Texas on the Potomac regularly publishes guest opinions from across the political spectrum. Today, we offer a commentary by Diana Liebmann that was written for the San Antonio Express-News.
In parts of West Texas, wind turbines extend across rocky mesas as far as the eye can see, turning otherwise unproductive land into a source of clean, renewable energy. Our state has world-class wind resources, and wind developers want to expand generation into the area of the state with the best wind resource. There has been just one problem: The Panhandle lacks transmission lines to carry the power generated by wind to consumers around Texas.
But that’s changing. On Friday, the Public Utility Commission of Texas (PUC) approved a plan to bring needed transmission lines into the windy Panhandle. In 2005, the Texas Legislature established the Competitive Renewable Energy Zone (CREZ) process to build transmission lines to areas with exceptional wind resources like West Texas and the Panhandle. Local residents want to capture their wind generation potential and reap the economic benefits of job creation, new income for landowners and tax revenues for school districts and cities.
In reaching its decision, The PUC required wind developers that wanted to use the new lines to demonstrate a financial commitment to develop wind projects by putting collateral at risk. To meet the PUC’s financial threshold, some wind developers anted up more than their fair share, and some wind developers made no commitment at all.
In the coming years, as the transmission lines are brought on-line and become oversubscribed with new wind projects from a myriad of developers — the companies that made the financial commitment necessary to achieve approval for the development of these transmission lines should be given priority to remain on-line and generate electricity.
This “dispatch priority” is needed so that wind developers who supported the transmission lines with real dollars when credit is tight, power prices are low and the economy is in a recession, are not bumped off-line by developers who sat on the sidelines with their hands (and money) in their pockets.
This situation must be remembered in the coming years when the new transmission lines become oversubscribed — a situation that has occurred in West Texas, and was a driver behind the CREZ legislation.
When too much electricity is being generated, reliability of the system will require that wind generation on those lines be choked back. When that happens, priority should be given to the wind developers who posted a financial commitment. These developers should be entitled to utilize the transmission that was built based on their financial commitments. Those that posted no commitment, and took no risk, should be first to be backed down.
The state has managed this process in a way that protects the interests of taxpayers and consumers; using a resource in a manner that brings real benefits without undue financial risks. All Texans will benefit from increased transmission to allow for the development of no-cost fuel generation that wastes no water nor harms the quality of the air we breathe.
Now that the Panhandle transmission lines have been approved, and a completion date anticipated to be in 2013-2014, Texas needs to reinforce its sound policy and ensure that dispatch priority is given to companies that supported the transmission build-out, invested resources, and shouldered the risk.
Diana Liebmann is a partner in the Energy and Power Practice Group of Haynes and Boone, LLP’s San Antonio office. Her clients include wind power generating companies.
This list was prepared by Jennifer Dlouhy of the Washington bureau.
The offshore drilling bill passed by the House Friday would:
☞ give subpoena power to the presidential commission investigating the oil spill.
☞ mandate a new $2 fee per barrel of oil and 20 cents per million BTU of natural gas produced on federal leases.
☞ mandate $900 million of annual spending for the federal Land and Water Conservation Fund, a 46-year-old account designed to help states and local governments acquire property for parks and protected wildlife areas.
☞ require all offshore drilling vessels working within 200 miles off the nation’s coastline to be registered in the United States and owned by Americans by next July. The Deepwater Horizon rig was registered in the Marshall Islands.
☞ hike the required insurance coverage for offshore facilities, to a minimum of $30 million (from $10 million) for those in state waters and at least $105 million for operations in federal waters.
☞ mandate offshore drilling vessels be built in the United States. The bill would exempt all facilities under contract when the measure is enacted and would allow the government to waive the mandate in cases where U.S. shipyards could not produce a required vessel “within a reasonable period of time.”
☞ overhaul the federal regulatory agency responsible for policing offshore drilling, following allegations of lax enforcement and a too-cozy relationship with the oil and gas industry. The Obama administration has already begun breaking the Minerals Management Service into three separate divisions, but the legislation would codify the overhaul in federal law.
☞ require energy company CEOs to certify _ under penalty of up to 10 years in jail fines of up to $10 million per day _ that well designs are safe, the firms have adequate oil spill response plans and that the companies are capable of quickly drilling a relief well if there is an emergency.
☞ require the Interior Department to impose new standards for cement barriers and mandate redundant components for blowout preventers, the devices used when wells are drilled as a final safeguard to block uncontrolled surges of oil and gas.
☞ end so-called “royalty relief” by barring companies from new drilling in federal lands and waters unless they renegotiate leases that allow the waiver of royalty payments to the federal government whenever energy prices dip below certain thresholds. In some leases issued in the late 1990s, the government did not stipulate that it could suspend the royalty waivers if prices jumped _ an oversight that could cost the government an estimated $53 billion in foregone revenues.
☞ create a new Gulf Coast Restoration Program to coordinate plans to restore the region in the wake of the oil spill.
☞ broaden the scope of exploration plans energy companies must file with the federal government, so they describe worst case scenarios.
☞ triple the current 30-day limit for the federal government to review exploration plans, and allow that review to be extended indefinitely under some situations.
