Local Bodies: The Great Oil Gamble and Wasted Opportunities

Written By: - Date published: 8:37 am, April 7th, 2014 - 24 comments
Categories: energy, national, same old national - Tags: , , , ,

bsprout at LocalBodies allows us to repost some of his interesting pieces. This one from last thursday asks why National are so fixated on selling our oil and gas exploration rights.

‘Gamble Big’ rather than ‘Think Big’ should be this National Government’s mantra.Opening up huge areas of our land and territorial waters for open slather oil and gas exploration is a gamble on so many levels. When many countries like Denmark are actively chasing a sustainable, clean energy future, this government is throwing all its hopes on a big strike of fossil fuel.

It is a gamble that in the twenty years or so before any worthwhile production will occur, that there will still be a high level of demand for the polluting fuel (given the growing urgency around climate change). It is a gamble that during the most dangerous exploration phase that the Government has limited public scrutiny and involvement in initial consents. It is a gamble to drill at depth of over 1,000 metres – the deeper the drill, the greater the risks. It is a gamble that the Government sees no benefit in ensuring thatMaritime New Zealand is capable of managing a serious spill and Anadarko’s own response plan reveals it would take up to 115 days to get a relief rig on site. We are also gambling with our clean green brand that 75% of our exporters are reliant on, one spill could tip the balance of our already shaky image.

While the Government is prepared to gamble on a fossil fueled future, there are readily available sources of cleaner more sustainable energy under our noses. If the same amount of money that is being spent subsidising oil corporates ($46 million a year) was directed into research and technology to tap into these opportunities we could be self sufficient in energy in the same time it would take for deep sea oil to become productive.

Rather than hoping for a large single source of energy from an oil or gas strike (that we will still have to pay commercial rates for) we should spread our attention to the smaller scale opportunities that could collectively be quite substantial:

  • The bio-waste on farms is a largely untapped energy source that could enable most of our dairy farms to be self sufficient in energy and capturing waste before it enters our water systems and atmosphere. I like the description of letting this waste run off the farm without being properly utilized as ‘energy leakage’.
  • Our timber industry produces a large amount of unused waste as trees are harvested and logs prepared for export. Converting waste wood into bio-fuel is a logical way of managing a generally discarded material.
  • Rather than seeing our sewage ponds as an ongoing municipal cost, the algae found in them could produce an income through the production of bio-diesel.
  • Many of our landfill sites are burning off methane into the atmosphere that could easily be captured as a source of natural gas for local use.
While John Key and his mates may enjoy gambling big with New Zealand’s future, I would rather take smaller risks and invest in longer term, sustainable options.

24 comments on “Local Bodies: The Great Oil Gamble and Wasted Opportunities ”

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  1. Lanthanide 1
    7 April 2014 at 9:06 am

    I suspect the reason none of the things being suggested at the end of the post are being done basically boils down to profitability. These processes are expensive and in their infancy. No one wants to invest the big up-front dollars in order to capture potentially meagre gains, especially if in 10 years time the technology has improved, rendering the old plant and equipment obsolete.

    • Draco T Bastard 1.1
      7 April 2014 at 9:19 am

      The only organisation that has the patience to invest in this type of R&D is government but our government has spent the last thirty years denying that it even has a major role to play in R&D. And all Labour have come up with R&D credits which international have shown usually don’t work (Marianna Mazzacuto, The Entrepreneurial State).

    • Dave kennedy 1.2
      7 April 2014 at 9:53 am

      Lanthanide, I agree that none of my list would probably attract interest from larger commercial entities except maybe in the production of the technology that supports them. I am talking about multiple small scale projects that meet the needs of individual businesses and local communities. Large scale energy production can actually involve large inefficiencies.

      We should be looking at multiple small scale solutions rather than looking at large, one size fits all, approaches. We don’t need to have these projects returning profits, most will probably just meet immediate needs and be just cost effective. The gains will be: a reduction in reliance on imported energy, a reduction in our current account deficit and, over time, reduce the costs of expensive national infrastructure.

      • Draco T Bastard 1.2.1
        7 April 2014 at 10:03 am

        I agree that none of my list would probably attract interest from larger commercial entities except maybe in the production of the technology that supports them.

        Nope, all the larger private entities would be interested in would be when they can come in and hoover up all the gains.

        I am talking about multiple small scale projects that meet the needs of individual businesses and local communities.

