerequisites to any country or region receiving durable and useful foreign direct investment and benefiting from the arrival of new industries. They cannot come later. Such measures attract stable partnerships with good-faith actors and help ensure that the local population is not being played. They also promote sounder and broader-based long-term investment of national natural resource wealth into human development for the whole population.

State Attorneys General are ruining the Earth. Literally.

Sigh. It seems that despite the overwhelming voice of Americans insisting the government take steps to reduce the effects of climate change, there are still those (read: gas and oil companies) that insist on blocking the effort. The New York Times’ Eric Lipton wrote a riveting piece on the collaboration of Republican state Attorneys General and corporations’ to push to dismantle the E.P.A and Obama administration’s regulations. He notes:

Democrats for more than a decade have teamed up with environmental groups such as the Sierra Club to use the court system to impose stricter regulation. But never before have attorneys general joined on this scale with corporate interests to challenge Washington and file lawsuits in federal court.

 
I’ll skip over the obvious in this statement (Democrats were trying to protect the air we breathe), and move onto the fact that this is incredibly dangerous and unprecedented business. David B. Frohnmayer, a former Republican Attorney General from Oregon noted that these Attorneys General are shamelessly using a public office to support corporate interests and their financial interests.

While these gas and oil companies are reveling in the success of these shared efforts, Republican Attorneys General — who represent half the states right now — are reaping the benefits of raised national profiles and a club that acts like a national law firm. The club has systematically filed lawsuits against major federal policy, including the Affordable Care Act, securities regulation, and recently Obama’s action on immigration.

Lipton focuses on one Attorney General in particular, Scott Pruitt of Oklahoma, a particularly proud collaborator with the industry. Mr. Pruitt’s office moved a couple words around in a three-page letter from Devon Energy, one of Oklahoma’s largest oil and gas companies, and sent it off to Washington on official state letterhead. One of Mr. Pruitt’s closest partners has been Harold M. Hamm, the Chief Executive of Continental Resources. Mr. Pruitt hangs out with Andrew P. Miller, a former Virginia Attorney General, who in turn has clients like TransCanada (aka the company behind the Keystone XL pipeline).
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The Battle for Xinjiang (and its energy riches)

One of areas of China bordering central Asia (including a small border with northern Afghanistan, which became important by accident during the U.S. invasion of that country in 2001) is China’s Xinjiang Autonomous Region. Over the past year, there have been a rising number of terrorist attacks on civilian targets in this region, and in other areas of China, performed by separatists from that Xinjiang Region.

Xinjiang, or the “New Frontier” from eastern China’s perspective sometimes, is formerly known as Chinese or East Turkestan in most maps from the Western World. It is China’s largest administrative area and is located in northwest China, north of the Tibet region. Very strategically, it shares borders with several former Soviet Republics, plus Afghanistan, Pakistan, and India.

Map of the de facto territory of the Xinjiang Autonomous Region in China. (Credit: TUBS - Wikimedia)

Map of the de facto territory of the Xinjiang Autonomous Region in China. (Credit: TUBS – Wikimedia)

Xinjiang is nearly evenly split between China’s overall majority ethnic group the Han and the ethnic minority Uighurs (also spelled Uyghurs) — who are the largest ethnicity in the Xinjian region, a situation which is highly unusual for Chinese minority ethnic groups nationwide and which has fueled a lot of tension.

Uighurs argue (probably correctly) that they are an oppressed minority in China. The Communist Party, in return, doesn’t trust them, both because they are dissimilar from the rest of the country and because they actively waged an Islamic insurgency during the 1950s against the People’s Republic of China. This rebellion was nominally in support of their Nationalist allies, who had fled to Taiwan after the end of the Chinese Civil War at the end of the 1940s, but was of course largely motivated by a desire for self-rule after many generations of outside domination.

In fact, Uighur support for the Nationalists was a rare exception to their historic trend of generally resisting all outsiders, including a Soviet invasion in 1934, the Russian Empire in the 19th century, and various Chinese dynasties that attempted to assert control over the area throughout history.

