Even John Boehner and Paul Ryan have voiced support for the idea — even if they were later reminded of their obligations and silenced by their oily campaign donors.

Democrats though, can’t seem to decide if they’re serious about ending all these subsidies, or if they’re just interested in scoring political points by bashing Big Oil. This lack of clarity is rewarding their political opponents, confusing and undermining their base of support, and minimizing their chances of policy and political success.

President Obama has proposed cutting roughly $40 billion over 10 years in subsidies to the oil, gas, and coal industries in every budget he’s submitted to Congress since taking office. While these are not all the subsidies that these mature and very profitable industries enjoy, they are some of the most obvious.

The president has consistently and clearly stated that the reasons for ending these subsidies range from deficit reduction to minimizing oil dependence and climate change. In short, the president’s proposal is a good potential first step towards fiscal and energy policy sanity.

Last month, House Democrats led by Reps. Welch and Blumenauer, went another step further, sending a letter to the supercommittee that called for eliminating $122 billion in subsidies for oil, coal, and gas over 10 years. This is a much more comprehensive ask, and would in fact begin to level the playing field for clean energy while saving nearly 10 percent of the overall goal for the supercommittee.

The House Democratic position is also supported by a majority of all Americans, according to a new poll by the non-partisan Civil Society Institute.

Then there’s the Senate. Sen. Robert Menendez of New Jersey recently led a letter that was sent by 13 of his colleagues to the supercommittee. The letter urged the committee to consider the Close Big Oil Tax loopholes act that Menendez sponsored earlier this year. That bill, which gained majority support but needed 60 to pass, would have eliminated only $21 billion over 1- years in subsidies to only the Big Five oil companies — Exxon, Chevron, ConocoPhillips, Shell, and BP.

This is the kind of a compromise that only could happen in the Senate — and that the supercommittee is supposed to avoid. It isn’t actually a serious proposal for subsidy reform, more like a public relations move designed to give the appearance of a win.

If the supercommittee ends up eliminating only subsidies to the Big Five oil companies in exchange for well, anything, it will be a terrible deal.

The Senate bill or any deal based on it would leave intact subsidies to some of the biggest and most profitable oil and gas companies. These include Koch Industries, Valero, Occidental, Anadarko, TransCanada, and Chesapeake Energy — to name just a few. These are not “Mom and Pop” companies. For example, Occidental’s Ray Irani was the highest paid energy CEO in the world, pulling down $76.1 million last year.

The push to exempt the so-called “independent” oil and gas producers comes from the Independent Petroleum Association of America (IPAA), which claims that its members would be disproportionately affected by the subsidy reforms proposed by President Obama. The IPAA was also, not coincidentally, a top oil and gas industry donor to the House members of the supercommittee in the third quarter of this year.

Earlier this year, Oil Change International took a look at just who some of these so called independents are. While the IPAA membership list is not publicly available, our research has revealed the following about the U.S independent upstream oil and gas sector. We looked at EIA data on the top 100 oil producers by reserves and found 86 publicly listed independent oil producers.

• We found 56 independent oil producers with market capitalizations of over $1 billion. The median market capitalization of all 86 companies was over $2 billion.

• The top five independent companies by market capitalization are Apache, Anadarko, Devon, EOG, and Talisman, which between them are worth over $178 billion.

• For 66 of these 86 companies, the average CEO salary in 2009 was over $4.8 million.

• Some “independent” companies are not so independent. Aera Energy LLC is a privately held company that is among California’s biggest producers. Shell and ExxonMobil jointly own it. Some companies are not owned by other oil and gas companies but instead by multinational holding companies. One such example is Fidelity Exploration and Production Company, which is owned by MDU Resources, a company with a $4.4 billion market capitalization. Others are multi-billion dollar enterprises that are registered in tax havens, which may be dodging the U.S. tax system altogether. One such company with significant U.S. oil reserves is Energy XXI, registered in Bermuda.

The fact is that the U.S. oil industry is enjoying a grand resurgence. The big growth is happening in places like the Bakken Shale in North Dakota. The Energy Information Administration (EIA) states that production of shale oil in the Bakken formation rose from 3000 b/d in 2005 to 225,000 b/d in 2010. PFC Energy expects it to rise to 450,000 b/d by 2013.

