In the Pipeline: 2/16/11

Sputnik Moment: Moscow embraces Arctic drilling while Washington D.C. prefers wood chips and switchgrass New York Times (2/15/11) reports: Earlier this month, Royal Dutch Shell postponed plans for drilling off Alaska’s Arctic coast, as the company continued to face hurdles from wary Washington regulators…The Russians, who control far more prospective drilling area in the Arctic Ocean than the United States and Canada combined, take a far different view…As its Siberian oil fields mature, daily output in Russia, without new development, could be reduced by nearly a million barrels by the year 2035, according to the International Energy Agency. With its economy dependent on oil and gas, which make up about 60 percent of all exports, Russia sees little choice but to go offshore — using foreign partners to provide expertise and share the billions of dollars in development costs…Russia, where onshore oil reserves are slowly dwindling, last month signed an Arctic exploration deal with the British petroleum giant BP, whose offshore drilling prospects in the United States were dimmed by the Gulf of Mexico disaster last year. Other Western oil companies, recognizing Moscow’s openness to new ocean drilling, are now having similar discussions with Russia…New oil from Russia could prove vital to world supplies in coming decades, now that it has surpassed Saudi Arabia as the world’s biggest oil producer, and as long as global demand for oil continues to rise…But as the offshore Russian efforts proceed, the oil companies will be venturing where other big countries ringing the Arctic Ocean — most notably the United States and Canada — have been wary of letting oil field development proceed, for both safety and environmental reasons.

You don’t say — new report from GAO argues Interior Department has been derelict with managing and issuing leases; best part is that it’s costing ‘taxpayers billions’ Washington Post (2/15/11) reports: The investigators found that Interior Department agencies were unable to verify production levels…”Without such verification, Interior cannot provide reasonable assurance that the public is collecting its legal share of revenue from oil and gas development on federal lands and waters,” the report said…Congressional investigators have concluded U.S. management of oil and gas leases on federal lands and waters is the newest high risk area of the government – and may be costing taxpayers billions of dollars…The Government Accountability Office said the Interior Department doesn ‘t know whether it’s being shortchanged on oil and gas revenue that is one of the largest nontax sources of federal funds. Revenues totaled about $9 billion in the 2009 financial year…The GAO report, obtained by The Associated Press, said the Interior Department’s management of the leases and production has been beset by persistent problems in hiring, training and retraining staff…The National Commission on the BP Deepwater Horizon Oil Spill found that in addition to missteps by the three companies involved, government regulators lacked the authority, the resources and technical expertise to prevent the disaster.

Murkowski is trying again to open ANWR. This is a hardy perennial; she introduces it or something like it every Congress. This time she is clearly preparing the ground for when oil prices go through the roof. Alaska Dispatch (2/15/11) reports: Alaska Sen. Lisa Murkowski has introduced two measures that would allow oil production from the coastal plain of the Arctic National Wildlife Refuge, a 1.5 million-acre swath that for decades has been a bone of contention between developers and environmentalists…ANWR, which totals more than 19 million acres, has long been protected by federal law from oil exploration and development but there are frequent attempts to pass bills that would lift the ban in the so-called 1002 area, or the coastal plain. Congress approved drilling in the coastal plain in 1996 but the measure was vetoed by President Bill Clinton…One of Murkowski’s bills would require the government to lease 200,000 acres of the coastal plain within two years of the bill’s passage. Infrastructure — including roads, drill pads, airfields, pipelines and other facilities — would be limited to 2,000 acres. Revenue from oil production would go to environmental mitigation along with federal deficit reduction, and part of the revenue also would pay for renewable and alternative energy development as well as environmental programs, according to a press release…The second bill wouldn’t let oil companies onto the refuge but would allow oil and gas production from the coastal plain through use of directional drilling from facilities on adjacent state land…”While this compromise is not my first choice,” Murkowski said in a prepared statement, I believe it’s a reasonable alternative that should silence any potential controversy over ANWR development.”

Put that in your pipe and smoke it — green tape delays with Keystone XL increase production costs from $1 to $13 billion Wall Street Journal (2/15/11) reports: TransCanada Corp. raised the cost estimate of a controversial oil-pipeline expansion by $1 billion to $13 billion and said it expects regulatory delays…The Calgary pipeline company said it expects a decision by the U.S. by “mid-to-late 2011,” citing “a heightened political environment and opposition to the project.” Previously, the company said it expected the U.S. State Department to decide by this summer on a new oil route that would boost volumes flowing south from Canada…Environmental groups as well as U.S. state and federal lawmakers have expressed opposition to the 1,700-mile pipeline-expansion project that would bring an additional 1.1 million barrels of oil a day to facilities in Nebraska and Oklahoma, and then south to the U.S. Gulf Coast, home to an extensive refining-and-port network. The project, dubbed “Keystone XL,” would help release the crude-oil bottleneck at the key U.S. supply depot in Cushing, Okla…Opponents have expressed concern about the higher environmental toll of oil-sands petroleum produced in Canada, as well as the potential for spills from the proposed pipeline.

We see your 15 and raise you 30: Sen. Vitter wants 15 deep-water permits if President Obama wants his nominee approved Fuel Fix (2//15/11) reports: Sen. David Vitter is pulling a page out of his Louisiana colleague’s playbook — for a second time — by vowing to block action on one of President Barack Obama’s nominees in a bid to speed up government approvals of offshore drilling projects…Vitter today announced his plan to stall Obama’s nomination of Dan Ashe to head the U.S. Fish and Wildlife Service at the Interior Department — a tactic similar to the strategy employed by Sen. Mary Landrieu, D-La., last year. Vitter said he wouldn’t release his hold on Ashe’s nomination until the Interior Department issues at least 15 deep-water drilling permits…Vitter also is blocking swift action on the president’s nominee for chief scientist at the National Oceanic and Atmospheric Administration… “Louisianians are desperate to get back to work,” Vitter said in a statement. “Filling those jobs is my top priority, and that has to come first. I love fish and wildlife, but my top priority is to stop the economic devastation caused to humans by the moratorium.”…Vitter said he is angry about what he calls a de facto moratorium on deep-water drilling that is stalling projects even though the administration lifted its official ban in October.

What you will agree to when you’re down and out; auto manufacturers inform Rep. Issa that fuel economy regulations are expensive Reuters (2/15/11) reports: While industry touts cleaner burning engines and is more serious about batteries for hybrids and electric plug-ins, car companies are seeking to slow or soften any requirement to nearly double efficiency by 2025 to 60 miles per gallon. Two years ago, struggling automakers, some receiving billions of dollars in taxpayer aid, agreed with the Obama administration to raise average fuel efficiency 40 percent to 35.5 miles per gallon by 2016, the largest jump ever. But they are drawing the line at more aggressive mandates, making it their top lobbying priority in Washington as they emerge from a four-year slump that devastated U.S. production. “Fuel economy regulations are by far the most expensive regulations that automakers face,” Shane Karr, vice president of government affairs for the Alliance of Automobile Manufacturers, said in a January letter to House Oversight Committee Chairman Darrell Issa.