It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
Thursday, August 12, 2021
Belarus Struggles to Circumvent Western Sanctions Against Its Oil Industry
On July 29, Belarusian President Alyaksandr Lukashenka appointed Mikhail Kostechko to serve as the new general director of the country’s main oil products trader, Belorusskaya Neftyanaya Kompaniya (BNK), and ordered him to maintain foreign market share regardless of the activity of the “Western scumbags” (President.gov.by, July 29). Undoubtedly, Lukashenka was referring to the sanctions recently imposed by the United States, European Union and the United Kingdom that had significantly affected Belarus’s oil sector (see EDM, June 30). The Belarusian side is experimenting with many different actions to try to mitigate the effects of these restrictive measures; however, it seems it will not be able to fully circumvent the international penalties. This is particularly the case because the Western sanctions continue to be expanded, as was illustrated on August 9, when the US, Canadian and UK governments imposed further sanctions packages on the one-year anniversary of the start of the Belarusian political crisis.
In general, Minsk’s attempted responses are currently aimed at both circumventing the Western sanctions against the Belarusian oil industry as well as making it more difficult for analysts to track the restrictive measures’ effects. First, the Belarusian authorities have removed open access to governmental customs data regarding oil products and potash exports (Interfax, July 13), and they likewise hid the statistics concerning the Naftan refinery’s production (the plant is under US sanctions) (Gorod214.by, July 29). Second, Belarus changed the shareholder structure of targeted companies (or their subsidiaries, due to the US Office of Foreign Assets Control’s “50 percent rule”) to limit their sanctions exposure. The starkest example of the latter tactic may have been the recent presidential order to withdraw Belarus’s international oil products trader BNK from Belneftekhim’s indirect control, as the latter had fallen under US sanctions in April of this year (Pravo.by, July 17). Third, the Belarusians are also founding brand new companies to replace previously operating entities. It took Mikalay Varabyey (one of the Lukashenka’s deputies, who controls the EU-designated oil products trader Novaya Neftyanaya Kompaniya, or NNK) only three days to establish a new company—OOO Nordstar—presumably to circumvent the sanctions’ effects (T.me/nexta_tv, July 25).
Moreover, it appears Minsk has also managed to informally secure continuous crude oil supplies to Naftan, despite the secondary sanctions looming over the companies involved. The basis for that inference is that the refinery has not been shut down since the revocation of the US sanctions suspension in April. By their technical nature, refining plants cannot be frequently stopped and restarted as these facilities need to maintain a specific minimum level of capacity utilization. But Belarus would not have been able to provide Naftan with enough crude based from indigenous sources—domestic petroleum production is small and is being exported to Germany. Therefore, even though official Russian customs data and Transneft exports schedules indicate a halt in supplies to Naftan (TASS, August 2), deliveries from Russia are most likely still being realized in some informal way (in contrast, non-Russian deliveries to Naftan would not be economically viable for Belarus and would be easily traceable). This presumed murky scheme involving Russian supplies might involve dedicated intermediaries, false certificates of origin, etc.
Although the Belarusian authorities evidently see the Western sectoral sanctions as a threat to the country’s oil industry, serious obstacles are likely to prevent a full mitigation of the associated economic risks. The largest concern for Minsk is probably the fact that the EU’s sectoral sanctions include a ban on any new contracts for the import or transfer of all Belarusian petroleum products (see EDM, June 30). That particular restriction will be especially difficult to circumvent, as the sanctions provisions clearly state that the ban relates both to fuels of Belarusian origin and to ones from third countries but that have been exported from Belarus (Eur-lex.europa.eu, June 24). Effectively, even if Belarusians try to sell their petroleum products as of different origin (e.g. Russian), they would have to do that via Russia or (much less probably) Ukraine. However, such a scheme should then be easy to spot for the EU countries’ intelligence services, and it could make those exports no longer profitable for the original Belarusian producers.
The second apprehension from Minsk’s point of view is that the Western countries and the EU itself are still further expanding their restrictive measures lists. Illustratively, yesterday, August 9—i.e., on the one-year anniversary of Belarus’s fraudulent presidential election, which sparked mass street protests and bloody crackdowns by the authorities—the US, Canada and the UK announced additional sanctions. The penalties include several new US designations aimed at persons linked to Lukashenka’s regime (Treasury.gov, August 9); while the British and Canadian measures bring those governments in line with the previously mentioned EU ban on importing or transferring Belarusian petroleum products (Gov.uk, Canada.ca, August 9). All of these new sanctions provisions/designations add to Belarus’s economic problems, further reducing its room for maneuver on the international stage.
The Bills Are Coming Due in the American Petrostate of North Dakota Some folks got rich quick in the fracking boom, but now they're concerned about the damage to their land and their water.
There are times when it is Tiger Beat On The Potomac, and there are times when it’s just Politico. Most often, the latter incidents occur in Politico Magazine, which has been a strong product ever since its launch, its early call on DeSantis v. COVID notwithstanding. One of these occasions can be found in Tom Haines’s lucid examination of how North Dakota is handling the inevitable—and highly predictable—consequences of having declared itself a petrostate a few years back. Both Dakotas pretty much gave themselves over to the extraction industry over the last couple of decades. It was there that fracking got to be the hot new thing. Now, the bills are coming due, and crows doth sit upon the drilling rigs.
Fracking has also accelerated life on the surface. Some landowners have made millions of dollars from selling the rights to oil beneath their land to major corporations. And struggling agricultural crossroads, including Watford City, the county seat 20 miles southeast of Novak’s farm, have found new life as boomtowns. During the past decade, a new high school and hospital, and housing developments sprawling from Main Street into the prairie, have arisen to serve the more than 10,000 people who have come from afar to work in the McKenzie County oil field.