Bakken oil producers, almost all of whom are independents, are making tons of cash. The International Energy Agency recently stated that:

High oil prices have been a key driver of [U.S. shale oil] growth, given that the breakeven oil price for a typical light tight oil development is around $50/barrel (including royalty payments).

Therefore one of the key areas of production for many independents, and the most significant in terms of growth prospects in the coming decade is a steal at current oil prices. The Article ]]> gristadmin http://grist.org/article/2011-04-26-api-shocker-oil-makes-money/?utm_source=syndication&utm_medium=rss&utm_campaign=feed:stevekretzmann http://grist.org/article/2011-04-26-api-shocker-oil-makes-money/#comments Tue, 26 Apr 2011 19:49:06 +0000 http://www.grist.org/?p=44425 ]]>

In a transparent attempt to blunt impending justified rage over this week’s profit reports from Big Oil, the latest piece of spin to emerge from the well-paid creative minds at the American Petroleum Institute is a real classic. The gist, in a nutshell, is that oil makes money — a lot of money. Really? You don’t say!

According to the press release:

While oil and natural gas stocks make up an average of 3.9 percent of public pension holdings in four key states, they accounted for an average of 8.6 percent of the returns in these accounts from 2005 to 2008.

I won’t bother quibbling with numbers here because the underlying specific point, that the oil companies are strong-performing blue chip stock,s is indisputably true.

That, however, doesn’t mean that oil addiction is good for our economy and our future, or even your future 401k earnings. Far from it, in fact.

The relationship between rising oil prices and larger threats to the local and national economy, including recession, is well established. Ten of the last 11 recessions were preceded by oil price rises. So when the API points out that their returns are counting for twice as much of your total, they’re not mentioning that the increase in price, which drives the increased oil profits and returns, is also sending much of the economy, and much of your portfolio, into a tailspin.

And is API actually trying to argue that we should subsidize stocks that perform well? “It’s the most ridiculous argument I’ve ever heard to justify subsidies for an industry,” Steve Ellis, vice president of Taxpayers for Common Sense, told Anne Mulkern of E&ENews PM.

If pension funds also hold Microsoft or Intel stocks, [Ellis] said, “does that mean the government should turn around and should subsidize Microsoft or Intel to boost the pension funds?”

“It’s really a preposterous sort of proposal,” Ellis added. “It makes no sense from a public policy standpoint.”

API’s new study can’t make the case that the small profits your 401k may enjoy from its slice of Big Oil makes up for the crushing impact of our nation’s dependence on oil. It doesn’t — it only means you’ll have a few more bucks to spend on gas in your twilight years.

Continuing to invest in oil is classic penny-wise and pound-foolish behavior. Once we stop using our tax dollars to support this folly, we’ll be one step closer to revealing the true price of oil.

[CORRECTION: This post initially neglected to credit Anne Mulkern of E&ENews PM.]

On Tuesday, the president once again proposed ending subsidies to the oil industry. As we’ve said before, this is a great idea, and should be supported in full.

That said, although we haven’t seen details, it’s quite unlikely that the administration is proposing to eliminate all these subsidies. First, there is an important difference from the unmet pledges of the last several years.

Obama is apparently no longer talking about eliminating “fossil fuel” subsidies, preferring instead to focus only on “oil” subsidies.

So eliminating subsidies to coal and natural gas would seem to be off the table. What’s more, the president has redefined “clean energy” to include natural gas and “clean” coal. More on this soon.

This shift puts Obama’s rhetoric (at least) out of step with the G20′s — which is ironic because that process was created by the president. But then again, not that much is happening there anyway.

Looking at last year’s budget submission and the president’s submission to the G20 process can supply some likely insight into what the administration has in mind. Here’s the page from last year’s budget with the subsidy removal line items:

This budget request, which was basically ignored by Congress, would have eliminated $36.5 billion in oil and gas subsidies and $2.3 billion in coal subsidies over the next 10 years. If you’re interested to get details on the line items, you should read the U.S. submission to the G20 subsidy removal process [PDF], which goes through each of these lines in detail.

