Elana Schor, E&E reporter
Published: Wednesday, February 8, 2012

When more than 20,000 barrels of fuel leaked from an oil sands crude pipeline in Michigan in 2010, the government set aside $13 million from a fund formed for spill cleanup — and stretched to its limits by that spring’s Gulf of Mexico gusher.

Five months later, the Internal Revenue Service quietly ruled that a significant portion of the type of Canadian crude flowing through that Michigan pipeline was exempt from the per-barrel tax created for that spill-liability fund. The loophole for oil sands fuel, which also forms the bulk of the crude set to run on the Keystone XL pipeline, remains in effect today despite congressional proposals to close it.

“It’s a real concern that these spills appear to be incredibly expensive to clean,” Natural Resources Defense Council (NRDC) attorney Anthony Swift, a leading critic of increased oil-sands development, said of leaks from pipelines carrying Canadian crude. “And the transportation of this crude is not producing the taxes that we’ll rely on to clean up spills.”

The IRS ruled on taxation of the oil sands crude that Keystone XL would carry in a January 2011 memo, issued at the request of a company whose identity was kept secret. While the agency “has not issued final regulations” on the Oil Spill Liability Trust Fund, paid for by an 8- cent-per-barrel tax set to expire in 2017, it noted that a congressional report accompanying that law excluded “synthetic petroleum” from its definition of oil.

“Accordingly, tar sands imported into the United States … are not subject to the excise tax on petroleum” that keeps the spill-cleanup fund flush, the IRS wrote. “However, crude oil and/or petroleum products that are coming led with tar sands are subject to the excise tax.”

It remains unclear how the per-barrel tax could be applied to only a portion of the fuel that came through Enbridge Energy Partners LP’s Michigan oil sands line, through Keystone XL or through any other pipe originating in Canada that carries its bituminous product. Pipeline companies typically accept fuel in “batches” that can include “dilbit,” a mixture of oil sands crude and natural gas condensate subject to the tax, or “syncrude,” a partially upgraded fuel that appears exempt (Greenwire, Aug. 23, 2011).

What is clear is the precarious financial future that the trust fund faces following the $626 million-plus strain imposed on it by cleanup of the Deepwater Horizon spill in 2010.

The per-barrel tax that oil sands crude was exempted from by the IRS comprises more than 90 percent of the fund’s intake, according to a recent Government Accountability Office audit that said it would soon run dry if Congress did not extend the levy beyond 2017 (E&ENews PM, Oct. 24, 2011).

Sen. Charles Schumer (D-N.Y.) submitted an amendment ahead of a Finance Committee vote yesterday on funding for a two-year
transportation bill that would have ended the oil sands crude exemption. Yet his plan would have sent the resulting money to the
nation’s cash-strapped highway trust fund, not the spill-liability fund, according to a summary released by the Finance panel. Schumer’s amendment never came up in the Finance markup last night (see related story).

The oil industry’s top trade group does not “currently have a position” on whether lawmakers should expand the spill liability tax
to cover oil sands crude, American Petroleum Institute tax policy manager Stephen Comstock said in an interview.

“I think the policy we’d have is, as long as the money is used to go to the [spill liability] fund, to us that’s the proper policy,” Comstock added. “There are some discussions about the money going off to do something else, and from our perspective, as long as you have a fund … you shouldn’t be diverting those dollars away.”

With Congress increasingly consumed by debate over oil sands crude in the wake of Keystone XL’s rejection by the White House, however, the taxation status of that Canadian fuel is likely to draw fresh scrutiny in the coming weeks.

Swift, of NRDC, warned that oil sands companies could be getting “a free ride.” Using the preferred appellation of greens opposed to Keystone XL, he added: “It appears that these tar sands are a product that places an inordinate strain on a fund they’re not contributing to.”

Kate Colarulli, associate director of the Sierra Club’s oil campaign, sounded a similar note in blasting the GOP as “incredibly
irresponsible” for pushing Keystone XL when the taxation of oil sands crude remains an unsettled question. “At the same time that we’re seeing intense Republican pressure to permit an oil pipeline, right now this isn’t being treated as oil” for tax purposes, she said.