But installing an industry atop an agricultural zone has brought less-heralded changes, too, including an elaborate system to deal with the saltwater, which is actually a polluted mix of naturally occurring brine, hydrocarbons, radioactive materials and more. Billions of gallons of it are produced by oil drilling and pumping each year.
Haines begins his story with an account of how one of the saltwater tanks got hit by lightning, whereupon it burst, sending its toxic contents spilling down washes and gullies and into a river, a lake, and one farmer’s groundwater. This was not an unusual occurrence.
The damage to [Larry] Novak’s land, while dramatic, isn’t uncommon in the North Dakota oil fields. More than 50 saltwater spills happen each year in McKenzie County, when tanker trucks crash, pipelines leak, or well pads or disposal sites catch fire or otherwise malfunction. Many spills are contained on well pads and at disposal sites. But others drain into fields, farmyards and roadways. Novak worried about his pasture, a water source for cows, deer, pheasants and more. And he feared the cumulative impact of so many saltwater spills in a county that is home to hundreds of streams and springs, and where farmers and ranchers often rely on water wells for livestock and themselves.
This, of course, puts the residents of the oil-rich state in the same bind as the poor folks down in Cancer Alley in Louisiana: What do you want, your job or your drinking water? Of course, in North Dakota, a lot of people got rich before being forced into that choice.
But today, even Republicans in deep-red McKenzie County are raising questions. One morning during my visit this May, I met Karolin Jappe, McKenzie County Emergency Manager, at her office in the county courthouse. She sat at her desk in a red-white-and-blue blouse, with a red-white-and-blue lanyard around her neck. She had a Trump-Pence 2020 coffee mug reading ‘Keep America Great.’ As coordinator of local response efforts, many of which come from volunteer fire companies, Jappe is often on scene after a tanker truck crashes and dumps wastewater, or a saltwater disposal site gets hit by lightning (which can happen several times a year), or a saltwater pipeline bursts a leak. The walls of Jappe’s office are covered with diagrams of well pads and county road maps. Next to her desk, she keeps stocks of extra-large sanitary wipes and emergency spill kits.
“I love the oil field,” Jappe told me. “But saltwater is my enemy.”
She is especially concerned about the damage that can come if pipes injecting saltwater a mile underground were to leak. She told me she is not confident underground aquifers, let alone fields and pastures impacted by surface spills, are safe. She worries that residents don’t have enough protection under current oil-field oversight by state agencies that can’t keep pace with development. “We’re their lab rats,” Jappe said.
It’s easy to dismiss the people in Haines’ story as suckers who went for the quick buck. But, in the 1980s, American farmers were in such awful shape that Willie Nelson and Neil Young started an annual benefit concert for them. So along come the oil companies wanting to drill, and offering bags of cash for the right to do so.
It’s awfully glib to say that the farmers should have refused it , especially with foreclosures and bankruptcy auctions happening every couple of hectares down the road. Now, though, these bills are coming due. Haines has caught the beginnings of what may be a serious political uprising by people of the land against the power of the industry that made some of them rich. Haines recalls a speech given by Art Link, one of the state’s few Democratic governors in this half-century.
Link, a McKenzie County native who is buried in Alexander, just eight miles south of the lightning-strike saltwater spill on Larry Novak’s land, gave what was then considered a defining speech for the state’s ideals. In it, he said he supported development of coal mining in the southern part of the state, but only in a way that protected land and water. “And when we are through with that and the landscape is quiet again …” Link said, “let those who follow and repopulate the land be able to say, ‘our grandparents did their job well. The land is as good and, in some cases, better than before.’”
Nigeria’s north needs jobs, not oil
This is not the time for oil exploration, especially when it risks further marginalising the country’s most vulnerable region.
Nigeria’s Petroleum Industry Bill was passed on 1 July, potentially ending a 13-year stalemate since it was first introduced in 2008. It is expected to radically reform Nigeria’s oil and gas industry and ensure that its citizens benefit more from its oil wealth. However some provisions appear to contradict this objective.
One of these is the allocation of oil revenues to exploration in the country’s northern region.
Natural resources can serve as a good base for growth and prosperity. But the political economy of oil in Nigeria means that production in the north may worsen the already deplorable security, political and socio-economic situation. It’s also unlikely to provide the substantial number of jobs urgently needed to drive stabilisation in the region.
The bill stipulates that 10% of rents on petroleum prospecting licences and petroleum mining leases and 30% of oil revenue collected by the Nigerian National Petroleum Corporation be allocated to a Frontier Exploration Fund. This fund was created to finance state-backed oil exploration in areas referred to as the Frontier Basins. The Frontier Basins include the Lake Chad, Gongola, Anambra, Sokoto, Dahomey and Bida basins and the Benue Trough, all primarily situated in Nigeria’s north.
Nigeria’s Frontier Basins
(click on the map for the full size image)
In February 2020, Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, announced that one billion barrels of crude oil had been discovered in Gongola Basin in Nigeria’s north-east. This announcement was met with public scepticism.
Nigeria’s mismanagement of its oil sector and its reliance on crude oil exports and petroleum imports have been central to several political and economic struggles. Rather than experiencing economic prosperity, the southern oil-producing Niger Delta region has suffered environmental degradation, worsened health outcomes and the erosion of livelihoods. It’s also endured violence and political instability, with the emergence of armed groups since 2004.