There are several other prominent subsidies that the administration has never talked about eliminating, but should. These include:

• The Foreign Tax Credit on foreign energy operations that are really disguised royalties. This was estimated to be worth $15.3 billion from 2002-2008 in a recent Environmental Law Institute study.
• Subsidies to international financial institutions and export credit agencies. Export of fossil-fuel related goods and services via Ex-Im Bank, the Overseas Private Investment Corporation, and U.S. commitments to multi-lateral lending institutions such as the World Bank vary annually but total at least $4 billion annually. (Note these are only totals for U.S. contributions.). The administration can and should end much of this unilaterally. Congress should oppose any more funding for these institutions unless they stop lending for fossil fuel projects that are not solely devoted to improving energy access to the poor.
• Oil defense. This includes costs to build, run, and finance oil stockpiles in the U.S. Strategic Petroleum Reserve; and defense of key oil infrastructure, including pipelines and oil shipping lanes. Does not include the cost of the Iraq war. Estimated to be more than $10 billion annually.

All of these are subsidies to the oil industry, it’s just likely that eliminating these isn’t what the president has in mind. But we’ll see.

One of the few bright spots for environmentalists and progressives over the last year was this week’s successful defeat of Proposition 23 in California.  As the organizer Saul Alinsky famously observed, power flows from both people and money.  Unlike every other energy battle this year, for Prop 23, activists had both.

It hasn’t been an easy year to be green.  Despite an historic effort, there’s no climate and energy law.  In March, President Obama caved to the opposition and called for expanding offshore drilling.  Then, BP’s Macondo well blew out producing the worst environmental disaster in our nation’s history.  In June, as oil from that well was washing ashore, the US Senate voted to continue to send billions of dollars annually to the oil industry.  In October, President Obama caved again on offshore drilling. 

Throughout 2010, the fossil fuel industry flooded the media with nearly $250 million in advertising dollars, while they were outspending national environmental groups at least 8 to 1 in lobbying and pouring close to $20 million directly into key campaigns, usually to Republicans.  Conservative groups on the outside echoed and amplified this imbalance by more than ten to one in the run up to the election.

If you want to know why Washington can’t pass clean energy legislation or even a coherent response to the BP spill, following the money is imperative.  And if you want to make progress on clean energy and ending our nation’s addiction to oil, exposing and stopping that money is the first step.

In California, environmentalists, allied with Hollywood, clean energy businesses, Google, Gates and others, outspent the fossil fuel industry including the Koch Brothers’ Flint Hill Resources by 3 to 1 on Prop 23.  Why did an industry that can clearly afford to spend more essentially stop funding Yes on 23?

By late September, activists working against Prop 23, riding a wave of grassroots support, had essentially pulled even on fundraising. A Field poll at that time showed the opponents of 23 leading by 11 points.  This groundswell of public opposition to Texas oil companies, coming just as Silicon Valley money began to pour in, caused Big Oil to blink.  In short, grassroots power plus money fueled victory.

But the industry had a Plan B.  Instead of rallying behind Prop 23, much of the oil industry broke ranks with the Koch Brothers and decided to back Prop 26, which was termed the “stealthy twin of Prop 23″ near the end of the campaign.  Chevron posted nearly $4 million to pass 26.  They were joined by Conoco Phillips and Aera, which is jointly owned by Shell and Exxon.  None of these companies gave anything directly to pass Prop 23. 

Plan B worked, as the much more diverse business coalition behind 26 was able to win handily.  Environmentalists weren’t as deep pocketed, and were unable to fight on separate fronts.  It remains to be seen whether or not Prop 26 can withstand a court challenge, and actually live up to its “stealthy twin” name.

If greens and their allies have to outspend the oil, gas, and coal industries to get a win, victories may indeed be few and far between. Outspending these industries dollar for dollar, day in and day out, is a questionable strategy at best – even for Hollywood and Google.  Given this, it may be that the most needed piece of environmental legislation is not cap and trade, but rather campaign finance reform.

Fierce grassroots support was also clearly a key ingredient in fighting Prop 23, although a lot of the energy behind No on 23 was mobilized in response to an outside attack.   Like the national level fights to defend the Clean Air Act, environmentalists have been able to organize well to defend existing laws.   But grassroots support has been absent or fractured in the national effort to pass new energy legislation.

Environmentalists need to create conditions to win, as opposed to not losing.

Finding ways to work with others on laws that would expose and ultimately reduce the influence of Big Oil and other corporations on government is an important next step for our democracy, and our planet.

