ClimateSpeak

The tar sands industry counterattacks

There's a great post at DeSmogBlog calling out a new, cynical tactic from the tar sands industry's PR campaign -- accusing environmentalists of shilling for the oppression of women in Saudi Arabia. The new offensive is as sleazy as it is slick. Check it out:

 

The video is produced by EthicalOil, a  website run by Alykhan Velshi, a 27-year-old former spokesman for Canada's Conservative government. In a Guardian profile, Velshi declined to explain his website's funding:  "I won't take money from any foreign corporations, any governments." He added, though, that, if offered, he wouldn't refuse Canadian corporate donations.

DeepClimate, a Canadian blog, dug deeper into Velshi's background, and found -- surprise, surprise -- close links to the tar sands industry.

What's notable is that Ethical Oil seems to have studied closely the campaigning tactics of environmentalists, and it has proved a fast learner. Tactics include Yes Men-style impersonations such as creating a fake group, Americans for OPEC. Another is creating a corporate boycott campaign against the cosmetics firm Lush, which is helping publicize the anti-tar sands effort with snazzy videos of its own. 

An interesting sidenote: Wikipedia's entry for Velshi says he is Ismaili, which is a branch of Shiite Islam. For perfectly legitimate reasons, the Shia generally do not have a high view of Sunni-run Saudi Arabia, which follows a path of sectarian opposition to Shia at home and abroad ... and which  just so happens to be Velshi's main target in his new video. A nice two-fer.

GOP talking points, take 2

More bad news for the planet = good news for the Republican Party. Reports today are indicating that the bankruptcy of solar manufacturer Solyndra may be even more politically damaging than I had discussed in my post several days ago. Here's why:

• The Center for Public Integrity, a respected policy outfit in Washington DC, reports that Solyndra was allowed unusual shortcuts in accessing its $535 million government loan, and received an interest rate lower than any other clean energy project funded through the federal stimulus package. 
• The government’s agreement with the company allows George Kaiser, a billionaire Obama fundraiser, to get in line ahead of taxpayers in trying to  collect on the debt. 
• Solyndra is now up for sale, and a buyer would not have to repay the $527 million in federal-backed loans. However, any buyer is expected to switch the company's manufacturing from Fremont, Calif., to China. Which would be an ironic twist because the federal loan was justified by the company's promise to keep manufacturing "green jobs" on American soil.

Republican-leaning pundits smell blood. The Solyndra bankruptcy shows "the entire concept of 'green energy' jobs was bankrupt from the start," gloated Robert Bryce of the libertarian Manhattan Institute. Similar conclusions came from Jennifer Rubin at the Washington Post and David Brooks of the New York Times.

The Energy Department has responded with some sensible explanations in Q&A format. The answers may be sensible, but what's needed is heavy artillery. Congressional Republicans are attacking. The House Energy and Commerce Committee and the Oversight and Investigations Subcommittee have begun a full investigation. Will they try to gin up Solyndra into a new Whitewater scandal? Will 2012 be a breathless flurry of hearings, hyperbole and wild accusations? Will the media eagerly fan the flames of fake scandal in the midst of the presidential campaign? Don't be surprised.

Is Keystone XL intended mainly for exports?

I'd like to draw readers' attention to the comments to my posting Sunday, "Keystone XL's Back Story." In the comments, Lorne Stockman of Oil Change International explains the reasons why he thinks the pipeline is intended mainly to allow increased diesel exports to Latin America and Europe. I then explain why I disagree.

Separately, I received an email from Bill Day, director of media relations for Valero Energy Corp., which included the following:

As for Oil Change International’s comment on your blog post: Valero has never discussed the specific amount of oil it intends to receive via the Keystone XL pipeline. In its footnotes buried at the end of its report, OCI cites unnamed “observers” who “reckon” the amount that Valero will receive. Valero has also never said that the new hydrocrackers being built at our St. Charles and Port Arthur refineries will be configured “to yield in excess of 90% diesel.” The statement that this is taken from talks about hydrocrackers in general, not specifically the new units at Port Arthur and St. Charles.