Given the Niger Delta situation, it can be argued that increased state-backed investment in oil exploration is the last thing Nigeria’s north needs – contrary to the proposition that it will drive industrialisation.
The northern region performs poorly on almost all human development indicators compared to the south. The World Bank reports that 87% of Nigeria’s poor live in its northern region – about half of them in the north-west. National Bureau of Statistics data shows that seven out of 10 states with the highest unemployment and underemployment rates are in the north. These challenges extend to issues like maternal and child mortality, literacy rates, and general life outcomes.
Nigeria’s northern region performs poorly on almost all human development indicators compared to the south
The disparity between the north and south has also affected the prevalence of conflict. The north-east is the epicentre of the Boko Haram insurgency in Nigeria, which has reportedly claimed an estimated 350 000 lives to date. Criminal gang activities have also escalated in the north-west and north-central. The north-central has seen the highest incidence of deadly clashes between herders and farmers. The region has also been disproportionately affected by the country’s growing kidnapping crisis.
The challenges the government faces in resolving the conflict in the north have made it apparent that the root causes of socio-economic deprivation and poor state presence need to be addressed.
As one example, efforts have been launched to stabilise the north-east, which forms part of the Lake Chad Basin. At the core of these efforts are the restoration of livelihoods and the creation of new livelihood sources. Violent extremists capitalise on these high rates of employment during recruitment drives.
Therefore what the north needs is jobs. Crude oil production, being capital-intensive, cannot fill this role. Instead it could lead to the loss of livelihoods through the pollution of agricultural lands and fishing sites. Oil exploration in Nigeria’s north may only increase its developmental gap with the south. It may also worsen the security situation by raising the stakes for resource capture between the state and violent extremists looking to take over the region. Resources should be invested in securing lives and livelihoods and figuring out how to create jobs
Changes in the global oil industry, driven by climate change mitigation, also create a case against long-term investment. Already, one of Nigeria’s major oil producers has expressed that its operations in the country are no longer suited to its green strategy. The country’s tough regulatory space is an added disincentive for foreign investment.
Nigeria’s dependence on oil exports as the major source of government revenue and foreign exchange consistently puts the country in difficult economic situations. Ninety-seven percent of the government’s revenue was spent on debt servicing in 2020 because of the COVID-19-driven decline in the demand for oil.
Nigeria should be on the path of industrialisation – focusing less on the production and export of commodities like crude oil and more on manufactured goods, for example. One way to do this is to transfer resources from the oil sector to more productive sectors such as agriprocessing that will provide employment. Agriprocessing for export and domestic consumption has the potential to employ more people at lower skill levels than required by the oil industry.
There’s a need for investment towards resolving the problems obstructing basic and advanced food production. This includes inadequate storage that leads to significant losses of agricultural output and processing and transport facilities and infrastructure. Continent-wide trade projects like the African Continental Free Trade Area agreement should be used – Nigeria should explore ways to embed northern producers into national and regional value chains. Insecurity is one of the biggest threats to the region’s agricultural activities.
Nigeria’s leaders shouldn’t be betting on oil at the risk of further marginalising its most vulnerable region
The focus for Nigeria’s oil sector should be to improve efficiency, curb corruption, and find ways to move up the production value chain. This isn’t the time for the country’s leaders to bet on oil at the risk of further marginalising its most vulnerable region – especially since there is no evidence that the government has learnt lessons from the Niger Delta.
Instead, resources should be invested in securing lives and livelihoods in the region and figuring out how to create sufficient jobs for its population. This would be the right kind of attention the north needs from the federal government.
Teniola Tayo, Research Officer, Lake Chad Basin Programme, ISS Dakar
This article is funded by the United Nations Development Programme and the government of the Netherlands.
In South Africa, Daily Maverick has exclusive rights to re-publish ISS Today articles.
AUSTRALIA
Beetaloo Basin fracking: court bid launched to stop Coalition giving company $21m in grants for project
Action alleges federal minister’s grants decision for Northern Territory basin plan was unlawful and failed to ensure ‘proper’ use of public funds
Demonstrators outside of Empire Energy offices in Sydney in May oppose the company’s fracking plans for the Northern Territory’s Beetaloo Basin.
Environmental groups will go to court in an attempt to stop resources minister Keith Pitt handing $21m in grants to a gas company seeking to frack the Beetaloo Basin in the Northern Territory.
According to court documents, it will be alleged that the minister failed to ensure the expenditure was a “proper” use of money and “efficient, effective, economical and ethical”, as required under public governance laws.
The case will argue the minister failed to consider the potential increased risk of climate change if the Beetaloo Basin is opened up to gas companies. It also argues the minister failed to examine the risk of publicly-funding gas projects, when the world is reducing fossil fuel use.
ECNT co-director Dr Kirsty Howey said the groups wanted to see “taxpayers money used wisely and with all the consequences being fully considered”.
“Granting $21 million to a private fossil fuel company should only be done after all care is taken to examine the impacts on climate change, the environment and the community,” Howey said.
Opening up Beetaloo to gas development is part of the Morrison government’s gas-led recovery plan. The Coalition set up the Beetaloo Cooperative Drilling Program to incentivise exploration in the basin, and the first three grants went to an Empire Energy subsidiary.
The groups are now asking for an undertaking that the money will not be transferred to Empire prior to the court deciding on the legality of the expenditure.
The Environmental Defenders Office chief executive, David Morris, said the case was about “whether the proper process has been followed”.
“Our client will argue that before making a decision to grant these funds, the relevant minister needed to make reasonable inquiries into a range of risks, including climate and economic risks, that may arise from the expenditure,” he said.
