Business, science and politics

Having Your Cake and Eating It, Too

American Association of Petroleum Geologists (AAPG)

U.S. Secretary of Interior Ken Salazar recently justified restrictions on leasing* by saying that “the public lands and oil and gas resources are owned by the American citizens. They are not owned by the oil and gas companies,” and that he didn’t want those lands “tarnished.”

“Tarnished” invokes an anachronistic image of the oil and gas industry from a century ago, of acres of back-to-back wooden oil derricks with rickety boardwalks across the open pools of oil between them, whereas modern drilling practices and regulations have progressed to the point where they are arguably environmentally friendly. Drilling structures are temporary, chemicals are contained and many are water-based, and even the old and undeniably tarnished Spindletop-type landscapes are being both reclaimed by nature and restored by government and industry.

The land and resource ownership issue also is worth examining. The resources that belong to the citizens of a country don’t do those citizens a bit of good if the lands are put off limits and the subsurface resources are left in the ground. They only become valuable when they are made publically available. Citizens heat their homes and move their cars with the extraction products, and they want to do so inexpensively. Since they can’t shovel the products out of the ground themselves like old-time bearded prospectors panning for gold, they pay industry to do it. And for industry, the balance between expense and revenue is a real constraint: Overall cash flow must be positive or the industry folds, whereupon employees and investors don’t get paid and citizens have to look elsewhere for the resources.

Increased regulation usually translates to increased drilling expenses, and since industry can’t operate at a loss, the added cost must inevitably be passed on to the consumer. When that happens, the consumer complains to the government, and the government feels compelled to impose further restrictions or punitive taxes on the producers, and we all chase each other around in merry circles.

It’s all very confusing if one has been trained as a geoscientist to look for a certain logic to the world, but it makes some sense if recognized as political action superimposed awkwardly onto business practices that were not designed for it. It certainly ain’t science.

Citizens and government alike would like to have their cake and eat it, too, and while this phrase usually implies naiveté and greed, in this case it is actually possible and in fact beneficial to all concerned. The public, through industry, can use the land and still have it; they’re not mutually exclusive. Oil and gas production does not consume the land because during and after production the land is still there and it still belongs to the public. Moreover, the land yields value through production of the minerals, not from the mere fact that it has a mineral content. As a bonus over and above a supply of oil and gas at reasonable prices for the public, the value added by production includes high-paying jobs and significant financial contributions to government treasuries – oil and gas royalties have comprised as much as a fifth of the annual income to the general fund of my home state of New Mexico.

The bone of contention in the discussion lies in how the balance between the value of these benefits and possible degradation in the land surface during production is calculated. In some calculations the impact on the land surface is suggested to significantly outweigh the value of the resources; the proportions are reversed if calculated using different assumptions. A drill rig on site for three months is either a visual travesty or an ephemeral monument to the betterment of civilization. One side wants no changes, the other sees inevitable change as benefitting a variety of entities and people.

These comparisons are hard to quantify, and politics are more visceral than logical anyway. Ironically, those who want to make it more punitive and thus more expensive to drill are often the ones who decry the cost of oil and gas.

There is a compromise, though extremists at both sides argue that it’s not, in environmentally responsible development of the resources. One model is Ted Turner’s Vermejo Ranch in the Raton Basin of northern New Mexico, which derives significant income from royalties on gas production from low-profile facilities. The royalties are used in part to underwrite significant conservation efforts.

AAPG has a variety of programs intended to inform the public and governments about what we do and the value that we, our science, and our industry bring to society. Official programs include the AAPG Communications Department, the AAPG Public Outreach Committee, and the AAPG GeoDC office. Less directly, the AAPG BULLETIN and other publications help establish and maintain a scientific reputation that gives us credibility in other areas. Finally, each of us is an ambassador for our organization. Spread the word that geologists have fun doing important work. What other science can be done successfully over spirits and sketches on a tablecloth in hole-in-the-wall restaurants in interesting parts of the world?

*Tulsa World, January 26, 2010, Chris Casteel/The Oklahoman, “Salazar defends energy policy.

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*Tulsa World, January 26, 2010, Chris Casteel/The Oklahoman, “Salazar defends energy policy.”

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