Day attached a memo that I had not seen previously from Carmine Difiglio, the deputy assistant secretary for policy analysis at the U.S. Energy Department. In his memo, Difiglio takes issue with many of the points made by oil industry consultant Philip Verleger in his influential report, The Tar Sands Road to China, which was issued earlier this year and prefigured much of the argument in the Oil Change International report. The nine-page Difiglio memo is too detailed to excerpt here, but it provides a useful and information-packed look at the dynamics of heavy vs. light oil for the Gulf Coast refiners and their problem of declining imports from Mexico and Venezuela. Whatever conclusions each of us finally draws, these details really matter. Check it out.

Oil!

There's a new oil boom underway in North America, and Canada's tar sands are just one part of it. For more details, check out my article in Sunday's San Francisco Chronicle. What I only alluded to in the article, and I plan on writing more about on this blog, is the potential political, social and environmental impact.

Like previous oil booms in North America -- from Pennsylvania in the 1860s to Texas, Oklahoma and California in the early 1900s -- will this one upend the political power balance and bring a new era of tycoons, scandals and backlash?

Rick Perry might be interested to know.

Keystone XL's back story

Photo credit: Ben Powless

The largest civil disobedience campaign in many years culminated Saturday with the arrests of hundreds of people protesting the proposed Keystone XL pipeline. The pipeline would rapidly increase the continent's greenhouse gas emissions, so it's clearly a critical issue. But an unusual aspect of the debate has been the way both sides have cast the pipeline as a matter of national energy security -- would it make the United States more or less dependent on imports of oil from overseas? Amid the back-and-forth claims, some underlying trends in the oil industry have been poorly understood, so a few clarifications here might be helpful. 

Since 1977, when then-President Jimmy Carter announced “the moral equivalent of war” to reduce U.S. dependence on foreign oil, energy independence has been a touchstone of American politics. Year after year, politicians pledged to reduce U.S. imports from the Middle East and to stop the flow of petrodollars to dictators and terrorists. But the imports kept rising.

Because English-speaking Canada is often considered virtually part of the United States (sorry, Canadians!), tar sands oil generally qualifies in the popular American mind as domestic oil. So the Obama administration has cited energy security as its primary justification for approving the Keystone XL pipeline. Environmentalists have fought back directly, citing a report by Oil Change International, a progressive Washington DC nonprofit, that claims virtually all of the tar sands oil sent via the Keystone XL would be re-exported to other countries. The report, issued Wednesday, said the pipeline would make the United States less self-sufficent rather than more so: 

The Keystone XL pipeline would not in fact enhance U.S. energy security at all. The construction of Keystone XL will not lessen U.S. dependence on foreign oil—rather, it will feed the growing trend of exporting refined products out of the United States, thereby doing nothing to enhance energy security or to stabilize oil prices or gasoline prices at the pump.

The report singled out Valero Energy Corp., one of the largest beneficiaries of the pipeline, and said the firm was planning to re-export nearly all of its oil supplied from the pipeline in the form of diesel to Latin America and Europe. Rebutting the claims, a Valero spokesman said that the company’s “volume of exports remains relatively small” and that “the vast bulk of our products are made for domestic consumption.” He added: “the pipeline would provide a steady supply of oil from a nearby and friendly trading partner, in a manner that is more efficient than bringing cargoes of oil in by ship.”

Which side is right? Probably both, to varying degrees. Here's why:

Given the hyper-complex nature of the oil markets, any hard and fast predictions about the proportion of tar sands oil that will be exported years from now are not credible. The most reliable guesstimate probably can be found by taking a step back to look at overall industry trends. Valero’s statement did not exactly deny that any Keystone XL oil would be exported, but it implied – without saying so explicitly – that the Canadian oil would substitute for other imports. Valero probably has practical business reasons to avoid any categorical statement that the company is planning to cancel foreign supply contracts contracts in a few years’ time. No company would do that, for fear that those suppliers would find other buyers and pre-emptively end their Valero contracts before Valero is ready to switch.

Because a significant portion of U.S. diesel production is currently exported to Europe, it would indeed make sense that some tar sands diesel would be exported, as the Oil Change report suggests. At the same time, however, a weakness of the Oil Change report is that it focuses almost exclusively on Valero, which represents only 20 percent of the total pipeline production. The report makes little mention of other producers, and thus any extrapolation is weak.

Lost in the debate is the fact that the heavy Canadian oil almost certainly could not substitute for any significant amount of Middle East oil, which mainly comprises light blends. Instead, the Keystone XL would substitute for heavy crudes from Mexico and Venezuela, which represent more than 50 and 30 percent, respectively, of the heavy crude imports for the vast refinery complexes along the U.S. Gulf Coast.