They are, essentially, another of the many small and diverse warrior cultures of Central Asia, which we’ve seen in action in Afghanistan and Pakistan throughout the 1980s, 1990s, and the past decade — except that they (now) happen to fall within China, on the map, as opposed to one of the “Stans.” And indeed they are more closely related to the ethnic groups in those areas than to the rest of China, which is one of the exacerbating sources of conflict.

The population, as is true of much of the Western half of China (outside of Tibet), is heavily Muslim. As a result — and due to its borders with Pakistan and Afghanistan — they have been somewhat accidentally caught up in the Global War on Terror.

But beyond the War on Terror, according to a report in The New York Times, there is also an almost mind-blowingly huge potential for energy production and distribution, which is being developed as fast as possible now. And that potential is probably the real reason the People’s Republic of China has been so determined since the 1950s — when the first very major oil field was definitively identified — to hold onto and dominate the Xinjiang region, especially now that the rest of China has such a large need for fuel and power.

At this point, Xinjiang’s strategic energy value is so high to the rest of China and the national government, that probably no amount of separatist unrest will shake them or slow down their energy economy development of the area. Here, from the Times report, is what they are working with …

Oil and gas production:

The foundation of Xinjiang’s energy economy is oil. Xinjiang has an estimated 21 billion tons of oil reserves, a fifth of China’s total, and major new deposits are still being found. This month, a state-owned oil company announced its greatest discovery of the year here, a deposit estimated to have more than one billion tons of oil on the northwestern edge of the Dzungarian Basin, not far from Karamay’s fields. Xinjiang is expected to produce 35 million tons of crude oil by 2020, a 23 percent increase over 2012, according to the Ministry of Land Resources.

 
Coal mining:

Xinjiang also has the country’s largest coal reserves, an estimated 40 percent of the national total, and the largest natural gas reserves. Those three components form an energy hat trick that China is capitalizing on to power its cities and industries.

 
Electricity exports:

The main state-owned electric utility, the State Grid Corporation of China, is investing $2.3 billion over the next year to build high-voltage lines, according to People’s Daily, the main party newspaper. Xinjiang will export electricity to more populated parts of China and perhaps to Central Asia.

 
Energy transit infrastructure:

“Xinjiang is where all the growth in oil, gas and coal is going to be coming from,” said Lin Boqiang, an energy scholar at Xiamen University and adviser at PetroChina, China’s biggest oil producer. “Second, all the imported resources from Central Asia, oil and gas, go through Xinjiang and then get distributed from there.”

Xinjiang produced 25 billion cubic meters of natural gas in 2012, and it aims to increase that to 44 billion cubic meters next year.

Pipelines already transport natural gas from Central Asia and Xinjiang to central and eastern China. A new pipeline from Western Siberia is expected to transport 30 billion cubic meters of gas per year through the Altai Mountains to central Xinjiang, where it would connect with domestic east-west pipelines.

 
In that light, probably the best the Uighurs of Xinjiang can hope for is additional autonomy (including religious and cultural identity autonomy, as well as freedom from ethnic and religious discrimination in government policy) and more importantly a new revenue-sharing deal to give them more of the export profits and a higher standard of living. Independence or maintaining a Uighur plurality in the region’s demographic breakdown (i.e. keeping out more Han Chinese residents and workers) are just probably not on the table anymore.

Climate policy: Disengage “stakeholders”?

Perhaps there has been too much engaging of certain uncooperative and undermining stakeholders in the climate change policy discussions. As one of the world’s largest climate action protests ever unfolded this weekend, Anna Lappé makes that case in a new Al Jazeera America op-ed entitled “What climate activists can learn from the fight against Big Tobacco”:

Progress has been stalled in part because the biggest polluters in the world — those oil and gas companies responsible for the lion’s share of emissions, for example — have been given a seat at the negotiating table, treated as partners and stakeholders at the annual global meetings called the Conference of Parties, or COP. Over the years, these COPs have featured industry-sponsored pavilions, dinners and breakaway meetings. And companies have been granted official observer status through their industry trade associations, which are considered nongovernmental organizations under current climate meeting rules. Some have even attended as official members of country delegations. (For instance, a representative from Shell joined the Nigerian delegation to COP16 in 2010 and Brazil’s to COP14 in 2008.)