        None of which have the capacity to support such R&D. The nation does.

        We should be looking at multiple small scale solutions rather than looking at large, one size fits all, approaches.

        Once the government has done the R&D we can put in place small scale solutions that meet the needs of the local community.

    • Naturesong 1.3
      7 April 2014 at 11:44 am

      I suspect that some of these ideas may not seem profitable simply because externalities and subsidies are not accounted for.

      For instance, cost of river pollution, who pays? Currently no one, or occasionally a local community project (volunteers) to clean up a section of the river that has been polluted by either farm runoff or manufacturing waste.

      And if you remove the subsidies from fossil fuels (tax credits, exploration data and research), suddenly the alternatives look more and more competitive.

    • Naki Man 1.4
      7 April 2014 at 5:59 pm

      Well said Lanthanide. Common sense and some people are not bright enough to work it out.
      USA has been down this road and given up after wasting millions

  2. tricledrown 2
    7 April 2014 at 9:41 am

    Nationals fossils (front bench and underlings)
    Have fucked up with mining and drilling.
    So spin
    National irrigation policy is in tatters after trustpower and other private investors are pulling out of hawkes bay dam.
    Farm research restructuring by by Joyce is sabotaging years of intellectual capital built up in Agricultural research.
    Not for the first time National destroyed longterm research when they first came to power completely destroying our world leading wool research unit at lincoln .
    Nactional are a bunch of bean brained bean counters.
    Who are only intetested in image over substance.

  3. Ad 3
    7 April 2014 at 10:20 am

    Was very encouraged by Z Energy getting their unsubsidised tallow-to-biodiesel plant up and running.

    Such a huge opportunity for Fonterra to dedicate their waste stream to diesel. They still don’t have enough pressure on their sustainability measures.

    Hopefully the wood waste stream in Kawerau will go into major commercial scale as well.

    What’s Labour and Green policy on biofuel commercialisation?

  4. tamati 4
    7 April 2014 at 10:25 am

    Yet even the Greens haven’t ruled out supporting a government that allows off shore oil drilling!

    • Naturesong 4.1
      7 April 2014 at 11:51 am

      I think you’ll find that they support any current deep sea wells (currently no deep sea wells) with conditions.

      Those conditions in a peak oil world (here now), are likely to make it unprofitable for deep sea drilling.

      The above consession is due to Labours position, and the Greens having to engage in real politik

      Greens Energy Policy

      D. Deep Sea Drilling, Hydraulic Fracturing (‘Fracking’), and Related Extractive Activities

      The increasing world wide demand for fossil fuels is leading to more extreme measures of fossil fuel extraction, including deep sea drilling and hydraulic fracturing. Both methods have significant environmental risks, and our capacity for dealing with even a small oil spill is very limited. The Green Party will:

      1. Make each of the following activities a prohibited activity:
      a. All new deep sea drilling within territorial waters, the Exclusive Economic Zone and the continental shelf for fossil fuels (with deep sea defined as below 200 metres). Fossil fuel exploration and exploitation in the Ross Sea region.
      b. Underground coal gasification.
      c. Exploitation of gas hydrates (e.g. methane hydrates).
      d. All new coal seam gas projects.

      2. Place a moratorium on hydraulic fracturing for oil and gas within territorial New Zealand, the Exclusive Economic Zone and the continental shelf until it is proven safe.

      I would like to see the Greens promote revaluing any oil and coal found down to 20% of it’s current book value (as per 350.org). At which point alternative energy sources become not merely an alternative, but the default.

      • fisiani 4.1.1
        7 April 2014 at 12:02 pm

        ie. no jobs under the Greens, no looking for vast wealth, no hope, no future.
        Greens tied to hip with Labour so under Labour no jobs, no wealth, no hope no future.
        And you wonder why 90% of people do not vote Green…..

        • Tracey 4.1.1.1
          7 April 2014 at 12:22 pm

          nope. and i dont wonder why 99.7% dont vote for act or dunne either.

        • Draco T Bastard 4.1.1.3
          7 April 2014 at 12:45 pm

          Mining and drilling don’t produce many jobs anyway and the vast wealth will just be sold off leaving us poorer. On top of that it will actually be burned pushing ever increasing AGW which will result in an Extinction Level event meaning that we will have no hope and no future following National’s path.

          The Greens on the other hand push creating more jobs by researching, developing and producing renewable energy assets. This will produce far more jobs and real wealth (as opposed to just money) than anything that National proposes. This would be due to National only being interested in lining their and their mates pockets with money.