A World Bank project lit this Sri Lankan shop with solar. Unfortunately, the World Bank’s current energy lending portfolio remains heavily biased toward conventional fossil fuels.Photo: World Bank

Similarly, at the World Energy Congress in Montreal last month, the plight of the poor was very much on everyone’s mind. Not that any of them was there to hear it, with admission to the conference running in the vicinity of $3,000 per person.

Nevertheless, speaker after speaker, from tar-sands related companies such as Enbridge, Suncor, and Exxon, emphasized the need to reduce “energy poverty” by improving access to reliable energy for the poor. 

According to Peabody’s Boyce: “The greatest crisis we confront in the 21st century is not an environmental crisis predicted by computer models but a human crisis fully within our power to solve. Study after study — and pure common sense — tell us that access to electricity helps people live longer and better.” 

Putting aside for the moment Boyce’s self-serving climate denial, it’s clear that he and other fossil fuel executives see their industries as the vehicles that will deliver the masses from darkness and poverty. It is tempting to dismiss the fossil fuel industry’s newfound concern for the global poor as the latest greenwashing ploy — and that’s undoubtedly true — but it’s also not the whole story. 

Access to energy is a very real problem — on this point it seems that industry, environment, and development groups all agree. Globally, more than one out of every five people lacks access to electricity. Nearly two of every five still rely on wood and biomass for basic cooking and heating. Many of the people without access to modern energy services live in rural areas of sub-Saharan Africa and Asia. In many cases, these populations will be the same ones that face disproportionate climate change impacts to their agricultural and natural resource-based livelihoods. Increasing clean energy access is certainly key to confronting a host of development challenges.

The question is, how do you effectively address energy poverty? The World Bank, which is funded through tax dollars from the U.S. and other countries, is well placed to address energy access. Inscribed over the main entrance to the World Bank are the lofty words: “Our Dream, A World Without Poverty.”

The World Bank’s current energy lending portfolio remains heavily biased toward conventional fossil fuels, and so the question becomes, do those projects support the poor?

A new report by Oil Change International dispels the myth that support for coal and oil projects increases access to energy for the world’s poorest. This finding stands in contrast to government, World Bank, and industry claims that ongoing taxpayer support for these large coal and oil projects is necessary to alleviate energy poverty.

The World Bank has used arguments around increasing energy access to justify the approval of massive new coal-fired power plants like the Eskom plant in South Africa, as well as the continued funding of oil projects. But the new report, which incorporates both original research and the World Bank’s own analysis, shows that none of the World Bank’s coal or oil lending for the last two years have prioritized increasing energy access.

“World Bank officials justify massively polluting coal and oil projects by saying that they increase energy access for the poor — but that’s just not true,” said one of the report’s authors, Elizabeth Bast. “Our analysis and the World Bank’s are remarkably similar. Energy from the World Bank’s coal and oil plants go to support big industry, not the world’s poorest.”

In this morning’s ClimateWire, World Bank spokesman Roger Morier argued, “Millions of people worldwide have benefited from World Bank Group energy financing. They know that they can now keep their medicines cool in a refrigerator, they can read and study at night, they can keep working at a factory that otherwise would be closed, and that they are on a path out of poverty. That is the true measure of the work we do.”

That’s a nice sentiment, but the question is, what is the best way to ensure that those benefits reach the poor as they are intended? Heike Mainhardt-Gibbs, another coauthor of the report stated that “If the Bank isn’t directly making provisions to make sure the poor, who constantly get left behind, [are] getting connected, then this electricity could just be going to feed the rising middle-class [or industrial] demand. And the poor, pardon the pun, are left in the dark.”

“If your entire overall mission and purpose as an institution is to reduce poverty, and then you further that by saying that one of the main objectives of your energy financing is to increase access for the poor, we want to see the poor benefit,” Mainhardt-Gibbs continued. “When you say access for the poor, that’s a direct connection. It’s not just a trickle-down theory that just because industry has energy, some poor person somewhere will get it.”

Many environmentalists, it should be noted, have changed their tune on this issue [PDF] recently. Recognizing the importance of energy access for the poor, environment and development advocates now allow that some fossil fuel projects may be necessary, if after looking at all the impacts, it turns out that they are the cheapest, most cost-effective, and best way to deliver energy services to the poor. This is exactly what the World Bank should be doing with its energy portfolio in the future.

