The Far-Ranging Costs of the Mess in the Gulf

A blown oil well in the Gulf of Mexico creates an environmental catastrophe — but the accident could at last provide the impetus to craft an energy policy that is smart, pragmatic and green

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Eric Gay / AP

Oil blobs and oil sheen gather in the waters of Chandeleur Sound, La.

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Indeed, as long as the oil keeps leaking, fighting the spill on the surface will be a holding action at best. For environmentalists horrified by the sight of the damage — which is occurring despite BP's reassurances to the government in 2009 that "no significant adverse impacts [would be] expected" from a spill even if it happened — this is the last straw. Hence the commercial released on May 3 that called on Obama to ban new offshore drilling and the sympathetic ear such demands are getting from some Democrats in Congress. "I will make it short and to the point," said Senator Nelson at a May 4 press conference. "The President's proposal for offshore drilling is dead on arrival."

Outsourcing Offshore
Reactions like this are where political argument usually begins in the U.S. — and, increasingly, where it stops. Already, greens and industry, Democrats and Republicans appear to be digging in for the usual siege. Offshore drilling was meant to be a bridge to conservatives, to get them on board with climate and energy legislation. A new moratorium could end that possibility. "A major oil spill could put in jeopardy our best chance to get off oil," says Steve Cochran, director of the Environmental Defense Fund's National Climate Campaign. "That'd be ironic."

Environmentalists' arguments that the U.S. needs to get off oil fast are right — to a point. No one pretends that relying on an energy source that fouls the planet, enriches petro-dictators, routinely destabilizes economies and, oh yes, is running out is a smart business model. The International Energy Agency expects global oil demand to grow 24% between now and 2030, which means that the race to drink up petroleum will only accelerate — driving prices up accordingly.

But if not oil, what? The 37.1% share of American energy that is supplied by petroleum dwarfs the 7.3% generated by renewable sources — and most of that is hydroelectric and biomass, including ethanol, not wind or solar. (Coal, natural gas and nuclear make up the rest.) It will take years — perhaps decades — until renewables represent more than a tiny share of the energy mix, and in the meantime America needs to keep the lights on and the factories humming. Even if the analysts are underestimating the growth of green energy by orders of magnitude — not impossible, given their shaky track record — it doesn't change the essential supremacy of oil. Green advocates were ecstatic to see the approval of the 170-megawatt Cape Wind offshore wind-power project in Massachusetts last month, but it would take 3,000 offshore wind projects of that size to meet projected U.S. electricity demand by 2030 — almost one plant every two days. "People really do not have a grip on the size and scale of our existing energy system and our dependence on hydrocarbons," says John Hofmeister, a former Shell executive and the author of the new book Why We Hate the Oil Companies.

One answer to the problem has been to try to split the difference between energy needs and environmental needs. In terms of offshore drilling, that means going where the oil is, as long as it's off the coast of other countries, not our own — effectively making NIMBYism (not in my backyard) part of U.S. energy policy. The practice began in 1969, when a blowout on a well 6 miles (10 km) off the coast of Southern California spilled about 100,000 bbl. of oil into the Pacific, fouling the beaches of Santa Barbara. The accident occurred just as the nascent environmental movement was taking off, and the public and political reaction was powerful. No new rigs were permitted off the Pacific and Atlantic coasts after that, but existing ones were grandfathered in.

That's led to subtle energy hypocrisy. New Jersey's Senators, for example, may use their influence to keep offshore drilling away from the Garden State's beaches, but no one presses the state's residents to give up the 230 million bbl. of oil they burned in 2008 alone. It's only in the Gulf of Mexico, whose waters yield nearly a third of U.S.-produced oil, and resource-rich Alaska that a moratorium on offshore drilling has never been considered.

The result has been an outsourcing of America's offshoring to countries like Kazakhstan and Angola, which are rapidly becoming the world's new oil powers. Their fields may hold billions of barrels of petroleum, but their environmental standards are nonexistent. Nigeria — a petro-state that produces more than 2 million bbl. of oil a day (a little more than 10% of U.S. daily consumption) — has spills equal to that of the Exxon Valdez about every year. "We offshore all the negative aspects of oil extraction," says New America's Margonelli. "There's a huge mass of consumers in the U.S. who just want oil to be cheap and don't want to think about the externalities." And who don't care about oil spills off the west coast of Africa.

What Obama Should Do
If a President who prides himself on his ability to recognize teachable moments wants to seize this one, he needs to begin the lesson by explaining the folly of NIMBY to America's greens and then to follow that with another reminder to the "Drill, baby, drill" chorus of why opening up every inch of the country and coastline to rigs is equally foolish. It would fail not only as environmental policy but as economic policy too, since petroleum is a commodity traded on a global market, which means that all the world's extracted oil is essentially poured into a single pot from which everyone draws. Even a greatly expanded offshore program would thus reduce the price of gasoline by only a few cents over the long term.

The next step is to put in place truly comprehensive energy and climate legislation, laws that could slap a price of some sort on fossil fuels while channeling serious funds toward clean-energy research and deployment. Whether in the form of a tax, cap-and-trade or some other mechanism, pricing carbon has long been a nonstarter in Washington, but that needs to change. And if you think the U.S. is already investing real money in green tech, think again. It spends a little more than $18 billion on research and investment in clean energy, while China spends more than $34 billion.

Additional offshore drilling would have to be a part of the new policy mix too. Since the Gulf disaster, the White House has backed away from its earlier openness to the idea, waiting on the Interior Department's investigation before deciding how to proceed. One approach would be to authorize some new drilling but with toughened regulation and a lot of new strings. Right now, for example, there's a tiny 8 cents-a-barrel tax on oil companies that goes into a cleanup reserve. What if that tax could be raised significantly, with the stipulation that it go toward clean-energy research and development? A tax of $2 per barrel on all the oil produced and imported into the U.S. could provide around $15 billion a year of independent funding for alternative power and environmental causes — and it would be done on the back of the wealthy industry responsible for disasters like Deepwater Horizon. "Environmentalists might be willing to take that risk [on new offshore drilling] if it can become a viable source of alternative revenue," says Matthew Kotchen, an environmental economist at Yale University. "It's what you do with that money that matters."

On the flip side, the U.S. needs to fast-track the development of alternative-energy projects and do so ruthlessly. Cape Wind in Massachusetts is a good example, but it came after nine years of legal battles, partly from local environmentalists who don't want their view spoiled — a shortsighted position if ever there was one. The lesson New Englanders and the rest of the country need to learn is that given the scale of the coming energy demand — coupled with the need to reduce carbon emissions — NIMBY is dead. Americans have to get used to the idea of some energy production, both conventional and renewable, in their real and metaphorical backyards. And energy efficiency and conservation — much of which can be accomplished with nimble regulatory action like the increase in auto-mileage standards put in place this year — can reduce the need for new power, whether it comes from oil rigs or wind turbines. Congestion pricing — a policy already used successfully in cities like London — could help reduce traffic in crowded cities and provide money for public-transit systems now starved of funds.

There are signs that the President is already thinking this way. "Oil is going to be a part of it," says Carol Browner, the White House czar for climate and energy, speaking about Administration policies going forward. "But it doesn't change the fact we need a comprehensive energy plan that can lessen our dependence on oil and help invest in clean energy."

That's trademark Obama — policies that are both pragmatic and potentially visionary, and guaranteed to annoy both sides a bit. It won't be easy. Energy policy, like so much else in the country, has been set to drift for too long. But the moment is there for the taking, a chance for something worthwhile to rise out of the muck still bubbling up from the floor of the Gulf of Mexico.

— With reporting by Steven Gray / Venice, La.

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