Obama Administration Plans to Seize BP’s Gulf Oil Revenue

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Money to be Used for Massive Cleanup

by Glynn Wilson

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Secretary of the Interior Ken Salazar

Under orders from President Barack Obama and Secretary of the Interior Ken Salazar, the Minerals Management Service is drafting a plan to nationalize the Gulf oil assets of the British Petroleum corporation and to seize all revenue from the company’s Gulf drilling operations to pay for a massive cleanup operation in the Gulf of Mexico.

The Minerals Management Service staff is now conducting an inventory of all of BP’s drilling operations in the Gulf and calculating quarterly royalty payments to the U.S. Treasury from oil and gas leases, according to a source who works for the agency, who insisted on anonymity for fear of losing the job at MMS since the Obama administration has been cracking down on leakers.

The new policy, which could be announced any day now, perhaps when Obama visits Dauphin Island Monday afternoon, is designed to ensure recovery of enough money to pay for the cleanup. A side benefit is that it will make BP less subject to bankruptcy or a hostile takeover, according to the source, who admitted to having his job at the MMS because of connections to President George W. Bush.

The public affairs office of the Minerals Management Service and the White House press office did not immediately return an e-mail message seeking comment over the weekend. We will follow up on Monday when the president visits Dauphin Island.


Meanwhile, there have been complaints from critics of the Obama administration that it has not moved fast enough to replace all the Bush-connected workers at federal agencies, embedded in permanent jobs there by former Vice President Dick Cheney in the last days of the Bush presidency.

This is true for the Minerals Management Service under the Department of the Interior as well as the Justice Department, although the source claimed the folks hired by Bush had more experience in the oil and gas business than the likes of Salazar, a former attorney general and senator from Colorado.

The Minerals Management Service, an agency of the Department of the Interior charged with regulating the oil and gas industry, has been ensconced in a ethics scandal in recent months for cozying up to the oil and gas industry. Allegations include financial self-dealing, accepting gifts from energy companies, cocaine use and sexual misconduct.

The agency granted BP a “categorical exclusion” to the National Environmental Policy Act on the basis of three reviews of the Gulf drilling area. The reviews, written largely by the industry itself, concluded that a massive oil spill was “unlikely,” according to government documents.

After Salazar was confirmed by the U.S. Senate as the 50th Secretary of the Interior on Jan. 20, 2009 when appointed by President Obama, he was quoted as saying he was the “new sheriff in town” who would reform the MMS. But less than three months after his confirmation, on April 6, 2009, the British Petroleum company was granted a permit for the Deepwater Horizon, one of the deepest oil wells ever dug in the Gulf of Mexico or anywhere.

Salazar’s Environmental Record

Salazar’s environmental record is mixed and he considers himself a moderate, which may be one of the reasons Obama chose him. Obama pledged in his winning campaign for president to tackle some of the partisan bickering in Washington by appointing qualified people acceptable to both sides.

In May 2009, Salazar announced he would uphold of a Bush-era policy that prevents the regulation of greenhouse gas emissions through the Endangered Species Act, a policy he pledged to reevaluate when he took office in January. The policy states that, despite the apparent negative impact global warming has on polar bears, an endangered species, greenhouse gasses cannot be regulated with the ESA.

“The single greatest threat to the polar bear is the melting of Arctic Sea ice due to climate change,” Salazar said in a conference call announcing the decision. But the Endangered Species Act, he said, “is not the appropriate tool for us to deal with what is a global issue.”

Salazar contended that the ESA was never intended to be used for the regulation of climate change, while sidestepping questions of how this situation is different from the Clean Air Act, used by the Environmental Protection Agency to regulate emissions.

The decision was met with criticism from environmental groups. But it was praised by energy groups including the American Petroleum Institute, some Democrats and many Republicans, according to Salazar’s bio in the online encyclopedia Wikipedia, a good starting point for research.

In April 2010, Salazar approved the Cape Wind offshore wind farm, but he dealt with criticism from the political right after pushing to impose tougher leasing rules and cancel a series of planned drilling operations in Alaska.

