If the Great Debate Over Offshore Drilling Sounds Vaguely Familiar, it Should--But It's Time for a Happier Ending
Mr. Priest is Director of Global Studies in the C.T. Bauer College of Business, University of Houston, and author, most recently, of The Offshore Imperative: Shell Oil’s Search for Petroleum in Postwar America (Texas A&M Press, 2007), which received the 2008 Geosciences in the Media Award from the Association of American Petroleum Geologists. He is currently working on a study entitled, The Significance of the Ocean Frontier: The Contest over Offshore Oil from the Tidelands to the Law of the Sea.
Every U.S. presidential election has to have an antecedent, an earlier race that can serve up comparisons about the candidates and issues. Horserace election coverage is portraying the 2008 contest as a replay of the 1952 election between Dwight Eisenhower and Adlai Stevenson.
The candidates in both elections were non-incumbents facing an electorate grown weary of war and U.S. military occupation overseas. Barack Obama is cast in the role of Stevenson, another Ivy-League educated Illinois senator who championed the politics of civility and appealed to educated liberals and professional “elites.” The “straight-talking” war-hero John McCain is the all-around “man of the people,” according to his biographer, and heir to General Eisenhower, who incidentally spoke at the 1958 Naval Academy commencement where McCain graduated 894th out of 899.
But there is another obvious parallel yet to be discussed in the media. In both the 1952 and 2008 general election campaigns, the centerpiece issue around which the parties and candidates postured was offshore oil.
Last June, as gasoline prices soared, McCain and congressional Republicans challenged Obama and Democratic leaders to a showdown over lifting the 27-year congressional moratorium on offshore drilling along most of the nation’s Outer Continental Shelf (OCS). McCain adopted former House Speaker Newt Gingrich’s slogan “Drill Here, Drill Now, Pay Less” as the basis of his energy policy. President Bush followed McCain’s lead by lifting the presidential moratorium on offshore drilling. Obama and House Speaker Nancy Pelosi initially resisted any talk of lifting the congressional ban, but they have since softened their position provided that new offshore drilling is part of a broader energy package that would fund renewable energy by repealing certain tax breaks for oil companies. A so-called “Gang of 20” alliance of ten Republican and ten Democratic senators, led by Senators Kent Conrad (D-ND) and Saxby Chambliss (R-GA), has proposed a plan along these lines. Pelosi is brokering a similar compromise in the House. Both might come up for debate and vote this week.
Compromise is tangible, but remains elusive. Conservative Republicans and most oil companies balk at provisions that would be seen as a “tax increase” or concession to Democrats intent on limiting the industry’s access to undrilled frontiers where vast untapped reserves may lie. More drilling, they insist, will relieve high oil prices and reduce American dependence on imports. Democrats counter that no amount of drilling will replace oil imports, that coastal communities are too vulnerable to a potential spill, and that lifting the ban is a needless giveaway to Big Oil, which should be forced instead to drill on leases it has stockpiled in the Gulf of Mexico, the one area open to drilling and development. “Use it or lose it” is the rejoinder issued by a faction of liberal House Democrats to McCain and Bush. Meanwhile, the chants of “Drill, Baby, Drill!” at the Republican convention were met by the refrain “Spill, Baby, Spill!” from environmental activists descending on Capitol Hill last week.
The political polarization over offshore oil echoes an earlier debate at the dawn of the offshore age. Fifty-six years ago, Eisenhower and Stevenson came down on opposite sides of the “Tidelands Controversy,” a bitter and protracted confrontation between coastal states and the federal government over control of Outer Continental Shelf (OCS), which oil companies desired to lease for oil exploration. Whereas Stevenson sided with Harry Truman and the U.S. Supreme Court in favoring federal jurisdiction, Eisenhower embraced the “states rights” position supporting a congressionally legislated “quitclaim” of offshore “tidelands” back to the states, a measure Truman had twice vetoed.
By 1952, both sides had hardened beyond compromise. Proponents of federal control believed that the submerged lands were a valuable part of the national public domain that should not be turned over a small number of states, whose more corruptible officials would submit to the demands of the oil lobby and lease the lands in a reckless manner. “Talk about stealing from the people,” thundered Harry Truman. “It would make Teapot Dome look like small change.”