As climate activists call for governments to take real action on climate, the decades-long fight against Big Tobacco — specifically, how public health advocates successfully kept companies away from the negotiating table — holds powerful lessons for the role industries should have in these key talks.

 
It would be one thing if the oil and gas companies were actively interested in pursuing new energy strategies or diversifying their future plans into new and cleaner areas, but as she notes they are spending a lot of money trying to undermine the case that new regulations or laws are even needed in the first place. And in that regard they are probably forfeiting their right to have a seat at the table as stakeholders.

Incidentally, that mention of the Shell rep serving on the delegation from Nigeria in 2008 and 2010 is very unsurprising. As I explored in an article in January 2011, entitled “The Nigerian Republic of Royal Dutch Shell”, on the Nigeria-specific revelations from the leaked diplomatic cables a few years ago:

Royal Dutch Shell has essentially become, according to the company itself, the industrial octopus inside Nigeria’s government, even in the “democratic” era…

The ambassador reported: “She [Ann Pickard, then Shell’s vice-president for sub-Saharan Africa] said the GON [government of Nigeria] had forgotten that Shell had seconded people to all the relevant ministries and that Shell consequently had access to everything that was being done in those ministries.”

 
Until now, most of the discussions have included oil and gas lobby folks on the theory that their “buy-in” would be critical to producing actionable plans for dealing with climate change. But what if they just refuse to buy-in? It should be clear after more than two decades of efforts that they aren’t really interested in taking the transformative steps necessary to bring their businesses into the future. At this point, they have too much influence at the table, rather than not enough. The fight against Big Tobacco is probably a useful analogy.

Dark clouds of smoke and fire emerge as oil burns during a controlled fire in the Gulf of Mexico, May 6, 2010. The U.S. Coast Guard, working with BP, local residents and other federal agencies, conducted the burn to help prevent the spread of oil following the explosion on Deepwater Horizon, an offshore drilling unit. (Credit: US Navy via Wikimedia)

Dark clouds of smoke and fire emerge as oil burns during a controlled fire in the Gulf of Mexico, May 6, 2010. The U.S. Coast Guard, working with BP, local residents and other federal agencies, conducted the burn to help prevent the spread of oil following the explosion on Deepwater Horizon, an offshore drilling unit. (Credit: US Navy via Wikimedia)

Pennsylvania gov’t admits fracking contamination

Nice to finally have some confirmation that it wasn’t all imagined (as some have insisted to me and others many times):

For the first time, Pennsylvania has made public 243 cases of contamination of private drinking wells from oil and gas drilling operations.

As the AP reports, Pennsylvania’s Department of Environmental Protection posted details about the contamination cases online on Thursday. The cases occurred in 22 counties, with Susquehanna, Tioga, Lycoming, and Bradford counties having the most incidences of contamination.

In some cases, one drilling operation contaminated the water of multiple wells, with water issues resulting from methane gas contamination, wastewater spills, and wells that simply went dry or undrinkable. The move to release the contamination information comes after years of the AP and other news outlets filing lawsuits and Freedom of Information Act requests from the DEP on water issues related to oil and gas drilling and fracking.

 
One wonders if there will be any consequences, though, given that the industry has spent massively on the campaigns of favorable state reps and state senators in Pennsylvania to open the way to fracking operations all over the state.

The industry lobby’s response to the disclosure, as reported by the AP/Wall Street Journal, was to fault Pennsylvania rocks for being difficult to work with and to blame the state government for lax regulation on drilling well construction and design (a statement which takes a lot of chutzpah).