The exports of both Mexico and Venezuela to the United States are primarily heavy grades, similar to the crude that will be carried by the Keystone XL. Because most refineries are set up to refine only one kind of crude -- such as light sweet or heavy sour -- and because retrofitting them is extremely expensive and time-consuming, finding the right match is important.

As Adrian Lajous, former CEO of Mexican oil monopoly Pemex, has explained, the heavy crude market is inherently regional:

Canada is the sole exporter to the Rockies and has 96 per cent of the market in the Mid-Continent. Meanwhile Mexico supplies over half of the heavy crude imported by Gulf Coast refiners and Venezuela a third. In California over 80 per cent of imports of heavy crude is supplied by Ecuador and Brazil, while Angola and Chad jointly maintain a significant market share in the East Coast, where Venezuela has a dominant position.

The Gulf Coast's supply is being upset by a rapid decline in both Mexican and Venezuelan oil production. Mexico’s total output has dropped from about 3.5 million barrels a day in 2004 to 2.5 million barrels in 2010. Mexican oil exports to the United States, now 1.1 million barrels a day, have fallen by nearly one-third in the past six years, and Mexico is expected to become a net oil importer as early as 2015.

Venezuela's oil industry is also in general decline, despite the country’s vast reserves of extra-heavy crude in the Orinoco Belt. The leftist government of President Hugo Chavez is trying to sell CITGO, its U.S.-based refiner and distributor, and Chavez has frequently threatened to stop selling oil to the United States altogether. In the past five years, U.S. imports from Venezuela have dropped by about one-third. Because of the ongoing risk of a diplomatic crisis between the United States and Venezuela that could conceivably lead to a cutoff of oil shipments, it is arguably in the common self-interest of U.S. oil firms and the Venezuelan government to disengage their relationships.

As a result of all this, the apparent logic of the Keystone XL is overwhelming – without it, the United States would confront a significant decrease in its oil imports. From the perspective of conventional national security, in the absence of any consideration of environmental impact, the United States desperately needs the tar sands oil to replace the void being left by vanishing imports from Mexico and Venezuela. It’s easy to imagine the memos that Obama has been receiving from the CIA, Treasury Department and the rest of his national security and economic security teams. In each case, the message would be simple but severe: “Mr. President, we have no choice but to approve Keystone XL.”

Yet such an argument would also be deceptive because the decrease in volume from Mexico and Venezuela is likely to be compensated by increased U.S. domestic production. As I explain in a San Francisco Chronicle article published tomorrow (Sunday, Sept. 4), new extraction technologies are unleashing a new oil boom in many areas of the Lower 48 states, from North Dakota to south Texas and from Ohio to California. Most of this new crude is expected to be light blends suitable for refineries in the East Coast and Midwest, rather than more heavy crudes for the Gulf Coast.

This new oil boom is not without its own environmental problems, but it is a potential game-changer for the U.S. economy and for American politics. The Keystone XL is only one piece of this puzzle.

In any case, there is no reason to believe that Gulf Coast refiners would use a different marketing strategy for their new flow of Canadian crude. As with their current supplies of Mexican and Venezuelan heavy oil, most of Keystone XL's supply probably would be sold to existing U.S. purchasers as gasoline, diesel, aviation and bunker fuel, petrochemical feedstocks, and the wide variety of other petroleum products that are consumed so voraciously by the American economy. 

Got green jobs?

I’d much prefer to inaugurate this blog with a more upbeat message, but there’s little fodder for optimism right now. The past week has not been good for the U.S. environmental movement, and it’s worth taking a step or two back to survey the scene, which bodes ill for the next few years and perhaps far beyond:

• On Tuesday, Energy Secretary Steven Chu signaled that the administration is likely to give a final green light to the Keystone XL pipeline, which would bring oil from Canada’s tar sands to U.S. refineries. The plan would dramatically increase greenhouse gas emissions from both Canada and the United States, and it has been a cause célèbre in recent weeks, with hundreds of protesters arrested at the White House.
• On Wednesday, Solyndra, a solar photovoltaic manufacturer in Silicon Valley that was the Obama administration’s poster child for a resurgent U.S. solar equipment industry, immediately laid off its 1,100 workers and announced it would file for bankruptcy.
• And Friday, the White House overruled the Environmental Protection Agency by rejecting long-delayed regulations that would have significantly reduced industrial emissions of ground-level ozone.