Advocates for state control viewed the Tidelands fight as part of a larger effort to resist the expanding assault by the federal government on free enterprise, private property, and “states rights.” The coded but obvious subtext to the rallying cry of states’ rights was the brewing struggle over black civil rights in segregationist Texas and Louisiana. The notorious political boss of Louisiana’s Plaquemines Parish and national “Dixiecrat” leader, Leander Perez, led the states’ rights charge on the Tidelands for Louisiana. Next door, the perceived betrayal of Texas citizens by an overbearing national government, and an all-or-nothing “no surrender, no retreat” stand on principle by their valiant defenders, played right in to the creation myth of the Republic of Texas.
Democratic leaders in Texas, Louisiana, and Florida vilified Stevenson for his stance on the Tidelands. “Remember the Alamo and the Tidelands oil grab!” was a common reaction to his speeches in Texas. Having been first courted to run for the White House by Texas independent oilman Sid Richardson and his close associate, Robert B. Anderson, who were disenchanted with the direction of the national Democratic Party, Eisenhower rode the Tidelands to victory in Texas in 1952 with the help of turncoat Democratic governor Allan Shivers. Thus the politics of oil helped pry the Lone Star State away from its “Yellow Dog” allegiance to the Democrats.
In early 1953, just as Eisenhower settled into the White House, Congress took up the Tideland’s issue. After the longest Senate filibuster in U.S. history staged by the Democrats, Congress passed and Eisenhower signed the Submerged Lands Act, which quitclaimed ocean territory three miles from the coast back to the states (Texas eventually acquired jurisdiction over three leagues, or 10.4 miles, based on historical claims dating to the Spanish empire). The act was seen initially as a victory for Texas, Louisiana, and other coastal states. Over time, however, the fruits of victory were revealed to be paltry compared to the amount of oil and gas discovered on the federal OCS. For more than fifty years, none of the substantial revenue generated by federal offshore leasing -- estimated at a total nominal value of approximately $140 billion -- would be shared with the coastal states. Finally, in 2006, after the ravages of Hurricane Katrina, the delegation from beleaguered Louisiana finally convinced Congress to approve a provision for kicking back meager funds to the Gulf Coast states.
The fact that coastal states, which assume much of the environmental and economic risks of offshore development, received virtually nothing from leasing of the federal OCS, has fortified their resistance to new leasing. A change in leasing policy in the early 1980s, introduced under President Reagan and Interior Secretary James Watt, which attempted to open up vast new areas for leasing without addressing the states’ demands for revenue sharing, shut down the leasing program outside Alaska and the Central and Western areas of the Gulf of Mexico. The resulting “Seaweed Rebellion” by the states forced the enactment of restrictive leasing moratoria over ever more extensive expanses of the OCS.
It did not have to turn out this way. Back in 1949, House Speaker Sam Rayburn (D-TX) tried to broker a compromise that would have accepted federal control of the OCS but given the states a big share of the revenue generated from leasing – 2/3 of the revenue inside three miles and 37.5 percent beyond it (the same share the inland states received from mineral leasing on federal lands inside their boundaries). It was a sensible solution to those politicians and oilmen wanting to move forward. The Tidelands issue, however, could be too easily played for symbolic effect. Leander Perez and Texas attorney general Price Daniel sabotaged the compromise, preferring to make political hay out of the issue in the service of enlarging their own power and furthering the cause of states rights and white supremacy. The issue helped Perez preserve his personal financial interest in submerged oil lands around Plaquemines Parish and prolong the commitment to segregation in the Deep South. Egged on by letters of support exclaiming such opinions as “High tide low tide Tidelands notwithstanding black lawyers or white day or night I am a Daniel man," and “the unjust and diabolical decisions in the Tidelands case and our segregation slaws are against God’s and highest human laws,” Daniel exploited the issue to win election first to the U.S. Senate and then to the Texas governorship. As Rayburn predicted, the demagoguery of Perez and Daniel cost their states dearly in the long run.
The current wrangle over offshore oil is somewhat different. Although an African-American man is the historic Democratic presidential nominee, race has nothing to do with the issue this time. Nevertheless, the debate still boils down to Republicans and oil companies pushing to open up more of the OCS versus Democrats who prefer a higher degree of federal control.