Unfortunately, the World Bank seems to be continuing to reflect the interests of corporations in its donor countries rather than the poor. So far, the poor aren’t benefiting from Boyce and other corporate fossil fuel executives’ newfound self-serving interest in energy poverty alleviation. But maybe, if we can all agree that the priority really is the poor, then we can make progress.

When in doubt, follow the money.

As the new site DirtyEnergyMoney.com reveals, each Congress over the last decade has become more mired in oil money and choked on coal cash. Over $114 million has been paid by these industries over the last decade to buy access and influence in Congress. Although we won’t know for another six months, the 111th Congress could end up being the dirtiest yet.

DirtyEnergyMoney.com was built by the organization I direct, Oil Change International, using data provided by the Federal Election Commission and the Center for Responsive Politics. It’s a fully interactive site that allows folks to easily discover, expose, and track how much money their representatives are taking from the oil, gas, and coal industries.

The site is supported by a large and growing list of partner organizations: Appalachian Voices, Chesapeake Climate Action Network, Energy Action Coalition, Earthworks, Friends of the Earth, Greenpeace, MoveOn, Public Citizen, True Majority, 1Sky, and 350.org. All of the partners will be contacting their millions of members and urging them to tell their Representatives to stop taking dirty energy money.

One of the strengths of the site is its interactivity, so feel free to investigate and analyze the data yourself.  For instance, each company and each politician has their own unique URL, so you can target and track what you’re concerned about the most. You can even embed widgets tracking them in your own site.

Some of the key findings of the site so far include:

· Overall, the coal industry has been friendlier to the Democrats than Republicans thus far in the 111th Congress, with over $3.7 million going to Democratic members of the House and Senate, compared with about $2.8 million to Republicans.

·Republicans continue to take more oil and gas money, with the oil and gas industry contributing over $5.1 million to Republicans and $3.1 million to Democrats.

The influence of the industry also shows in recent energy votes:

· Senators voting in favor of a narrowly defeated June 10 resolution sponsored by Senator Murkowski that would have weakened the Clean Air Act and blocked new fuel economy standards, took on average two and a half times as much Dirty Energy Money as those who voted against it.

· Senators who voted against a June 15 vote sponsored by Senator Sanders that would have eliminated big oil and gas company subsidies have taken more than 3 times more oil and gas money in this Congress than those who voted for the amendment.

· House votes exhibit similar trends. Members who voted against the recently passed CLEAR Act (HR 3534), which removes the liability cap for oil spills and reforms oil and gas industry regulations, took nearly five times the amount of oil and gas money on average in the 111th than those voting for the Act.

A full list of our preliminary findings can be found here. 

Apparently, we’re going to need to change the system of corporate run campaigns and democracy before we can ever truly win on climate and energy.  Lets get to it.

As oil continues to gush into the Gulf of Mexico, as fisherman watch their stocks die, as beaches become tar-filled messes, we will hear a lot about the need to learn lessons. The oil industry has already started to push their predictable spin that although “mistakes were made”, they’ll learn what needs to be learned to ensure that this never happens again.

The cause, we’ll likely be told soon, was a faulty valve, or human error. If things get really bad (and they will) we’ll hear that the safety regulations that the industry wrote for Congress are inadequate, and they will be strengthened (slightly). Several mid-level managers will be forced into early retirement.

What you won’t hear in the mainstream is that the real cause of the Drilling Disaster is our addiction to oil and an energy strategy that is not based on rational discourse, but rather is the result of political calculations in a democracy which is as soaked in oil as the Gulf.

The debate on offshore drilling stopped being close to rational when John McCain struck a gusher of oil money after changing his position in June of 2008. Over the next two months, as McCain mounted his only serious threat of the campaign, a willing public was fed lies about how drilling off of our coasts would lead to energy independence and cheap gas.

In response, then candidate Obama announced an end to his previous opposition to offshore drilling in August 2008 by noting: “My interest is in making sure we’ve got the kind of comprehensive energy policy that can bring down gas prices. If, in order to get that passed, we have to compromise in terms of a careful, well-thought-out drilling strategy that was carefully circumscribed to avoid significant environmental damage — I don’t want to be so rigid that we can’t get something done.”

This, it seems, is what Team Obama usually does best. With Bush and Cheney, we were outraged that the oil industry sat at the table to make an energy policy. With Obama, there was no table – only the echoes of “drill baby drill” in their ears, and a painfully naïve desire to avoid conflict and seek consensus.