In March 2009, Salazar agreed to move forward with the Fish and Wildlife Service’s decision under the Bush administration to remove the Rocky Mountain Gray Wolf from the Endangered Species List in Montana and Idaho, but not Wyoming. He has faced criticism from environmental groups for that.

Several prominent environmental groups are wary of Salazar, noting his strong ties with the coal and mining industries.

Kieran Suckling, executive director of Center for Biological Diversity, which tracks endangered species and habitat issues, has been quoted as saying that Salazar, “is a right-of-center Democrat who often favors industry and big agriculture in battles over global warming, fuel efficiency and endangered species.”

According to Project Vote Smart, Salazar received a 60 percent D vote rating for 2007 by Defenders of Wildlife, but he has an 81 percent B lifetime rating from the League of Conservation Voters, including a 100 percent rating for the year 2008.

Salazar supported the Bush Administration’s release of lands in the Conservation Reserve Program for emergency haying in Colorado’s Yuma and Phillips Counties, but in 2007, he was one of only a handful of Democrats to vote against a bill that would require the United States Army Corps of Engineers to consider global warming when planning water projects.

In 2006, Salazar voted to end protections that limit offshore oil drilling in Florida’s Gulf Coast, and in 2005, he voted against increasing fuel-efficiency standards for cars and trucks. He also voted against an amendment to repeal tax breaks for ExxonMobil and other major petroleum companies.

Gulf Oil and Gas Lease Facts

The Gulf of Mexico is owned by the people of the United States, not the oil companies. The revenue from oil and gas leases go into the federal budget with some revenue sharing with state and local governments.

According to the MMS Website and a report compiled by the Reuters wire service, a total of 331 wells were drilled in federal waters in the Gulf of Mexico in 2009, while more than 50,000 wells have been drilled in federal waters in the Gulf since 1947.

There are 7,000 active leases in the Gulf of Mexico, 64 percent in deepwater of greater than 1,000 feet.

Gulf production in state and federal waters in 2009 came to 1.6 million barrels per day and accounted for 31 percent of total domestic oil production. Gulf natural gas production equaled 11 percent of domestic supplies.

About 4,000 wells have been drilled in the Gulf in depths of 1,000 feet or greater, and 700 wells in all federal waters 5,000 feet or greater.

About 80 percent of offshore oil production and 45 percent of natural gas production came from deepwater in 2009.

Federal offshore leasing generated $6 billion in revenue last year, providing direct employment of about 150,000 jobs.

Deepwater offshore oil production surpassed shallow water production in 2001, and since 1953, the federal government has collected $200 billion from lease bonuses, fees and royalty payments from all offshore operators.

Over the past 45 years, 17.5 billion barrels of crude oil and condensate have been produced in federal offshore waters, while 532,000 barrels have been spilled. That’s 30.3 barrels spilled per 1 million barrels produced.

The number of spills jumped during the 2000-2009 decade to 72 from 15 in the 1990s and the amount of oil spilled jumped to 18,000 barrels from 2,000 barrels in the 1990s.

Seven offshore blowouts occurred in federal waters from 1964 to 1970 that resulted in spills exceeding 1,000 barrels. Since 1971, blowout events have resulted in only 1,800 barrels of spilled oil.

Worst Disaster in History

That is, until this year, when BP’s Deepwater Horizon exploded in the Gulf, killing 11 workers and leaking an estimated 600,000 to 1.2 million gallons a day from the bottom of the sea.

The most recent government estimates put the total amount of oil lost at 23.7 million to 51.5 million gallons, far more than the 10.8 million gallons dumped into Prince Williams Sound Alaska when the Exxon Valdez ran aground in the spring of 1989.

Scientist are now calling the BP’s Deepwater Horizon blowout in the Gulf the largest and worst environmental disaster in U.S. industrial history.

© 2010 – 2016, Glynn Wilson. All rights reserved.

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