Pitt described the case as another example of “activists using the courts with baseless allegations to try and delay nationally important resources projects”.
“This latest case of green ‘lawfare’ declared on legitimate projects threatens to delay an estimated 6,000 new jobs being delivered for the Northern Territory along with around $37 billion on economic activity,” he said.
“Grants are provided to companies that possess the highly specialised skills to meet the challenges of developing the Basin as determined by an expert assessment panel.”
He said the grants were awarded in accordance with the grant guidelines.
Separately, a Senate inquiry into fracking the Beetaloo on Wednesday heard evidence about Empire and other grant recipients.
Empire’s chair is Paul Espie, a frequent Liberal donor and chair of the Liberal-aligned Menzies Research Centre.
Liberal senator Jane Hume has previously described Espie in parliament as a doyen of the party.
The company’s managing director, Alex Underwood, told a Senate inquiry on Wednesday that he had met with the federal energy minister, Angus Taylor, and praised the grants program in March, just prior to the grant guidelines being released.
The company has denied it lobbied Taylor to obtain grants or that Espie’s links to the party played any role whatsoever.
During Wednesday’s hearing senators also heard evidence about two other companies seeking to exploit the basin.
The not-for-profit group Publish What You Pay Australia investigated the corporate structures of both Sweetpea Petroleum and Falcon Oil and Gas Australia, finding both had links to the tax secrecy jurisdiction of Delaware.
Falcon, it told the inquiry, was linked to Russian plutocrat and Vladimir Putin ally Viktor Vekselberg, who held a 16% stake in its parent company.
Beetaloo Basin fracking plan: gas companies linked to tax secrecy havens and Liberal party, inquiry told
One company given grants worth $21m for drilling despite not having Northern Territory environmental approvals, senators hear
A protest outside Empire Energy’s offices in Sydney in May against the company’s fracking plans for Beetaloo Basin in the Northern Territory. Photograph: Loren Elliott/Reuters
The gas companies seeking to frack the Beetaloo Basin have been accused of sharing links to tax secrecy jurisdictions, the Liberal party and Russian plutocrats, a Senate inquiry has heard.
Opening up the Northern Territory to fracking is a key part of the Morrison government’s “gas-led recovery”, and the commonwealth is incentivising exploration through the $50m Beetaloo cooperative drilling program.
Earlier this month, the first three grants from that program were given to a subsidiary of Empire Energy, a company chaired by frequent Liberal donor Paul Espie. Espie is the also chair of the Liberal-aligned Menzies Research Centre and has been described by Liberal senator Jane Hume as a doyen of the party.
A Senate inquiry into fracking in the Beetaloo Basin on Wednesday heard that Empire Energy was given the grants, worth $21m, to drill at three sites in the Beetaloo, despite still waiting on the necessary environmental approvals from the Northern Territory government. Coalition granted $21m to Liberal party donor to frack Beetaloo Basin
The inquiry also heard that Empire executives met with the federal energy minister, Angus Taylor, on 10 March, prior to the announcement of the grant guidelines later that month.
“From memory, I may have told the minister that I believed it was a good policy and that it might incentivise an acceleration of activity,” Empire’s managing director, Alex Underwood, said. “But I can assure you there was no mention of seeking any kind of influence over the process.”
Asked by Greens senator Sarah Hanson-Young whether he believed Espie’s connections with the Liberal party helped the company obtain the grants, Underwood responded: “No, I do not. They played no role whatsoever in our applications for these grants. We follow due and proper process at all times.”
In October last year, the company invited Taylor to visit its first Beetaloo well, paying for a charter flight and a dinner. Espie was on the charter flight, the inquiry heard.
Empire was also asked about one of its larger shareholders, a company named Global Energy and Resources Development. The company was registered in the Caribbean and associated with (Michael) Tang Yan Tian, who the inquiry heard is the subject of an arrest warrant in Hong Kong relating to alleged insider trading.
Underwood said Empire, which is publicly-listed, did not have a good relationship with Global Energy and Resources Development.
“I have no control over whether or not that entity chooses to hold shares in our company,” he said.
Earlier, the inquiry heard about two other companies that are seeking to exploit the Beetaloo Basin: Sweetpea Petroleum and Falcon Oil and Gas Australia.
Both companies have been investigated by the not-for-profit group Publish What You Pay Australia.
It found that a Russian plutocrat and ally of Vladimir Putin, Viktor Vekselberg, held a 16% stake in Falcon’s parent company. One of its subsidiaries is registered in Delaware, a known tax secrecy jurisdiction.
Sweetpea Petroleum, the inquiry heard, appeared to be owned by a US investment firm that had recently created a shell company, Longview Petroleum LLC, in Delaware.
Parts of the corporate structure were registered to a two-story yellow brick building in downtown Wilmington, which is home to more than 285,000 companies, the inquiry heard.
Moore told the inquiry that Sweetpea’s parent company appeared not to have paid a small tax bill in Delaware.
“I would take the view that a company whose parent company appears not able to pay the few hundreds of dollars of tax to remain of good standing in Delaware should not be receiving valuable government revenue under the program at this stage,” he said.
Former Darwin lord mayor and Protect Country Alliance spokesman Graeme Sawyer told the inquiry that the industry had effectively captured the territory government.
“A former NT chief minister is now a consultant for the oil and gas industry, key government senior staff are people from the industry, and key people from the bureaucracy and advisory positions leave to work in the industry,” he said. “The revolving door is in full operation in the NT.”
Sawyer also said there was no informed consent from traditional owners in the area.