This isn’t the result of anything even remotely resembling rational discourse on the energy needs of the nation – it’s a cold-hearted political calculation that began as a campaign maneuver. It is certainly not a coherent energy policy.

Obama has an out here though, and he should take it immediately. Since Obama originally reversed his position we have all learned two important facts:

1) That the impact of drilling on gas prices is barely discernible – the government’s Energy Information Administration recently put it at whole 3 cents per gallon in 2030;

2) That even the best available technology cannot always avoid significant environmental damage.

We also know now, as we knew then, that the amount of oil that remains offshore is truly negligible and that the American public has always favored clean energy over offshore drilling.

The President needs to take this moment to educate the nation about the many dangers of our fossil fuel addiction. He can begin that process by doing something that Presidents aren’t supposed to do, but which we desperately need right now.

Obama needs to admit he was wrong about offshore drilling. It was a mistake to reverse his position on offshore drilling, and he should see that clearly now. If he can admit that, and lead the nation in learning this critical lesson at this time, maybe there is still hope not only for our coasts, but for rational discourse in our democracy.

Originally posted at Price of Oil.

How much money will be freed up by eliminating fossil fuel subsidies in the developed countries?   While no definitive study exists, Jonathan Pershing (the lead US Climate Negotiator) authored a study in 2004 that cited $57 billion annually in OECD (developed country) subsidies.  The same paper notes that per-capita subsidies in the OECD are more than twice a high as those in the developing world.   Other studies range as high as $150 billion in developed country fossil fuel subsidies.  However that comes out – it’s a huge dent in the need for long term climate finance.

G20 leaders agreed in Pittsburgh to phase out subsidies over the “medium term”.    One way to move forward both financing and emissions reductions goals would be to set firm dates for developed country subsidy phase-out. 

The G20 noted that fossil fuel subsidies were worth $300 billion and that their elimination would lead to a 10% reduction in greenhouse gases by 2050.  Readers may be interested to know that the study referenced by the G20 excluded all developed country fossil fuel subsidies, and instead only quantified developing country subsidies.  Therefore additional money and more emissions reductions can be expected from developed subsidy phase-out.

There is elegance to subsidy shift that is compelling for the public and politicians who will have to explain long term finance to their electorates.  Stop funding the problem, start funding the solution.  Long term finance will have to come from somewhere.  Instead of giving $3 billion to Exxon, as the Obama Administration did just last week, shouldn’t part of the solution here in Copenhagen be to use the money that has previously been given to the fossil fuel industries?

Take action to demand that President Obama and Congress stop funding Big Oil and Coal, and start funding long term international climate finance.

According to a leaked letter, the Obama administration is set to propose ending fossil fuel subsidies next week at the Pittsburgh G20. The letter, authored by Michael Froman who is an Obama advisor on international economic affairs, calls on the G20 to eliminate all fossil fuel and electricity subsidies, as a “logical step in combating global climate change.”

Eliminating fossil fuel subsidies is a great idea, if it’s done right.  This is certainly the right time, but the G20 is likely not the right place.

In general, it’s so obvious, you can’t really believe it hasn’t happened sooner.  With all the hoopla about cap and trade, carbon offsets, and parts per million, wouldn’t a good place to start be to stop supporting big oil and dirty coal with our tax dollars?  We can then use that money to finance a transition to clean energy — both in the U.S. and globally. 

The principle is simple and clear: You can’t really say you’re committed to the fight against climate change if you’re still funding oil and coal.  If you’re in a hole, stop digging.  Many global leaders including U.N. Secretary General Ban Ki Moon, Sir Nicholas Stern, Al Gore, and John Browne (the former Chief Executive of BP) have all spoken out against the ongoing practice of subsidizing fossil fuels with public funds.  Obama campaigned on the idea, and the administration has already proposed eliminating some domestic subsidies in the 2010 budget.

But the reality, is, as usual, stickier.  In the U.S., calls for subsidy removal tend to be answered by the oil industry and their allies with dire predictions of rising gas prices and consumer pain thus leading to unemployed politicians.  This is because the poor oil industry couldn’t possibly have anything less than record profits, and they’ll continue to either use our tax money to do it, or they’ll jack up prices on us.  In other businesses involving addiction, this is called a protection racket.

This explains why the Obama proposal for subsidy removal in the U.S. is only partial at best, and also why it is gathering dust, not steam, in Congress.