Special thanks to Richard Charter.

http://summitcountyvoice.com/2012/02/06/groups-sue-to-halt-7-year-oil-spill-in-gulf-of-mexico/

Posted on February 6, 2012 by Bob Berwyn

Feb. 2 report compiles independent monitoring data

By Summit Voice

SUMMIT COUNTY- Citing the public’s right to know why an oil rig 11 miles off the coast of Louisiana has been leaking oil for seven years, a coalition of watchdog and environmental groups has filed a lawsuit against Taylor Energy Company LLC.
The lawsuit, filed last week in federal court by the Waterkeeper Alliance and several Gulf Coast Waterkeeper organizations, aims to halt the spill and to make public the facts of the company’s seven-year response and recovery operation. The lawsuit claims that the damaged operation has been leaking several hundred gallons per day into the Gulf of Mexico.

The spill is one of several identified in a new Gulf monitoring report released Feb. 2 by watchdog groups including SkyTruth, SouthWings, Lower Mississippi Riverkeepers and the Waterkeepers Alliance.

“The plaintiffs filed suit to stop the spill and lift the veil of secrecy surrounding Taylor Oil’s seven-year long response and recovery operation,” said Marc Yaggi, Executive Director of Waterkeeper Alliance. “Neither the government nor Taylor will answer basic questions related to the spill response, citing privacy concerns.”

The public deserves to know how this spill happened and why it continues. Coastal communities should understand the risks involved in developing off-shore oil resources and what protections are in place to prevent damage from future spills, Yaggi added.
Part of the evidence presented in the course of the lawsuit will come from satellite images, research by SkyTruth and aerial observations by SouthWings.

The Waterkeeper Alliance and its local Waterkeeper organizations say the spill started after an undersea landslide in the aftermath of Hurricane Ivan in 2004. An offshore platform and 28 wells were damaged, and since then, Taylor has yet to stop the daily flow of oil from the site.

“The Taylor Oil spill is emblematic of a broken system, where oil production is prioritized over concerns for human health and the environment,” said Justin Bloom, Eastern Regional Director of Waterkeeper Alliance. “Nearly two years after the BP Deepwater Horizon Spill, none of the comprehensive reforms recommended by the National Oil Spill Commission have been enacted and Congress has yet to pass a single law to better protect workers, the environment or coastal communities.”

President Obama has called for a massive push to open up another 38 million acres in the Gulf of Mexico to oil exploration and extraction. He also seeks to open up pristine Arctic waters to drilling, but oil exploration and extraction technology has dramatically outpaced the development of safety and recovery technology, while the regulatory regime appears incapable of controlling what critics call a runaway industry.

A report released this week by the Gulf Monitoring Consortium, a partnership between Waterkeeper Alliance, SkyTruth, and SouthWings, investigates several spills in the Gulf (including the Taylor Spill) and highlights numerous deficiencies in the reporting and response process.

A copy of the report can be found here: http://waterkeeper.org/ht/a/GetDocumentAction/i/24733

“Imagine an incident like the Taylor Spill in a deepwater, high-pressure environment, that could not be contained in 7 years,” said Paul Orr, the Lower Mississippi Riverkeeper, “Do we really want to race to the bottom without a lifeline when it looks like big oil is still at the helm?”

One Response
.
Norman, on February 6, 2012 at 7:42 am said:
Under the guise of “national security”, or what ever the excuse, the lack of enforcement by the appropriate agency[s] to monitor these leaks and have them fixed, proves how broken/corrupt the system is today. The industry knows that they can get away with almost anything, so they do it. The snivel and whining that is heard when ever anyone calls them on the subject, well, the attitude of “there you go again” needs to stop. Of course, that won’t happen until the money is taken out of politics. Considering that the congress critters spend most of the time begging for money, while letting the office help run the show, proves just how much the system needs an overhaul.
Reply

Special thanks to Richard Charter

http://www.reuters.com/article/2012/02/02/us-cuba-oil-idUSTRE8111S620120202

By Jeff Franks
Havana | Thu Feb 2, 2012 12:56pm EST

(Reuters) – Spanish oil company Repsol YPF has begun drilling the first well in Cuba’s long-awaited exploration of offshore oilfields that the communist country says hold both billions of barrels of oil and the key to greater prosperity, industry sources told Reuters.