The ocean is the last frontier. As was the case throughout American history, struggles over incorporating new frontiers into American society usually involved competing visions about defining property rights, the extent of the public sphere, and the nature of development. Thus, these struggles can become ideologically charged and politically intractable, with both sides playing to the basest impulses on their fringe and imagining conspiracies working against them. Like they did in 1952, politicians in 2008 are sharpening the issue into an election-year political weapon.
Liberal Democrats and conservative Republicans alike have made exaggerated claims about the effects of lifting the congressional moratorium. The Democrats do this to appease their environmentalist and bi-coastal constituency and the Republicans to bolster their oil patch and nationalistic support. Drilling here and drilling now, as the Republicans urge, will not reduce oil prices in the short term, if ever, or eliminate U.S. dependence on imports in the long term. With oil at over $100 a barrel, oil companies are doing everything they can to develop commercially viable leases in the booming deepwater Gulf of Mexico, but this is still not enough to replace declining national production. Drilling off the Atlantic and Pacific coasts promises to add to national supply, at a time when the United States and the world could use every spare drop, and it poses less ecological risk than liberal Democrats advertise. Since the Santa Barbara oil spill in 1969, the U.S. offshore industry has developed extremely safe and environmentally sound methods of operating. And drilling does not have to come at the expense of promoting alternative energy. Both should be part of a broad-based search for solutions to our energy crisis.
As the United States and the world struggle to make energy supply meet demand, it would be a shame if the candidates and congressional leaders did not have the courage to back down from their extreme positions and work out a deal to open up new areas of the Continental Shelf for drilling, even if only to a limited extent. This could set a precedent for bipartisan cooperation on formulating energy policy, something this nation has never really had before, and maybe produce sane conversations about our energy future, instead of belligerent ranting and chanting, which is all we have seen in the past. Our energy security is too important to allow continuing policy paralysis, to which past disputes over offshore oil have been major contributors.
As the Tidelands saga demonstrated, the temptation to use the issue to mobilize the liberal and conservative bases may be too hard to resist. Although the Democrats are searching for common ground and relaxing their opposition to lifting the drilling ban, the right wing, as it did nearly sixty years ago, is gearing up to take no prisoners. John McCain’s running-mate selection of Alaska Governor Sarah Palin, an exuberant advocate of drilling everywhere, is not an encouraging sign for compromise.
Furthermore, many Republicans see a golden opportunity to end the congressional drilling moratorium outright without having to give an inch. The moratorium expires, as it does every year, on September 30. In the past, it always has been renewed as a rider on the appropriations bill. But lameduck President Bush has promised to veto any renewal this year, and enough votes will probably not be found to override the veto. Rather than a victory for the pro-drilling forces, however, this would ultimately lead to further political polarization, litigation by the states, and a continued paralysis in leasing.
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Andrew D. Todd - 9/20/2008
To Raul A Garcia:
Plastics are a trifling fraction of oil consumption. They can in any case be made from coal or natural gas. It is just that plastics are visible, whereas fuel is not visible, being hidden in the gas tank. What is on the way out is the use of oil as a fuel.
As for long-distance commuting, I should clarify. I am talking about the kind of people who drive a hundred miles a day, fifty miles to work, and fifty miles back again, who, in effect, specialize in being long-distance commuters. It is reported that a minority of the population which does that, twenty percent or so, accounts for perhaps eighty percent of the automobile mileage. At that level, there are surely alternatives, of one kind or another. If you took only that portion of automobile travel which is on freeways, and managed to convert it to electric power, that would be enough to reduce gasoline consumption to a point where it would no longer need to be made from imported oil.
To Robert Smith:
Large-scale use of coal for electricity generation is simply the status quo. Further, the coal is burned in comparatively populated areas, not in the remote areas where synfuel would be made. For many transportation uses, such as automobiles, the performance of a fuel, that is its energy content relative to weight or bulk, is not critical. For such uses, methanol is good enough, and methanol can be produced from coal by the comparatively nonpolluting Hydrocarb Process, developed about twenty years ago at the Brookhaven National Laboratory. The Hydrocarb Process essentially pumps the input material up to a pressure of several hundred atmospheres, breaks it down into carbon, hydrogen, and oxygen, and puts it back together again into methanol, leaving out such contaminants as sulfur and arsenic. It is supposed to deliver methanol for about twenty cents a gallon, which is equivalent to about forty cents a gallon for raw gasoline (ie. a dollar a gallon or so at the gas station). Before the present crisis started, these number were not especially compelling. But times have changed.