“There is no informed consent about fracking and the family groups that I have spoken to at length have recently reinforced their opposition at a meeting in Darwin in June. There was about 45 traditional owners there and I’d really encourage you to talk to them in detail about that notion of informed consent.”
Empire said it went to great lengths to ensure informed consent was obtained from traditional owners. It also said its projects would deliver significant economic benefits to the local region.
Wednesday, August 11, 2021
At current rates, oil and gas companies will prevent world from hitting 1.5°C warming goal
The benchmark from the World Benchmarking Alliance (WBA), alongside partners CDP and ADEME, scores private, state-owned and publicly listed companies using CDP’s and ADEME’s Assessing low Carbon Transmission (ACT) methodology. This is the first time the industry has been judged against a 1.5°C scenario - the most ambitious emissions reduction plan proposed by the Paris Agreement - and the first study to assess oil and gas companies using the International Energy Agency’s (IEA) Net Zero Emissions by 2050 scenario. Assessing 100 of the world’s biggest oil and gas firms against this scenario, it shows that based on current rates of production these companies are set to consume the sector’s allocated carbon budget (from 2019 to 2050) by 2037 - 13 years too early. Despite this trajectory, researchers found that none of the 100 companies have committed to stopping exploration. Other key findings include:
From 2014-2019 the majors and National Oil Companies (NOCs) all increased either their oil or gas production.
Only 13 companies have low carbon transition plans that extend at least 20 years into the future.
The top 10 companies in the ranking all come from Europe.
State owned companies emerge as the ones that hold significant influence, but are severely lacking in corrective action, eating into the IEA’s remaining overall carbon budget (for all sectors). Oil and gas extracted by the 100 companies assessed is set to use up nearly 80% of the remaining CO2 budget for all sectors and all human activities. State-owned companies will take up half the remaining carbon budget (54%). The seven oil majors (BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Shell and Total Energies) account for a further 13%, and independent companies 12%. Sector marked by lack of ambition and action
Opaque, unambitious or non-existent targets and strategies from the greatest contributors to climate change show that the oil and gas sector is not accepting its share of responsibility for global emissions. Some companies’ scope 3 emissions are equivalent to the emissions of whole countries, for example ExxonMobil’s scope 3 emissions in 2019 were greater than Canada’s. Also in 2019, Saudi Aramco’s scope 1, 2 and 3 emissions were greater than Germany, France, Italy and Spain’s combined emissions.
There is also an overall lack of comprehensive and comparable climate reporting in the sector. Crucial gaps include emissions data, with most companies sharing only partial data across scope 1 and 2. Only a third of the companies, including Galp, Repsol & Equinor, disclose information on scope 3 emissions.
Research & Development (R&D) is another area where companies are yet to show action, despite many referencing “new technologies” as the future of the industry in their transition plans. While more than half of those assessed have disclosed R&D expenditure, only 17 companies report information on the proportion of investment dedicated to low-carbon technologies in 2019. Worryingly, even fewer (just 12) publish information on low-carbon capital expenditure investment plans to 2024 and these planned investments remain too low to enable a shift to a low-carbon world.
Who should pay for climate mitigation? Colorado looks to the oil industry.
Lawsuits across the state accuse the energy companies of deceptive practices that escalated the climate crisis.
2010’s Fourmile wildfire in Colorado destroyed 169 houses.
Patrick Cullis/Cooperative Institute for Research in Environmental Sciences
This story originally appeared in the Guardian and is republished here as part of Covering Climate Now, a global journalism collaboration strengthening coverage of the climate story.
More than a decade after the Fourmile Canyon blaze drove even the firefighters out of Gold Hill, blackened hillsides and scorched trees attest to the Colorado mountain town’s close shave with destruction.
“Because of the wind and the dryness, it took off,” said Chris Finn, who volunteers as the town’s fire chief when he’s not running the local inn. “That day in 2010, I felt that my business and my house might not be here anymore.”
Gold Hill’s few hundred residents fled as the fire moved along the ridge above a town that began life as a mining camp during the 1859 gold rush. The firefighters followed when they could not stop the flames swallowing scores of homes.
By the time it was extinguished, the Fourmile blaze had destroyed 169 houses, the most by any wildfire in Colorado history. But that record was broken less than two years later, and then again within days, as the pace of fires picked up.
Gold Hill was once again surrounded by flames last year, which saw a record number of wildfires in Colorado.Now, Finn is bracing for another season of record-breaking fires.
“I’ve lived up here my whole life. You can see the change in the weather,” said Finn.
The 65-year-old fire chief pauses as he sits in the garden of his modest wooden house.
“I hope that my grandson can be sitting here when he’s my age,” he said.
Chris Finn stands where the Fourmile wildfire came to the edge of Gold Hill, and where the effects can still be seen over a decade later.Rebecca Stumpf/The Guardian Finn’s nagging fear that Gold Hill is living on borrowed time is replicated across Western states ravaged by some of the most intense wildfires in modern American history. But angst about the immediate threat is accompanied by increasingly urgent questions for communities on the frontline of the climate crisis about the long-term financial cost of survival – who should foot the bill?
Gold Hill has received a state grant to thin out the forest around the town in the hope of slowing if not stopping future fires. But that is a fraction of the cost that the surrounding county says it will take to deal with the impact of global heating.
Boulder county estimates it will cost taxpayers $100 million over the next three decades just to adapt transport and drainage systems to the climate crisis, and reduce the risk from wildfires.