The massive Scarabeo 9 drilling rig, which arrived in Cuban waters two weeks ago, began drilling into the sea floor about 30 miles northwest of Havana on Tuesday night, the sources said.

A Repsol spokesman said the company could not comment on “operational details.”
The newly built, high-tech rig is operating in 5,600 feet of water, or what the oil industry calls “ultra-deep water,” in the Straits of Florida, which separate Cuba from its longtime ideological foe, the United States.

Sources close to the project said such wells generally take about 60 days to complete.
Repsol, which is operating the rig in a consortium with Norway’s Statoil and ONGC Videsh, a unit of India’s Oil and Natural Gas Corp, has said it will take several months to determine the results of the exploration.

The well is the first of at least three that will be drilled in Cuban waters with the Scarabeo 9, which was built in China and is owned by Saipem, a unit of Italian oil company Eni.

Sources have said that Repsol will drill the first well and then the rig will go to Malaysia’s Petronas in partnership with Russia’s Gazprom Neft and then back to Repsol for the third well.

It is not clear what happens after that, although some sources have said Repsol, which is leasing the Scarabeo 9 from Saipem at a rate said to be more than $500,000 a day, will move the rig to Brazil for exploration there.

Cuba has said it may have 20 billion barrels of oil in its northern waters, which are its part of the Gulf of Mexico. The U.S. Geological Survey has estimated it may have 5 billion barrels of oil, but its study does not include the entire Cuban gulf zone.

(Additional reporting by Jane Sutton in Miami; Editing by Bob Burgdorfer)

Special thanks to Richard Charter

http://www.tampabay.com/opinion/columns/tracking-a-potential-cuba-oi-spill/1213878

By Robert H. Weisberg, Special to the Times
In Print: Sunday, February 5, 2012

Numerous articles continue to be written about oil exploration off the coast of Cuba. Some federal officials, while discussing potential spill mitigation, claim that the swift currents of the Gulf Stream will protect South Florida by carrying most oil away before it could hit the beaches. Is this correct, or might a threat to South Florida’s beaches exist, given a drilling mishap?

The Gulf Stream indeed is swift, but if it isolated Florida from Cuba, then how did so many Cuban rafters reach the shoreline between Miami and Palm Beach over the past 50 years? To address this and the potential for oil to reach the Florida coastline, it is important to consider the Gulf Stream in its entirety.

There are two primary components of flow. The first, driven by the large-scale winds over the Atlantic Ocean, is geostrophic. The second is driven by local winds. Neglecting eddies, the geostrophic part alone would tend to isolate Cuba from Florida because it would be difficult for surface oil picked up on the Cuban side of the Gulf Stream to traverse across the region of maximum speed to the Florida side. However, the local wind-driven part can achieve this.

The geostrophic part is a balance between two forces, the pressure difference across the Gulf Stream and the Coriolis force by the Earth’s rotation. The result is a flow that nearly parallels the coastline. The local wind driven part is also a balance between two forces, the friction of the wind on the sea surface and the Coriolis force by the Earth’s rotation. The result is a net transport of water directed to the right of the wind.

This Ekman transport, named after the discovering scientist, explains why sea level is higher than the normal high tide level on Florida’s East Coast under northerly winds and lower than the normal high tide level under southerly winds. The reason is that water under the influence of northerly winds is driven toward Florida’s East Coast. The converse occurs along Florida’s West Coast. Thus flooding of low-lying areas on the East Coast tends to occur after the passage of strong weather fronts when the winds are northerly, whereas this tends to occur on the West Coast in advance of the front when the winds are southerly.