You can reduce coal burning, if you are prepared to pay for it, by using more nuclear power, more renewables, and more energy conservation and increased efficiency. Come to that, you can use a nuclear reactor to power a chemical plant, such as a refinery or a synfuel plant. The traditional norm has been that such plants were self-powered, using a portion of their input material for fuel, and putting out a large proportion of low-value sub-quality products. For example, an oil refinery only generates about fifty percent gasoline, and before the invention of the catalytic cracker, it was much less. This does not have to be the case. The waste products can be reprocessed until they become gasoline. Apart from process heat per se, there is an increasing interest in microwave chemistry. The idea is that you have a chemical reactor vessel which is designed to function as a kind of microwave oven. It zaps the chemicals with microwaves tuned to the natural frequencies of particular chemical bonds, and thus drives particular reactions. A nuclear reactor can provide the requisite electric power.
The point is that, in electricity generation, the game is between coal, and nuclear, and renewables, each with its own merits. Oil just isn't a player, because it has the disadvantages of all, and the benefits of none. If you modernize transportation to the same extent as electricity and electrical equipment, much the same thing will happen to transportation's energy sources. By the time you have built a really good road, you have done so many other things that putting in electricity isn't really a big deal. To take an extreme case, it is axiomatic that elevators are electrically powered. So are subways, because of the underground smoke problem. In a city, the only way to have a positively uninterrupted railroad line is to put it either above ground level or below ground level. The better sort of passenger trains are electric, because they need to have a subway mode, or because they go so fast that a powerful enough engine would be too big. All trains which go a hundred and fifty miles an hour are electric.
To Lawrence Brooks Hughes:
When you talk about the "laws" of economics, you lose sight of the fact that Adam Smith knew almost nothing about mass production technique, which came after his time. The basic fact of life about heavy industrial infrastructure, things like oil refineries, is that there is a physics of size which means that certain types of plants work best when they are really gigantic. These gigantic plants cost a lot of money, of course, and they have to be paid for up front, but they tend to last for a long time, say fifty years or more, and their operating expenses are not very great, relative to their size. That means that the marginal cost of production from a giant plant is low, and if someone finds the money to build a giant plant, he can generally undersell everyone else. Practically speaking, the money for the giant plant ultimately comes from a government, eg. the Manhattan Project and subsequent nuclear power, the Interstate Highway System, the Air Force and the airlines, etc. The worship of short-term economics, when applied to such a highly capitalized industry, is in practice an unconditional surrender to whoever has bought a plant up front, and consequently has low marginal costs. In the case of oil as presently constituted, it would be King Abdulah of Saudi Arabia. Saudi production costs are only about a couple of dollars per barrel because the plant is already paid for. This gives the Saudis enormous room to cut prices, drive competitors out of business, and afterwards raise prices again. The Saudis can "roller-coaster" the price of oil, just like they did last time, back in the 1970's, whipsawing it up and down.
The thing about the Outer Continental Shelf is that it is about a mile deep, and, say, a hundred miles offshore. This is not impossible, to be sure, but it does mean that even to look for oil, one would have to spend money in a fairly substantial way. Only a handful of the newest and most expensive drilling rigs are designed to be capable of drilling while floating, in water too deep to sit on the bottom of the sea. So drilling the Outer Continental Shelf would involve a sizable shipbuilding program, probably on the same general scale as the United States Navy. The oil companies won't risk it. We are talking about something which would have to be paid for by the government, along the same lines as the Bridge to Nowhere. The money might be better spent on synfuel plant.
The oil industry likes to have the United States dependent on the Middle East. Economic theory says that when a commodity gets cheap, people use more of it. However, the reality is that commodities are used in conjunction with each other, and a cheap commodity's consumption may be limited by the expensive commodities it is used in conjunction with. For example, at present prices, the gasoline consumption cost of driving might be as much as thirteen dollars an hour ($4/gal, 20 mpg, 65 mph), but the driver's time might be worth anything from twenty dollars an hour up to fifty dollars an hour or more. If you cut the price of gasoline back to a dollar a gallon, the total cost of driving, per hour, might drop from the $30-$60 range to the $20-$50 range. In short, driving would still be almost as expensive as before, and people would be equally reluctant to drive further than necessary. So, for the oil industry, reduced prices mean reduced revenue. They like the situation the way it is, when oil prices are high, but people have not adapted to high oil prices. It's like selling drugs to a junkie. Of course, most people are not junkies by temperament, and the situation cannot last very long.