The county government says the bill should be paid by those who drove the crisis – the oil companies that spent decades covering up and misrepresenting the warnings from climate scientists. It is suing the U.S.’s largest oil firm, ExxonMobil, and Suncor, a Canadian company with its U.S. headquarters in Colorado, to require that they “use their vast profits to pay their fair share of what it will cost a community to deal with the problem the companies created.”
“Communities in this country and around the world were essentially robbed of their options.”
Boulder county, alongside similar lawsuits by the city of Boulder and San Miguel county in the southwest of the state, accuse the companies of deceptive trade practices and consumer fraud because their own scientists warned them of the dangers of burning of fossil fuels but the firms suppressed evidence of a growing climate crisis. The lawsuits also claim that as the climate emergency escalated, companies funded front groups to question the science in order to keep selling oil.
“It is far more difficult to change it now than it would have been if the companies had been honest about what they knew 30 or 50 years ago,” said Marco Simons, general counsel for Earth Rights International, which is handling the lawsuit for the county. “That is probably the biggest tragedy here. Communities in this country and around the world were essentially robbed of their options.”
BOULDER COUNTY’S LAWSUIT contends that annual temperatures in Colorado will rise between 3.5 and 6.5 Fahrenheit by 2050 and imperil the state’s economy, including farming and the ski industry.
Extremes of weather are already melting the mountain snowpack, causing increased evaporation and a shortfall in the amount of water flowing down the region’s most important river, the Colorado, which supplies drinking water to the state’s largest cities and irrigation all the way to California and Arizona.
Micah Parkin, founder of an environmental coalition, 350 Colorado, moved to Boulder from New Orleans after it was devastated by Hurricane Katrina.
“We decided to move to higher ground knowing hurricanes are getting more intense, sea levels are rising,” she said.
Micah Parkin left New Orleans after Hurricane Katrina for somewhere safer and then got flooded in Boulder, and evacuated during the Fourmile fire in 2010.Rebecca Stumpf/The Guardian Within two years, Parkin and her family were put on evacuation notice as the Fourmile Canyon fire threatened the city and she watched the flames from her house. Then in 2013, floods swamped Parkin’s home, the very thing she’d fled New Orleans to escape, when Boulder recorded nearly a year’s worth of rain in just eight days.
Flooding spread over 2,000 square miles, killing eight people, destroying more than 1,700 homes and causing more than $3 billion of damage across 14 Colorado counties.
“They were calling it a once in a thousand year event. I don’t believe that. We’ve loaded the dice for more and more of these intense events happening,” she said. “It’s clear that Exxon and these other companies need to be held responsible.”
Exxon and Suncor are alarmed at the prospect of the cases being heard by local jurors with first-hand experience of the impact of global heating in Boulder. The companies are pressing to move the trials out of state courts and into a federal system where laws on deceptive marketing and consumer fraud do not apply.
“Their strategy is to say that these cases need to be in federal court because federal jurisdiction applies. Then they will turn around and argue that federal law provides no remedy,” said Simons. “It is all about a route to dismissing these cases.”
The outlines of the oil industry’s defence have emerged in newspaper columns pushing back against any parallels with big tobacco and claiming it is the end user, ordinary Americans, that causes pollution.
Gale Norton, a former Colorado attorney general who led the state’s litigation against the cigarette companies and later worked as a legal counsel for Shell, has attacked the Boulder lawsuits as a money grab.
“About the only thing that ‘Big Tobacco’ and ‘Big Oil’ have in common … are the deep pockets of the defendants,” she wrote in the Denver Post. Her column highlighted her position as state attorney general, and later as U.S. Department of Interior secretary under President George W Bush, but made no mention of her work for the oil industry.
“What is our own individual liability, since annual greenhouse gas emissions amount to almost 20 tons per person?”
The Denver Post editorial board followed a similar line in denouncing the “false equivalence” between the cigarette companies and big oil, and said consumers bore the greater responsibility for the climate crisis.
“The companies didn’t create the demand for fossil fuels. We did through our lifestyles and consumption, including every single member of the communities who now wish to target corporations for a legal shakedown,” it claimed.
“The companies didn’t create the demand for fossil fuels.”
That criticism stings in climate-conscious Boulder and other high-income communities that are susceptible to charges of hypocrisy in part because areas of Colorado have some of the highest carbon footprints in the country from heating and cooling larger than average homes.
Max Boykoff, director of the environmental studies program at the University of Colorado Boulder.
Rebecca Stumpf/The Guardian
Max Boykoff, a professor in the environmental studies department at the University of Colorado Boulder, acknowledged the problem, alongside the popularity of high fuel consumption vehicles. But he said that should not be used by the oil companies to absolve themselves of responsibility for a crisis they have played a leading part in creating.
“These lawsuits are one of the tools to hold both these companies accountable,” he said.
Finn said there was no doubt that people moving into the mountains have contributed to the damage from wildfires in part by stopping the natural processes of thinning out the forest.
But the Gold Hill fire chief said the climate crisis was “a big part” of the surging heat and number of fires, and that corporate campaigns to deny the warnings from scientists played an important role.
“The science has been there for years. The problem is that you have half the population who don’t want to believe in science because it means they couldn’t make as much money,” he said.
Chris McGreal writes for Guardian US and is a former Guardian correspondent in Washington, Johannesburg and Jerusalem. He is the author of American Overdose, The Opioid Tragedy in Three Acts.
Utah’s oil and gas industry is as busy now as
it was during Trump’s ‘energy dominance’
era
Despite Biden’s lease moratorium, drilling activity has stepped up in Uinta Basin while White House ponders reforms (Brian Maffly | Tribune file photo) Pump jacks pull up hydrocarbons in the Three Rivers oil field southwest of Vernal, near Pelican Lake and the Green River, pictured on June 14, 2019. Members of Congress, including Utah Republicans, are seeking a halt to collection of federal royalties for mining and drilling on public lands — except they want the states to keep getting their share.