In Pittsburgh next week, the Obama administration is apparently going to propose that the G20 eliminate fossil fuel subsidies.  What is a fossil fuel subsidy?   Simply put, it is any government action that lowers the cost of fossil fuel energy production, raises the price received by energy producers or lowers the price paid by energy consumers.  There are a lot of activities under this simple definition — tax breaks and giveaways, but also loans at favorable rates, price controls, purchase requirements and a whole lot of other things.

Generally, subsidies are either on the production side (making the cost of production cheaper), or the consumption side (making the price of fuel cheaper to the consumer). In the U.S. and the rest of the industrialized world, we generally have production subsidies, which also serve as corporate welfare to the oil and coal industry who return the favor with lavish campaign contributions.  But in the developing world, consumption subsidies, which make access to energy and fuel affordable to the poor, are far more common.

It is these consumption side subsidies in the developing world that the OECD the IEA, and now perhaps the Obama administration have been focused on as market distortions.  True, excluding the military and wars for oil, they are the largest subsidies — on the order of $200 billion annually.  However, the intent of these subsidies is generally not to increase consumption of fossil fuels per se — rather it’s usually simply to help make access to energy and transport affordable to the poor.

This is not the place to start leveling the playing field for clean energy. Like raising prices on U.S. consumers, it’s likely to provoke a backlash in developing countries, ensuring gridlock for years to come.

A better idea would be eliminating international subsidies via institutions like the World Bank, the U.S. Export-Import Bank, or the Overseas Private Investment Corporation — all of which are supported by U.S. tax dollars, all of which gave billions last year to the fossil fuel industry, and all of which could be important sources of public funds for clean energy.

These institutions actually use our tax dollars to build infrastructure for fossil fuel extraction and use in the developing world. So, if we don’t end this practice first, we’re essentially saying to the rest of the world that we’ll use our public funds to support Exxon, Chevron, and Shell to build carbon intensive infrastructure in the developing world, but we’d like the developing world to remove the subsidies that make use of that infrastructure affordable to its population. 

Fighting climate change — and remaking the global economy to run on clean energy — is going to take money.  And the U.S., Europe, and others in the developed world, which have caused the problem, are going to have to ante up if we expect others to chip in. Conservative estimates of the need for public money alone from the industrialized North to pay for a global clean energy transition and the costs of adaptation to climate change run in the area of $200 billion annually.

Towards that end, Europe has put $21 billion on the table.  That, sadly, is it.  Nothing so far from the U.S..  Nothing from anywhere else in the developed world.  To the cry for the need for money to stop climate change globally, the answer has mostly been the sound of crickets.

Meanwhile the fossil fuel industry continues to pull in at least $67 billion in production subsidies from the rich countries around the world.  That’s more than three times more than the U.S. and others have put up to fight climate change internationally.

What was that about market distortions?

Great, let’s end fossil fuel subsidies.  Absolutely, we must find money for international climate finance.  But if Obama and others focus first on consumption subsidies the motives look less like fiscal responsibility and a stable climate, and more like a finger pointing exercise or negotiating tactic designed to show that the developing world has plenty of funds available to adapt to climate change and invest in clean energy, if only they would stop making energy affordable for their populations.

It shifts blame for the looming potential failure in Copenhagen to China, Russia, India, and others, and away from the U.S. and Europe.  If that’s the point, it might work well.

Originally posted on Price of Oil.

After thirteen years and countless hours by lawyers, community members, and activists around the world, Royal Dutch Shell finally settled the Wiwa v Shell case in a New York court for $15.5 million.

Plaintiffs in the case, which included Ken Saro-Wiwa Jr., and the families of other Ogoni men hanged in November 1995, charged that the Royal Dutch/Shell company, its Nigerian subsidiary, and the former chief of its Nigerian operation, Brian Anderson, with complicity in the torture, killing, and other abuses of Ogoni leader Ken Saro-Wiwa and other non-violent Nigerian activists in the mid-1990s in the Ogoni region of the Niger Delta.

Saro-Wiwa and the Ogoni had been protesting Shell’s decades of pollution of their Niger Delta homeland, a practice that sadly continues to this day.

Shell says they settled the case as a “humanitarian gesture” to the Ogoni.  Does anyone really believe that after fighting for more than a decade to keep this out of court, Shell suddenly woke up and felt great compassion for the Ogoni?  Please.