Oxygen-assisted burning: The separation of oxygen from air is becoming efficient enough that it can be used in a power plant. Burning fuel in pure oxygen enables the fuel to be burnt at a higher temperature, without the formation of nitrogen oxide pollutants, and this higher temperature, harnessed through a MHD generator, enables the plant to operate at a greater efficiency, and consequently, to provide enough additional power to drive the oxygen separator.
And here is the ultimate in Clean Coal:
Lawrence Brooks Hughes - 9/19/2008
If the government would just get out of the way and let the oil industry fill the demand while crude lasts, we would end up with rational development of new fuels at rational speed and rational prices. So long as oil is king, let it be king. When we can't find any more oil, probably in 35 or 40 years, we can gasify coal, grind shale, liquify natural gas, or do anything else slightly more expensive, and on and on--efficiently and indefinitely. For now we should just drill for oil everywhere the locals are willing, and start numerous atomic plants to satisfy our growing needs for electricity. Battery cars, solar panels, windmills and the like can and will compete whenever their cost without government subsidy equals or undercuts the cost of conventional fuels--probably a very long time in the future. The federal government should insure the liability of atomic plants, and supervise atomic waste disposal, period. As I write this gasoline in the Midwest is $4.00, but from the wholesale prices it appears ready to drop to $3.00 in 10 days, and will probably continue dropping to $2.50 or below. At that point all the substitutes will look really silly again. And gasoline will stay reasonably priced if we drill, drill, drill.
Robert Smith - 9/17/2008
Synthetic coal-based fuels haven't been widely deployed anywhere due to cost (which is changing) and the awesome amount of pollution creating such fuels generates (which isn't changing). Synthfuels, from creation to consumption, generate 2-3 times the pollution of conventional petroleum products.
The trend of switching to highly-polluting technologies like coal and tar sands as crued oil prices rise is not a good one. Expect the leading cause of death in the USA to switch to respiratory diseases.
Raul A Garcia - 9/17/2008
Good points, Mr. Todd. I would hope the local job situation were really a reality- unfortunately most commute still long inefficient distances. Palin's economics may resemble Chavez' but one is more truly for free enterprise where the latter is more for statism and governmental economic controls- I prefer Palin's "lunacy" over Chavez real lunacy any day!
If oil is on the way out, wherefrom then, all plastics, not to mention disk drives, compact discs, etc.??
Regardless of the ascendant/descendant conundrum I suspect more of a steady mix, with hopefully more rapid mixing in of alternate energies.
Andrew D. Todd - 9/16/2008
The most important comment one could make is that this is not 1952, and the technological conditions are completely different. In 1952, oil, and automobiles, and airlines were all in the technological ascendant. Now they are in the technological descendant, pounded and pulverized by the growth of electronics and computers. I have gone into this in a recent comment (*). The oil industry is a dying industry, grabbing at every straw to prolong its existence a few more months or years.
Oil at a hundred dollar a barrel is not sustainable over the long term, because, all else failing, you can make synfuel from coal for considerably less, using the same kinds of techniques that the Germans and the South Africans used. In a place like Wyoming or Montana, there are functioning coal mines, railroads, refineries, oil and gas pipelines, in short, a whole range of infrastructure which does not exist in most parts of the Continental Shelf and the adjoining coastlines, except for the Gulf of Mexico. All that is needed to produce synfuel in Wyoming is to build what is, in effect, a new kind of refinery, based on a raw material of which there is a virtually unlimited supply. If you are willing to make the investment in infrastructure to use electricity for transportation, that is even more attractive than synfuel. The price of oil is only being maintained by political panic. I do not think the disputed offshore leases will ever be drilled. The oil industry is already reluctant to undertake capital expenditure on those oilfields, plants, etc. which it already has. It would rather pay out dividends to the shareholders instead.