Given this conceptual discussion, it is possible to simulate the movement of oil that may be spilled on the surface using a computer model that contains these physics (geostrophic and Ekman motions). One particularly suited for the task is run by the Navy along with academic partners.

By downloading the modeled velocity fields and inserting virtual particles indicative of surface oil, my associates and I can track where the oil might go in time and space. For illustrative purposes, we used January 2012. Neutrally buoyant particles were distributed about an exploration site claimed to be 22 miles north of Havana, and new particles were seeded every three hours to mimic a continual release of oil.

Two examples are provided, one for a period of time when virtual particles encountered East Coast beaches about five to seven days after release, the other for a period of time when they did not. The differences are due to the local winds during these week-long simulation intervals.

Recognizing that weather fronts regularly transit the Florida peninsula, with southerlies on the leading side and northerlies on the trailing side, and that the interval between successive fronts is days to a week or so, we can expect that a prolonged spill would likely bring oil to South Florida beaches. Regardless of these simulations, simply recall the tar on South Florida beaches in the 1970s before the Clean Water Act restricted offshore bilge pumping.

Whereas a vibrant economy requires energy, risks are inherent to oil exploration and production. Such risks increase with deepwater drilling in swift currents, and the swift Gulf Stream regularly transits the deepwater region north of Cuba. It is unfortunate that we were unable to surmount the political and diplomatic issues pertaining to the present oil exploration in Cuban waters because once the oil potential was identified years ago, drilling was inevitable. Without readily achievable energy alternatives to hydrocarbons, other than nuclear, it is ever more important for the United States to adopt a sound energy policy.

Robert H. Weisberg, distinguished university professor, is a professor of physical oceanography in the College of Marine Science at the University of South Florida St. Petersburg.

Would the Gulf Stream protect South Florida?

Cuba is exploring for oil off its shores. With that in mind, USF professor Robert H. Weisberg used computer models to track the path of a theoretical spill: Would the fast-moving Gulf Stream protect Florida? His model, using real-life conditions for two weeks last month, plots the trajectories of “virtual particles” from an oil exploration site 22 miles north of Havana. Each dot represents a particle seeded within the surface velocity field of a U.S. Navy global ocean circulation model. The color coding indicates the time in days after the particle was seeded near the exploration site. Thus, on the first map, showing Jan. 10-17, virtual particles would reach the Miami to Palm Beach coastline within five to six days. On the second map, Jan. 15-22, the spill skirts the coast. If a spill were long-lasting, the chances are great it would hit South Florida shores.

[Last modified: Feb 04, 2012 03:31 AM]

Special thanks to Frank Jackalone and Richard Charter

http://www.reuters.com/article/2012/01/31/us-usa-cuba-oil-idUSTRE80U01520120131

By Jane Sutton
MIAMI | Mon Jan 30, 2012 7:19pm EST

(Reuters) – Since the United States couldn’t stop Repsol from drilling for oil off Cuba’s coast, it should make the Spanish oil giant pay dearly for damages from any spill that threatens neighboring Florida, a congressional Republican said on Monday.

“We need to figure out what we can do to inflict maximum pain, maximum punishment, to bleed Repsol of whatever resources they may have if there’s a potential for a spill that would affect the U.S. coast,” Representative David Rivera, a Florida Republican, told a congressional subcommittee that oversees the U.S. Coast Guard.

The House of Representatives subcommittee met at a Florida hotel with a panoramic view of the waves breaking over an Atlantic beach dotted with sunbathers, to conduct a hearing on the potential impact on Florida’s 800-mile (1,290-km) coastline from the first major oil exploration in Cuban waters.

Repsol is working on the project in partnership with Norway’s Statoil and ONGC Videsh, a unit of India’s Oil and Natural Gas Corp. The oil rig leased for the project, the Scarabeo 9, arrived off Cuban waters earlier this month and is expected to begin drilling any day now.
The rig is 60 miles from the Cuban coast and 80 miles from Florida, in a spot where the Gulfstream and other powerful ocean currents could rush any spilled oil to Florida beaches within five to 10 days.