Writing in the Daily Beast, Joe McGinniss asked “how much is a dead Nigerian worth to Shell”?  It’s a perfectly legitimate question to ask, especially when you consider that Royal Dutch Shell is a corporation that made more than $30 billion in profits last year alone.

Its also more than a bit unfair.  Not to Shell – who cares about them?  But to the families of Ken Saro-Wiwa and the other executed Ogoni men, McGinniss’ article is insensitive to the reality of trying to find closure on a painful episode in their lives.

As Ken Wiwa Jr. wrote eloquently in the Guardian, “the case [was] freighted with all kinds of agendas that it [could not] possibly satisfy”.   Has the settlement brought relief to Ken Wiwa jr and the families of the other men who were executed?   The answer from them is an unequivocal yes.  That alone should be cause for celebration, and they alone get to be the judges of what is adequate for that.

Is $15.5 million is enough to compensate for the hanging of nine men, the death of thousands more, and for the destruction of an ecosystem?  No of course not.  One wonders what amount of money would ever be enough for that. 

But was $15.5 million on par with what a jury would have awarded in this case?  Yes, lawyers tell me, for sure. 

The reality is Shell settled because they were scared, and they knew the evidence against them was overwhelming.  They publicly say they had nothing to do with the execution of Ken Saro-Wiwa and the other Ogoni, and yet there were documents and video that they fought hard to keep out of the public eye.

Evidence that was to be introduced in the case included an internal Shell memo where the head of Shell Nigeria offered to intervene on Saro-Wiwa’s behalf, if only Saro-Wiwa and others would stop claiming that Shell had made payments to the military.

Then there was this memo, requesting payment to the Nigerian military for an incident in which at least one Ogoni man died.

Witness were set to testify that they saw Shell vehicles transporting Nigerian soldiers, that they saw Shell employees conferring with the military, that they saw money being exchanged between Shell employees and military officers, and that they heard military officers, including Major Okuntimo of the Rivers State Internal Security Task Force, make admissions regarding the work they were doing on behalf of Shell.

We have known of Shell’s involvement in this tragedy for a long time.  In early May of 1994, Ken Saro-Wiwa Sr. faxed me a memo authored by Major Okuntimo which read “Shell operations still impossible unless ruthless military operations are undertaken for smooth economic activities to commence” and further called for “pressure on oil companies for prompt regular inputs“. 

I received that fax and immediately called Ken, who was in London at the time.  He said “this is it.  They’re going to kill us all.  All for Shell.”  It was the last time I talked with him.  He returned to Nigeria (an incredibly brave thing to do), and was shortly arrested on the trumped up charges for which he was ultimately hanged.

Ken Sr.’s famous last words from the gallows were “lord take my soul but the struggle continues”.  In this moment, perhaps more than ever before, we need to heed that call to action.  The settlement in this case brings satisfaction to the plaintiffs for an event that happened 14 years ago. It in no way, shape or form excuses or absolves Shell of their ongoing destruction of the Niger Delta environment  

One of the central complaints of Niger Delta communities for forty years is gas flaring, which sends plumes of toxic pollutants into the air and water of the Niger Delta. Gas flaring endangers human health, harms local ecosystems, emits huge amounts of greenhouse gases, wastes vast quantities of natural gas, and is against Nigerian law.  Shell does it nowhere else in the world in volumes that are even remotely comparable to what they flare in the Delta.

But Shell is still flaring gas with reckless abandon in Nigeria.

While there is no doubt that the settlement represented a significant victory for the plaintiffs’ in this one  human rights case against Shell, true justice will not be served as long as the people of Nigeria continue to suffer the terrible impact of Shell’s operations.  Shell estimates it would cost about $3 billion – only 10% of just their last year’s profits – to end Shell’s gas flaring in Nigeria once and for all.

But instead of putting their great “humanitarian concern” into action, Shell points the finger at the Nigerian government and demands that they pay to end this practice.

Shell also is at great pains to prove their corporate concern for climate change, and yet they are actually the Send a message to Shell’s CEO Jeroen van der Veer, and let him know that if he really wants to prove his great concern for the Ogoni people, not to mention the climate, he’ll end gas flaring once and for all.

The struggle continues.

(A version of this post originally appeared in the Huffington Post.)