By Brian Maffly | Aug. 4, 2021 There were just three rigs drilling in Utah’s oil and gas fields last January when newly installed President Joe Biden halted new leasing on public lands while his administration reviewed the federal oil and gas program.
Today there are 10 rigs sinking new wells in the Uinta Basin, according to energy consultant Baker Hughes. Meanwhile industry has flooded agencies with drilling proposals in Utah, filing more applications in the past six months than during any six-month period under Donald Trump’s industry-friendly reign as president, according to state data.
While state and industry leaders forecast doom for energy development and rural employment from Biden’s moratorium, which they characterized as a “ban” on development, the exact opposite appears to be happening. Utah’s oil and gas sector is waking up from its pandemic-induced slumber despite obstacles put up by the climate-friendly Biden administration.
So what’s going on? The price of oil has shot past $70 a barrel. Energy companies are acting swiftly to increase production while prices remain high, said the Utah Division of Oil, Gas and Mining.
The boom is proof that financial incentives drive energy development in Western public lands states, not executive orders from the White House, according to Landon Newell, a staff attorney with the Southern Utah Wilderness Alliance.
“Utah has claimed the sky is going to fall [because of Biden’s lease moratorium], but this has been directly contradicted by facts and reality,” Newell said. “They are drilling like crazy in the basin where the governor’s office has been claiming things would be at a standstill.”
Critics of the Biden administration have repeatedly characterized the moratorium as federal overreach and predicted dire consequences for the rural West. An industry-backed study from the University of Wyoming, for example, said a ban on development on federal land would blow a $15 billion hole in the Utah economy over 20 years.
While welcoming the upsurge in drilling, Cox stands by his earlier position, according to Thom Carter, director of the governor’s Office of Energy Development.
“The economic impact of all of this can be far reaching and we are concerned that decisions could be felt nationwide and have a disproportionate effect on rural Utah,” Carter said. “While what you’re reporting in relation to a rebound out of the pandemic is great, there are still some real economic issues around petroleum right now, including the cost at the pump and that’s regressive at times.”
So far this year, Utah drillers have started 144 wells, according to state data. That’s nearly as many at the 154 for all of 2019, the year before the pandemic, and puts the year on track to beat 2018 and 2017, when 204 and 199 wells, respectively, were drilled.
Rikki Hrenko-Browning, president of the Utah Petroleum Association attributed the rebound to a combination of factors, such as lease agreements secured during the prior administration, a large number of applications submitted anticipating that the Biden administration would not support new federal drilling, and a shift to Tribal lands.
“There is a long lead time from leasing to permitting to actual drilling, and it will take time for the full impacts of the federal leasing policy to be felt,” she said in an e-mail. “However, right now, our state is missing out on key revenues from lease sales that should have happened this year and jobs are at risk if the illegal leasing ban continues.”
Industry critics, however, contend Utah’s oil and gas recovery tells a different story. They say it bolsters the cases made in internal memos prepared by Utah state agencies and a new report that argued Biden’s lease moratorium will not slow energy development in the short term.
This is because so much public land in Western states was put under lease for oil and gas development by the Trump administration. The glut of undeveloped federal leases in Utah would support drilling for the next 60 to 90 years at recent levels of activity, according to a report released Wednesday by the Conservation Economics Institute, an Idaho-based think tank.
“We think of these Western states as having their economies completely tied to this industry,” said Anne Hawke of the Natural Resources Defense Council, or NRDC. “But in fact, there’s so much more going on economically in these states in terms of services and information jobs.”
The report was commissioned by SUWA, NRDC and several other conservation nonprofits that strongly support leasing reform. It examines federal leasing in Utah and four other energy-producing Western states: New Mexico, Montana, Colorado and Wyoming.
The groups posted it Wednesday ahead of expected announcement from the White House of proposed reforms to the federal leasing program overseen by the Bureau of Land Management.
“When the industry freaked out after the Biden moratorium, this report is bringing some reason,” Hawke said. “This is a long game and it’s not like we’re going to end tomorrow. The jobs are not affected the way they’re saying they are. It highlights all the reasons why stepping back taking a pause are really rational moves. We all know the system’s broken. We have to look at royalties.”
There is also evidence speculation runs rampant in the federal leasing program, especially in Utah where thousands of acres of leases are issued to people with no known ability to actually develop them.
In his first day in office, Biden halted new leasing while the Interior Department conducted a comprehensive review, which it submitted recently to the White House. The moratorium blocked only new leasing; it did not apply to drilling or production from existing leases.
A federal judge has since overturned the leasing moratorium, but the BLM has yet to resume offering new leases in Utah, although some have been issued in other states.
While conservationists hope Biden’s reforms limit federal leasing, especially in ecologically sensitive or scenic places, Utah officials want to see industry retain access to the West’s publicly owned energy resources.
“We are not interested in actions that pit rural and urban Utahns or rural and urban Americans against each other, and that’s what the president spoke about in his inauguration, it is what Gov. Cox believes, wholeheartedly,” Carter said. “We want market-based decisions. We don’t want government-based decisions, so if the market is driving some of [the drilling surge], that’s great.”
Still, at the end of the day, federal land is not central to Utah oil and gas production, even though Utah is a key public-land state. Of the 1,654 wells currently proposed for Utah, according to Carter, 58% are on non-federal land, that is tribal, state or private land.