          • aerobubble 4.1.1.3.1
            7 April 2014 at 1:19 pm

            Bridges says we should do both, how naive. Huge welfare assistance goes into maintaining a oil based transport system and once the reality of climate change threats finally dawns on the simpleminded Bridges and his ilk, there will be a huge crash in stocks for oil and a societial shift away from these fuels. Simply put, the huge expense of getting the fuel out of the ground, refining it, transporting it, and then maintain the equipment (and collapse of social addictions to it use) will mean even a surplus of such fuels will be re-purposed to other ends.
            In fact we are already see the rot, as ‘tallow’ and other additions are mixed into petroleum to maintain the current infrastructure, and its ensuing culture of excess. The Greens recognize that the culture of excess, eating several Earths is unsustainable, just Bridges is too think to understand the meaning of that word, unsustainable means his petroleum economy is a modern dinosaur extinction now inevitable.

          • Tamati 4.1.1.3.2
            8 April 2014 at 12:32 am

            Yet the Greens still won’t rule out supporting a Government that continues deep sea oil drilling. If they won’t stand up for their policies, are they really policies or more like aspirations or dreams?

            • aerobubble 4.1.1.3.2.1
              8 April 2014 at 3:53 pm

              That’s dumb. The sooner we all know how much is left, the sooner the reality of the end of oil makes Green policies more applicable. Sure Greens don’t want it, but its not the end of the world looking for these resources, in fact the sooner they get it done…

  5. Tracey 5
    7 April 2014 at 10:38 am

    Anadarko has just had to pay out 5.5b (USD) for past cleanup failures… I guess from their point of view it is cheaper to leave behind a mess, take the profit and wait for someone to sue….

    • Tracey 5.1
      7 April 2014 at 11:59 am

      nadis has quite rightly corrected me. anadarko inheritted these messes, they didnt create them.

      • Naturesong 5.1.1
        7 April 2014 at 12:14 pm

        Yes and no.

        They purchased Kerr-McGee with the full knowledge of the lawsuit against the company.
        Then did some really dodgy splitting off of the liability onto a shelf company with no resources in order to avoid having to pay for it.
        So they tried to get the upside of the purchase (plant, contracts etc) and tried to legally separate the downside.

        After the settlement, Anardarco shares rose, as it the settlement is widely believed to be far less than the cost of cleaning up all the sites. And it doesn’t even touch the damage and misery caused to thousands of people who lived (and continue to live) in areas polluted by Kerr-McGee

        Reuters
        Forbes
        NY Times

  6. exitlane 6
    7 April 2014 at 12:10 pm

    Another massive gamble is that the projected revenue from royalties will actually eventuate in 10 or 20 years time (should any oil actually start to flow). There are huge assumptions from the Govt that royalty rates will remain as high as they are today.

    But with all the big oil companies showing declining production in spite of massive increases in capital, and dwindling profits, you can confidently expect the heat to come on governments for seriously lower royalties rates as this squeeze gets tigher

    The projected royalty revenue may well be a mirage

    http://crudeoilpeak.info/wp-content/uploads/2013/03/IOC-oil_production_1995_2011_Jean_Laherrere.jpg

  7. aerobubble 7
    8 April 2014 at 4:00 pm

    Agreed. Its coal mining all over again. They get to open cast deniston and then find the coal price has crashed….

    Look at the Great Reagan mantra about revenue, that lowering tax would increase government revenue. Yeah, duh, when the huge massive dump of cheap high density fuel hit the world econmy, the growth in the economy would naturally mean that lower taxes would see citizen take gambles and thus return more revenue. Nothing to do with Reagan, just you’re classic politician getting out in front and declaring that what was about to happen whoever was in power was going to happen anyway.

    And therein lies the problem for conservatives. Now lower taxes do not translate into higher revenues for government because there is no trend of cheap energy.

    In fact lower taxes means parasite industries get to maintain their high energy use processes, and society of waste gets to maintain its lifestyles.

    Now higher taxes means higher revenue, and higher revenue is necessary to protect the wealth of
    the rich as inequality sets to destabilize nations. Its in the interest for the wealth to vote for high taxes as then they retain their relative wealth, otherwise they risk losing it if they let large mobs demand redress. i.e. Key wants more welfare and more taxes if he wants the rich to remain rich.