There are certain hard facts which go into investment decisions. One of these is that wildly disproportionate quantities of gasoline are used by a minority of commuters and business travelers who go extremely long distances, taking up a lot of their own time in the process. Such commuters and business travelers tend to have highly cerebral occupations; and they have the greatest ability and incentive to switch to some other system. This includes the possibility of telecommuting, of course, but there are other options. For example, WiFi-enabled laptop computers have transformed the significance of the commuter train. The train is often more attractive than the automobile, because it is possible to get a lot of work done on the train, without having to pay attention to the driving. People take the train, even if it is slower than an automobile, because the value of their time is the paramount consideration. Office hours are adjusted to reflect the work people do on the trains or at home. Add to these changes the comparatively minor factor of the hybrid car. The hybrid car is likely to be adopted first by the long-distance drivers, so a mere five or ten million hybrid cars in use is a serious matter for the oil industry. The oil industry has to reckon that its market might fall by a factor of two or three, as the abnormally heavy gasoline users switch over, essentially without warning. Under the circumstances, the oil companies are not going to be disposed to reinvest any more money than they are forced to.
At the same time that the rise of the extreme long-distance commuter has been taking place, the texture of daily life has been becoming more suburban, and consequently, more local. To illustrate with a humble occupation, in the year 1952, before the rise of the shopping malls, an aspiring department store salesgirl had to go all the way downtown to find a good sales job, at Macy's or Bloomingdale's, or the local equivalent. The jobs in the neighborhood business districts were likely to be inferior in character (Woolworth's, Kresge's, etc). Now, of course, the aspiring salesgirl can get a job at the local mall, a couple of miles away. Even if we assume that the salesgirl's occupation has been upgraded to something like a retail stockbroker, that, too, is a business done at the local bank branch. Commuting at that level might only account for a gallon or two of gasoline a week. It is also within easy range for an electric car, even without postulating a lot of infrastructure-building. Over the years, the oil companies have been boxing themselves into a more and more specialized niche, making themselves more and more vulnerable to sudden decapitation.
I might add that Sarah Palin is an anachronism precisely because she is from Alaska, and her politics are based around the distribution of the oil dividend, and her husband is an oilfield worker. She is a de-facto oil industry lobbyist, essentially on the grounds that what is good for the oil industry is good for Alaska. Suppose that you value oil as if it were coal, on the basis of heat value. On that basis, oil is only worth about six or seven dollars a barrel, Alaskan oil might be too expensive to produce, and there would probably be no dividend. Western coal commands a landowner royalty of about sixty-five cents a ton, equivalent to fifteen cents per barrel of oil. A ton of coal ultimately becomes about two hundred dollars worth of electricity at retail prices. For practical purposes, coal has no economic scarcity value. Including things like locally paid wages, stimulation of local business, taxes, the whole lot, in short, the states where the coal is mined generally do not see as much as five percent of what the consumer ultimately pays. The Navajo Nation has lots of coal, and the Navajo are sooo poor... On the basis of coal, Alaska's oil revenues might be worth something like a hundred dollars per capita per year, chump change, in short.
Sarah Palin's economic interests approximate those of Hugo Chavez, president of Venezuela. Indeed, I understand she is sometimes called the Alaskan Hugo Chavez. She doesn't want to produce really a lot of oil, because that would cause the price of oil to fall, and cause the Alaskan standard of living to fall down to Navajo levels. She wants the oil to be scarce and expensive, and she wants the United States to be dependent on foreign countries, because OPEC can do things which would constitute violation of the American anti-trust laws if Americans did them. OPEC can set the price which is paid for American oil.
So let's call Palin's bluff. Open up the continental shelf to drilling, according to whatever terms can be obtained quickly, and without much argument. The same for the Arctic National Wildlife Refuge. This will force her to take more of a cultural conservative stance, isolating herself from the great mass of the American people.
(*) My "Yes, It's The Oil-- But Not Quite the Way You Might Think," in response to Judith Apter Klinghoffer, "Why Tom Friedman Is Wrong on Russia and Wrong on Energy"
Raul A Garcia - 9/15/2008
I admire this balanced portrayal of such a divisive but relevant issue. I also agree with the advocacy of a comprehensive energy plan- one many times trumpeted but only tokenly applied by previous administrations, both Democratic and Republicans. I don't agree Palin is so radical, and we should move forward with both safe drilling and other energy sources online, and much better efficiencies in our vehicles- I see our toll plazas as anachronisms. Our incrementalism in the energy field is deplorable.
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