A review of past drilling and production shows that only a third of this activity in Utah occurred on federal land. Yet plenty of federal land has been leased. Less than half the 3 million acres under lease in Utah are in production, according to BLM statistics.
In other words, unused oil and gas leases encumber 1.7 federal million acres in Utah, some of them within sight of national parks and monuments. There is not much the Biden administration can do to prevent industry from drilling most of those lands.
Oil and gas industry in New Mexico could drill for almost 2 decades with no federal leases
New Mexico oil and gas operators could have almost another 20 years of drilling if not another single federal lease was issued, per recent research.
A study from the Conservation Economics Institute, commissioned by the Natural Resources Defense Council found that while New Mexico had the least unused federal acreage leased by the industry compared with other states analyzed in the study, it still has decades until oil companies run out of public land to drill upon.
In its research, the institute compared major oil-producing five states in the inter-mountain west region – New Mexico, Wyoming, Utah, Colorado and Montana – which hold 86 percent of federal leases in the U.S.
About 426,266 acres of federal land in New Mexico is leased but unused, per the study, compared with 4.9 million acres in Wyoming, 1.8 million in Utah and about a million each in Colorado and Montana
New Mexico had about 18 years of drilling opportunities for low-intensity operations, the study read, and 11 years for medium intensity if no new federal leases were issues – the least amount of time among the states studied.
Utah had the most with almost 100 years for low intensity and 60 years for medium intensity extraction operations, the study read.
Evan Hierpe with the Conservation Economics Institute said the data indicated a pause on federal leasing, enacted by the administration of President Joe Biden in January as the Department of the Interior reviews its fossil fuel program, would have little impact on oil and gas operations for the states that have the majority of production on federal lands.
The DOI was expected to release an interim report on the review this summer.
When the pause was enacted, both oil and gas industry leaders and New Mexico’s State administration voiced concerns it could result in oil companies shifting to neighboring Texas where 90 percent of operations are on private land not impacted by federal policy.
In New Mexico, more than half of oil and gas extraction is on public land, while the state depends on the industry for about a third of its budget.
But Hierpe said reforms to the federal leasing program were needed so states like New Mexico were not vulnerable to the volatile nature of the commodity-based fossil fuel industry, and the pollution it brings.
“The federal oil and gas leasing program is woefully inefficient and outdated. This results in heavy subsidies to oil and gas companies,” Hierpe said. “It results in pollution and it results on a very poor return for taxpayers. There is great need for reforming the leasing program.”
New Mexico’s Permian Basin region in the southeast corner of the state recently saw a dramatic uptick in operations, Hierpe said, with oil companies in Eddy, Lea and Chaves counties holding more than 100 federal land lease each.
“What we’re seeing is rapid increases in oil production coming from the Permian Basin in the last few years,” he said.
New Mexico was also one of the states most dependent on federal production, the study read, with 50 percent of oil production coming from federal lands in 2019.
But operators stockpiled leases in anticipation of changing policies ahead of Biden, a Democrat, taking office after pledging during the campaign to enact tougher controls on oil and gas and pollution he said the industry generated.
“While New Mexico has fewer non-producing acres, they have recently stockpiled leases and drilling acres,” Hierpe said. “There are numerous opportunities in southeast New Mexico in particular for develop on private and state lands. It is a concern for New Mexico but we’re seeing it has at least another decade to see any real economic impacts.”
Hierpe argued oil and gas production can push residents from a region or dissuade people from moving in, while conservation efforts like establishing outdoor recreation opportunities can lead to growing populations.
“The same areas that are leasing federal lands are struggling to keep residents. Oil and gas dependent counties repel migrants over the long-term,” he said. “What we found was the direct opposite for protections and conservation which appeared to attract migrants.”
And while the pause on federal leases may lead to a decrease in new acreage for oil and gas, Hierpe contended employment in fossil-fuel-dependent communities was more tied to the price per barrel of oil and market trends.
He said oil and gas was small portion, about 2 percent, of employment in the region in 2019, dropping from about 5.5 percent in 1980.
"Oil and gas employment while important in certain regions is a very small amount of overall employment in these states that are most affected," Hierpe said.
Plugging about 2.6 million abandoned oil and gas wells in the intermountain west could create about 85,200 jobs for the next decade, the study showed, and eliminate 252,000 metric tons of methane pollution from the air.
More jobs could be created in the sector by communities embracing less-polluting sectors, Hierpe said, like wind and solar energy along with pushing for more inspections and carbon capture at existing oil and gas facilities.
“What we have with oil and gas is the boom and bust cycle. That often leaves rural communities worse off,” he said. “That mostly goes to large companies. The profits are leaked out of the communities.”
Jesse Prentice-Dunn, policy director at the Center for Western Priorities said the data indicated a pause on federal leases was needed for the federal government to reevaluate how it manages public land.
“Communities are increasingly realizing public lands are our best assets,” he said. “The Biden admin is right right now, to take a pause and have a fact-based review of the leasing program.”
Josh Axelrod, senior advocate for the NRDC’s nature program said past administrations put the oil and gas industry’s needs above public health and the environment.
He said this resulted in drastic impacts from climate change like the extinction of species of plants and animals, drought and wildfires.
“The way lease public lands and waters to oil and gas is broken,” Axelrod said. “For too long, fossil fuel development on federal lands has been prioritized over benefits of other uses that could be beneficial to everyone.”
Demonstrators outside of Empire Energy offices in Sydney in May oppose the company’s fracking plans for the Northern Territory’s Beetaloo Basin. 
