x Abu Dhabi, UAETuesday 25 July 2017

Oil spill raises a flood of questions

The long-term impact of the oil spill in the Gulf of Mexico may be on the future of drilling in US waters and the pace of the country's push towards renewable energy.

The oil is seen leaking from the Deepwater Horizon wellhead and piercing its way through the ocean.
The oil is seen leaking from the Deepwater Horizon wellhead and piercing its way through the ocean.

For 17 days, the wind, ocean currents and efforts of emergency response teams kept an enormous oil slick in the Gulf of Mexico from coming ashore on the beaches of the southern US.

The oil from a sunken BP drilling rig - now larger than the area of all five of the UAE's Northern Emirates combined - remained largely invisible to the anxious fishermen and residents of Louisiana. But the toll it ultimately takes on the environment will have far-reaching effects on the politics and culture of energy in the world's biggest oil-consuming country, experts say. The immediate effects, including a suspension of additional offshore drilling and new scrutiny of the oil industry, are already in motion. Other implications are less clear — and potentially much more far- reaching.

An environmental catastrophe of the size some have forecast could become the oil industry's equivalent of the 1979 nuclear accident at Three Mile Island in Pennsylvania, which sapped public support for new nuclear reactors for almost three decades. Coming at a time of rising oil prices, new awareness of climate change and falling prices for alternative energy sources such as wind and solar power, the oil rig accident could turn a nascent shift towards clean energy in the US into a major movement, said Bracken Hendricks, a domestic energy policy expert at the Centre for American Progress, a liberal think tank.

Oil consumption in the US has already been in decline for two years, cheaper natural gas has prompted a shift away from dirty coal power plants, and the growth of renewables remains strong. Wind turbines made up 39 per cent of all new power capacity added last year, overshadowing coal and falling just behind natural gas, the leader. The Gulf of Mexico oil spill is one of the top three events this year "to set the tone for clean energy investment worldwide", predicted Ross J Beatty, the president of the clean energy venture capital group Solar Bancorp. "The oil gushing from a BP well and threatening the coast of Louisiana has reminded US policymakers and the public about the potential disadvantages of encouraging offshore drilling and could - like Hurricane Katrina before it - make Congress better disposed towards renewable energy legislation," Mr Beatty said last week.

For the UAE, one of the world's biggest oil exporters, the implications of any such shift are enormous. A steep drop in oil consumption would affect the global oil market and the stability of prices. But at the same time, growth in the US renewables sector would present big opportunities to companies such as Masdar, the Abu Dhabi Government's clean energy venture. The creation of a US carbon market, as envisaged in pending legislation, could also create a new source of finance for expensive investments in reducing emissions in the UAE, experts have said.

The oil industry has already felt the effects of the spill as politicians withdraw the support for offshore drilling that they had underscored as recently as a month ago. On Tuesday, Arnold Schwarzenegger, the governor of California, effectively killed a proposal that would have expanded offshore drilling along the southern coast of the state to help raise revenue for the Californian government. And officials in Virginia on Friday announced they had postponed a move towards new drilling 80km of the state's coast.

Most important, perhaps, is that the Obama administration has backed off a proposal it floated last month to open vast new areas of federal waters off the eastern and southern coasts to new drilling. Administration officials have said they first needed to find out what went wrong on the Deepwater Horizon rig, and to understand why equipment that was designed to staunch the flow of oil did not function properly.

For clean-energy companies, the more important question is what the spill means for pending legislation that would lend huge support to their industry and set the US on a path towards cutting greenhouse gas emissions. Political jockeying in response to the spill has already begun, with some members of Congress saying the accident in the Gulf of Mexico complicates a previous compromise reached to have the clean-energy bill passed in the Senate.

But Republicans and Democrats have cited the spill as a reason to reform the country's energy mix. John Boehner, the Republican minority leader in the House, said the crisis should lead to "more environmentally responsible development of America's energy resources", and called for more support for renewables and nuclear power. The big question mark is how the public will ultimately react. A poll conducted by Zogby International between April 30 and May 3 - well after the rig accident on April 20 - found that 63 per cent of Americans continued to support the Obama administration's move to allow greater offshore drilling, pending an investigation of the spill.

But the public had not yet seen the oil take a toll on beaches, marshes and wildlife, since it remained out at sea and had come ashore only on isolated barrier islands. In the worst case, the slick could be spread along the coast, including the western coast of the Florida peninsula. "I don't think we've even begun to feel the impact of what the Gulf spill means," Mr Hendricks said. "The impacts are potentially devastating, especially what it's going to do in places like Alabama, Mississippi and Florida", where support for the oil industry has been strong in the past. He added: "The impact will be felt when they're pulling more oil-covered birds out of the sea."

As the immense oil slick in the Gulf of Mexico threatens to wash ashore and displace long-term public support for the oil industry, the immediate question in Washington is how it will affect the prospects of the climate and energy legislation going through Congress. Even if the spill creates new public support for clean energy, it has in the near term strained a political consensus - one to permit new offshore drilling - that promised to assure passage of a bill by the end of this year. In the weeks since the spill on April 20, a number of liberal Democrats have said they will no longer support a concession to Republicans that would have allowed new offshore drilling off parts of the US Gulf and Atlantic coasts. The US Senate needs 60 votes to get a bill to the floor for a vote without the danger of it being stalled by a filibuster, and "there are not nearly 60 votes today", said Lindsey Graham, a key Republican senator from South Carolina who has worked with Democrats on passing a climate and energy bill. "Some believe the oil spill has enhanced the chances energy legislation will succeed. I do not share their view. "Our original legislation included an expansion of offshore drilling with revenue sharing. It doesn't take long for one to conclude that opposition to expanded offshore drilling with revenue sharing has grown among certain senate Democrats." But senate Democrats hope outcry after the spill will force some Republicans to support the measure. "I think it should spur it on," Harry Reid, the Senate majority leader, said last week. The House of Representatives passed a climate and energy bill last year. The leading Senate proposal referred to by Mr Graham would extend tax credits to renewable energy and building nuclear reactors, set a quota for the proportion of electricity from clean energy, and aim to reduce US carbon emissions by 20 per cent from 2005 levels by 2020. The final legislation from the two bills would form the centrepiece of President Barack Obama's agenda for a robust clean-energy industry, reduce dependence on imported oil and shrink the country's emissions of carbon dioxide and other greenhouse gases. It would be the first law in the US to set binding targets on gas emissions. Mr Obama told an international summit last December that by 2020 the US would reduce its emissions by more than 17 per cent from 2005 levels. The House and Senate bills represent a "make-or-break moment for the [clean energy] industry right now", said Bracken Hendricks, a US energy policy expert at the Centre for American Progress. "Talking to industry folks who are trying to commercialise specific clean energy technologies … what they need most is a predictable market and capital for investment." In the longer term, the bills would put a value on emissions reductions as they would set binding targets on power plants and, several years later, on energy-intensive industries such as steel mills and chemical plants. * Chris Stanton, with agencies cstanton@thenational.ae