The Solyndra case was especially poignant – especially for the workers themselves. No severance pay, no extended health coverage, nothing green or even humane about it. Just the cold, capitalist boot. Solyndra had received $527 million in loans from the federal government, and most if not all of that amount is expected to be lost – thus costing the taxpayers as much as $479,091 per short-term job.

Solyndra’s federal loans were part of the 2009 stimulus package, and it was the first solar firm to get federal backing. President Obama visited Solyndra last year and touted the firm in his 2010 State of the Union speech, thus joining himself at the hip with the company. 

Some analysts have pointed out that the Solyndra bankruptcy did not prove that government support for renewable energy was inherently unwise or impractical; China, they noted, has had admirable success with its own government support for its solar and wind industries, turning them from mere asterisks to the No. 1 producers worldwide in just a few  years. China's low wages and generous subsidies for its solar industry have helped drive the price for solar cells down 42 percent since December 2010. That was what doomed Solyndra, rather than any inherent failing of the company itself.

Two other American solar companies, Evergreen Solar and SpectraWatt, also sought bankruptcy protection in August, and both blamed Chinese competition for their financial problems.

According to a Department of Energy report released Wednesday, the U.S. share of solar panel manufacturing fell from a peak of 43 percent in 1995 to just 7 percent last year:

Also, it's true that the federal largesse for solar is small potatoes in comparison to the subsidies that have long been given to the oil, gas and coal industries. As Aaron Fown pointed out on CleanTechnica: 

Between 2002 and 2008, the US appropriated subsidies for energy production totaling around 100 billion dollars. Of this, nearly 3/4 went to fossil fuels, and of the 29 billion devoted to renewables, nearly half was in the form of subsidies for corn based ethanol. And this is all without counting the massive, multi-trillion dollar cost of US foreign policy, which seems at times to be far more devoted to the interests of the oil companies than to the interests of the American people. Essentially, the US commitment to solar production has been half-hearted at best, and that has not changed much since 2008, despite the change of the guard in the White House.

All of the above caveats and excuses are perfectly valid. But in political messaging terms, they're irrelevant. Already this week, plenty of Republican politicians and commentators have been cackling and jeering about “green jobs boondoggles.” You can bet the ranch that Republican PR professionals are already cueing up the Solyndra debacle as Case #1 in some pretty devastating attack ads for next year’s presidential campaign. 

Throughout his 2008 campaign, Obama promised to create 5 million green jobs. How has he done? Supporters such as the Center for American Progress say the record is rosy, although they admit that much of that benefit is merely short-term. These supporters note correctly that Republican opposition in Congress and in many state governments has limited the extent and power of the green stimulus, so blaming Obama isn't completely fair.

Exactly how many green jobs have been created in the Obama years is a matter of much dispute, and about the only fact everyone can agree on is the lack of a common definition for “green jobs” or the methodology by which to count them. The federal government’s definition, for example, is hopelessly broad. What is clear, however, is that the pace of green job creation has been less than expected and that the ability of the sector to grow without a steady stream of federal dollars is highly questionable.

The reality check to all this, however, was the news Friday that the overall economy is failing to create new jobs.  In the cruel logic of politics, this provides an excuse for the Obama administration's self-proclaimed realists to jettison all pro-environment moves and adopt a traditional, lunch-bucket focus on the economy. It's quite likely that Obama and his advisers planned this week's environmental trifecta in large part because they had advance notice of the bad jobs news. 

So has Obama thrown the environmentalists under the bus? Of course. Does he have any other alternative if he wants to win re-election? Probably not, given the chance that the economy could worsen dangerously over the next year, and given Obama’s overall unwillingness to take any tough stands on anything whatsoever. He’s framed himself into a corner as the eternal conciliator, centrist and all-round punching bag for Republicans. Once framed that way, it's difficult for him to suddenly decide to fight back without seeming even more cynical or desperate.

This political rope-a-dope strategy may or may not eke out a 50.1 percent victory for Obama in  November 2012 against a Neanderthal Republican opponent. As substantive policy, it is empty. As legacy for the planet and future generations, it is lamentable. And as communications strategy, it’s unworkable.

So, fellow tree-huggers: We should probably get used to Obama's tires running up and down our backs. Feel the burn of hot rubber above. Feel the crunch of hard pavement below. There’s lots more to come.

What we do about it, however, is up to us.