The Oil and the Glory

The Weekly Wrap — July 23, 2011

The Weekly Wrap — July 23, 2011

The Santa Barbara syndrome: This week marks a year since BP at last stopped the oil spewing from its Macondo well in the Gulf of Mexico — at 5 million barrels, it was the largest oil spill in history, and seemed on the verge of destroying BP as a company. Much has happened in that space of time: In February, Big Oil companies unveiled an emergency spill containment system to act against any new major accident, something that many outside the industry had thought already existed. The system arrived just in time for ExxonMobil to make a fresh, 700 million-barrel discovery in the Gulf and, further afield, for intensified efforts to begin exploring the environmentally sensitive Arctic Circle. BP is wobbly but got back on its feet.

The industry has marked the anniversary with a full-throated campaign for a restart of Gulf of Mexico drilling permits at pre-Macondo rates. Two industry groups — the American Petroleum Institute and the National Ocean Industries Association — funded and issued a 156-page study arguing that 186,000 jobs would result by 2013 if federal regulators clear a backlog of permit applications. The July 11 report was by Quest Offshore Resources, an oil industry consulting firm. This week came the release of a similar study, this one funded by the Gulf Economic Survival Team, a lobbying organization formed by Louisiana Gov. Bobby Jindal, a bitter critic of the drilling moratorium ordered after the spill by President Barack Obama. Among other findings, this report, carried out by IHS CERA, estimates that 230,000 jobs would result by next year in a pre-Macondo permitting environment.

One suggestion in both reports is that if only there were sufficient regulatory efficiency, the permitting backlog would vanish. But is that the case? I cannot say with certainty because spokespeople for the relevant regulators — the Bureau of Ocean Energy Management, Regulation and Enforcement — did not reply to a query. Another symptom of the backlog, you might say. But one wonders if the old pace will or even should return regardless of the resources thrown at the effort. After Macondo, the run-of-the-mill regulator might be expected for quite some more time to exercise exceeding caution in vetting drilling plans. Decades later, Santa Barbara and the Valdez, for example, still dog the industry.

Go to the jump for more of the Wrap.

The (long) shift to a post-hydrocarbon world: A group of environmental activists is urging two weeks of sit-ins in Washington to try to persuade President Barack Obama to reject expansion of the flow of bitumen-based crude from Alberta oil sands into the United States, the Huffington Post reports. The protestors say enlarging the Keystone Pipeline would be "game over" in terms of climate change. I’ve written otherwise on the grounds that the Alberta government has been attentive to environmental concerns, unlike the hydraulic fracturing industry, which sees salvation in assertive PR. But in a long piece at Popular Science, Paul Roberts goes broader. Roberts explains why, regardless of the wisdom of a shift away from hydrocarbons — in particular the dirtiest forms — they are highly likely to be with us in a dominant fashion for decades more. He goes on to handicap which will and ought to be produced, and in what order. It’s recommended reading.

 

The Kremlin Contest: Don’t wait — submit your guess for who will be Russia’s next president. Enter the Kremlin Contest, only here at O&G. Use the email link above my photo to the right on this page.

ARPA and technology bets: At Bloomberg, Ken Stier writes a long piece on Arpa-E, the agency formed on a bet that, by copying a highly successful Pentagon formula, the federal government can trigger revolutionary advances in alternative energy technologies. The model is Darpa, the radical innovation lab that produced the Internet, GPS and a lot of the semiconductor advances we’ve seen over the years. In a new piece in Foreign Affairs, David Victor and Kassia Yanosek argue that clean energy is in trouble in part because genuine innovation is underfunded. So I emailed Victor asking why he would say that considering Arpa-E’s stable of somewhat risky investments. His reply is that Arpa-E’s investments are "the right idea," but that the agency needs to become even riskier — it must "focus on even earlier stage technologies — well before even the venture capitalists are interested." Ultimately, Victor says, Arpa-E lacks Darpa’s central super sauce — a captive, deep-pocketed end user with whom it can scale up the manufacture of its products. Said Victor:

While there are similarities to Darpa, there are big differences — notably on the customer (the military for Darpa, which has created scale and less sensitivity to cost; by contrast, large numbers of retail customers who are sensitive to cost are the ultimate customers for Arpa-E technologies.).

 

In praise of the Chisholm Trail: U.S. Secretary of State Hillary Clinton has officially embraced a bandwagon urging restoration of the ancient Silk Road. As you may recall, this is a plan that’s been circulated for some years in Washington by Professor Fred Starr, who recalls the route’s long and important economic role in Central Asia, the Indian subcontinent and China. He, part of the Pentagon and now Clinton argue that its rehabilitation can trigger important commerce, and even pacify long-warring Afghanistan. The idea is not only to rebuild the road, but also to erect modern stuff, like electricity networks, and a natural gas pipeline.

That’s impressive, but what vexes me is that, given the economy, both Mrs. Clinton and Professor Starr neglect pretty impressive dirt tracks right here at home. Personally, I have an attachment to the Chisholm Trail. For quite some decades in the 19th century, you may recall, this grand old track was a loci of important commercial activity. Hundreds of small feeder tracks flowed together into a singular, majestic land route along which cowboys urged forward Texas longhorns, all of them converging on a Kansas railhead, from which they were shipped to markets in the U.S. east. Today, the route is buried humbly in U.S. Highway 81, but why? Here is a splendid lane for resurrectors such as yourselves.

And who can forget Route 66, the fantastic, cross-country U.S. road that inspired a great song, not to mention a TV show? Has the Interstate Highway System that officially replaced this legendary highway inspired any decent music? No, it has not. Needless to say, Mrs. Clinton and Professor Starr might be wise to take a long look at bringing back Route 66, too.

We close with some 1974 Rolling Stones.