A recent post by Ken Cohen, head PR guy at ExxonMobil, laments the temporary shut-down of offshore oil and gas drilling and its impact on all of us -- not them, but us, through lower federal taxes, higher deficits, less jobs, and less security.
Cohen titles his entry "A trillion-dollar missed opportunity -- enough to pay the U.S. deficit," and then goes on to provide data contradicting his claim. He references research done by ICF International for the American Petroleum Institute to that claims the foregone earnings to government by not leasing up our coastal oil and gas resources are $1.3 trillion over the lifetime of the projects. But the $1.3 trillion deficit Cohen is pointing in his blog title as being offset is an annual figure. Thus, if the foregone projects last 10 years, the income would be only 1/10th of the deficit over the relevant period; if they last 15 years, 1/15th, and so on. Net out subsidies, and the contribution to federal stability shrinks further.
The ICF study is actually kind of a mixed bag for supporting Cohen's points. Page 31 highlights growing oil security risks around the world. The fact that the US offers such a stable regime for oil and gas operators like his firm simply underscores how much the feds are undercharging energy companies for the leases right now, especially by improperly boosting federal takes automatically as global energy prices rise. The feds should perhaps charge even more for the access in the future. Note that this conclusion on US undercharges is broadly in line with a Government Accountability Office analysis of the issue a couple of years ago. GAO noted that "the U.S. federal government receives one of the lowest fiscal takes in the world" (page 2, emphasis added).
ICF's data on page 17 regarding industry investment into carbon mitigation strategies is also problematic for Mr. Cohen. Upon first skim, the data suggest that the oil and gas industry have been good guys, taking the problem seriously and investing more in mitigation than anybody else. OK; so it's not hard to beat the coal industry. But $58.4 billion in total investments for nine years (2000-08 inclusive) isn't much to write home about either for one of the core industries linked to the climate change problem. That's $6.5 billion per year for the entire oil and gas sector. In comparison, ExxonMobil alone (which, we learn on page 33, is not even very big by international standards), had revenues of $477 billion in 2008 and $311 in 2009. Big difference.
Even these limited investments seem a bit diminished once one starts to dig into what the industry has counted as carbon mitigation spending. The largest share seems to be directed towards making their own operations tighter, such as reducing gas flaring and improving the efficiency of refineries. This is certaintly nice to see, but belongs in the same category as WalMart boosting in-store energy efficiency. It's a stretch to treat these investments as an illustration of industrial leadership poised to to address sector-related problems head-on. In fact, much of this spending is likely for high return investments that should have been done years ago, and would have been had there been any price on carbon.