“The significance of these strong currents is that they can move oil very quickly, potentially up to 70 to 80 nautical miles in a 24-hour period,” said oceanographer Debbie Payton, who heads the emergency response division of the National Oceanic and Atmospheric Administration.

A spill would have catastrophic effects on Florida tourism, which accounts for a third of the state’s economy, and on its fisheries, panelists said. Such an accident would devastate the state much as BP’s Deepwater Horizon spill in the Gulf of Mexico in 2010 devastated other coastal areas.

Those powerful currents would make it harder to contain and burn or scoop up any oil on the water’s surface, but they would make oil dispersants more effective by mixing them up with the water, panelists said. Booms and the anchors needed to hold them in place would likely do more harm to Florida’s fragile coral reefs than the oil itself, they said.

The United States has no diplomatic relations with Cuba, which is considers a state sponsor of terrorism, and no oversight over companies that operate in its waters.

Repsol has said it will voluntarily adhere to U.S. safety and environmental regulations and international industry standards. It allowed U.S. authorities to inspect the rig off the coast of Trinidad and Tobago last month, including an examination of its construction, drilling equipment, blow-out preventer and other safety systems.

Based on the inspection and on information Repsol provided, the inspectors concluded that “the well could be safely capped using existing methods,” said Lars Herbst, Gulf of Mexico regional director for the Interior Department’s Bureau of Safety Environmental Enforcement, or BSEE.

BSEE has no authority to endorse or certify the rig but it “found the vessel and the drilling safety equipment including the (blow-out preventer) to be entirely consistent with existing international and U.S. standards by which Repsol has pledged to abide,” Herbst said.

UNSAFE WELDING

He said the inspectors found unsafe welding and incomplete wiring of safety systems, which Repsol pledged to repair. Asked if the agency could certify the rig had it been in U.S. waters, Herbst said it could not without confirming those repairs had been made.

Rear Admiral William Baumgartner, commander of the Coast Guard district that includes Florida, said there was a low probability of a spill, “but if it does happen, especially a complete well blowout, there would be high consequences.”

“There are multiple safety provisions in any drilling operation. I’m not promoting, you know, business in helping Cuba develop oil, but this is a brand-new oil drilling rig, Norwegian designed, much of it is very much state-of-the art as I understand, so it should be capable,” he told Reuters after the hearing.

The Norwegian-designed, Chinese-made rig is owned by an Italian company and flagged in the Bahamas, Baumgartner said.

Repsol and its partners are subcontractors, Herbst said, and the United States would have no way to hold them responsible for any oil spill damage, Herbst said.

“The Cuban government must have the full responsibility for any oil spill,” Herbst said. “In this case it is Cuba that’s doing the contracting and we have no control over that.”

Rivera, a Cuban American from Miami, has sponsored a bill that would make foreign oil companies responsible for clean-up costs if a spill from their operations reaches U.S. shores.

He urged the panel to look into whether a Repsol subsidiary that operates off the U.S. continental shelf could be made to pay or stripped of its license if there was a spill from the Cuban well. Herbst said afterward that it could not.

The United States has maintained an economic embargo against Cuba for five decades in order to put pressure on its communist government. But the U.S. Treasury and Commerce departments have already issued licenses to U.S. companies that would work under Coast Guard direction to contain and clean up any spill in Cuban waters, Baumgartner said.

Representative Ileana Ros-Lehtinen, a Cuban-American Republican from Florida, said the United States should impose sanctions against nations that help Cuba develop its oilfields.
She and other Republicans on the panel suggested that by failing to halt the project, the Obama administration was helping make oil tycoons of Cuban President Raul Castro and his brother, former President Fidel Castro.

Subcommittee Chairman John Mica said he was “a little bit shocked” that President Barack Obama had rejected the Keystone XL pipeline project from Canada while “doing everything we can to help the Cuban regime and we’re going to get stuck with both the damage and also the clean-up cost.”

(Editing by Cynthia Osterman)

Special thanks to Richard Charter