☞ double fines on companies that underpay royalties they owe the federal government or make late payments. These new penalties of up to $50,000 per day per violation would apply to all minerals, including coal as well as oil and natural gas.
☞ create new licensing requirements for the masters of offshore drilling rigs.
☞ force the federal government to update its list of pre-approved dispersants that can be used to break up oil in future spills. As amended, the bill also would require companies to disclose the ingredients of dispersants used to break up oil.
☞ force companies to pay federal royalties on any oil spilled from their wells.
☞ allow a study of the viability of drilling relief wells while drilling the primary well.
☞ get rid of the existing $75 million cap on economic and natural resource damages that companies can be forced to pay for oil spills from offshore facilities. Under current law, the companies are already responsible for all cleanup costs and the $75 million liability cap is lifted entirely in cases of gross negligence or violations of federal law.
SAN FRANCISCO — Chevron Corp. on Friday joined the parade of oil giants posting big second-quarter profits, as rising petroleum prices lifted its net income to $5.41 billion, or $2.70 per share.
That more than triples the $1.75 billion profit Chevron, based in San Ramon, Calif., earned in the second quarter of 2009, beating analysts’ expectations.
With the exception of BP, all of the big international oil companies are seeing their fortunes surge.
Oil prices have spent the first half of 2010 at levels that would have seemed stunning just a few years ago, only falling below $70 per barrel for a handful of days in May. Crude oil sold on the New York Mercantile Exchange closed Friday at $78.95.
As a result, Chevron made more money in the first six months of 2010 – $9.96 billion – than it did in all of 2003, when the company’s annual profit hit $7.2 billion.
Chevron even saw a big jump in profits from its refining and marketing operations, which had been faring so badly that the company cut 2,000 jobs from that division this year. The company’s downstream operations in the United States made a $433 million profit in the second quarter, compared to a $51 million loss during the same three months of 2009.
The massive BP oil spill did not shut down any of Chevron’s oil production in the Gulf of Mexico.
But George Kirkland, the company’s executive vice president in charge of exploration and drilling, said the federal drilling moratorium triggered by the spill had suspended drilling at two of Chevron’s offshore oil fields and will delay exploratory drilling at two other sites.
He called for lifting the moratorium and said that Chevron supports tightening standards for how offshore wells are drilled.
The size of the work force cleaning up oil spilled in the Gulf of Mexico and on its shores may shrink as oil disappears, BP’s incoming CEO said Friday, but he reaffirmed the company’s long-term commitment to the region.
At a Friday news conference in Biloxi, Miss., Robert Dudley said that his company is committed “to make good to restore the Gulf Coast.”
Dudley, who will replace BP CEO Tony Hayward on Oct. 1, also announced BP has hired James Lee Witt, director of the Federal Emergency Management Agency during the Clinton administration, as a special adviser to the company in the disaster response efforts.
BP’s Macondo well 40 miles off the Louisiana coast blew out April 20, destroying the Deepwater Horizon drilling rig, killing 11 workers and sending oil gushing into the Gulf for almost three months.
The oil fouled beaches and coastal marshes, especially in Louisiana, Mississippi, Alabama and the Florida Panhandle.
But with the well capped for 15 days as of Friday, it’s unlikely southern Florida, the Florida Keys and the East Coast will see any of the remaining spilled oil, according to an analysis released Friday by the National Oceanic and Atmospheric Administration. As the oil continues to break up, changes in currents are keeping it in the central Gulf, the study says.
“The light sheen remaining on the Gulf’s surface will continue to biodegrade and disperse, but will not travel far,” said NOAA administrator Jane Lubchenco in a statement.
‘Static kill’ delay
The effort to seal the well for good, however, may be delayed by a day or so.
BP plans a procedure called a “static kill” — pumping mud into the well through the system of pipes and valves on the wellhead to force oil back down into the reservoir more than two miles beneath the Gulf seafloor.
Before beginning that procedure, however, BP intends to complete the pipe-like casing in one of the relief wells it’s drilling to intercept the Macondo near the reservoir and seal it there, too.
That process was delayed for a day because debris accumulated in the relief wellbore after the drilling rig evacuated the site a week ago ahead of Tropical Storm Bonnie.
Retired Coast Guard Adm. Thad Allen, who commands the federal spill response, said in a briefing that the debris wasn’t a major obstacle but it means crews won’t complete the casing until Sunday. That means the static kill won’t start until Tuesday, a day later than projected.
Once the static kill is completed, BP will continue drilling the relief well and could intercept the bottom of the Macondo by Aug. 11 or 12 based on current timelimes, said BP Vice President Kent Wells. Sealing it permanently with cement could take up to two weeks after that.
Earlier in the week Allen said it was getting harder for skimmers to find large areas of oil on the surface to collect. But on Friday he emphasized that it would be premature to declare the spill over.
“We should not be writing any obituary for this event until the well is completely sealed, until we have no more oil on the surface of the water, until we understand where all the oil has gone to, until the beaches are clean, until state and local officials agree that the beaches are clean and we have a way to go back if we need to find oil that reoccurs,” he said.
‘Oil budget’ prepared
A scientific team is working to prepare an “oil budget” to calculate how much oil has been released and how much has been skimmed, burned, dispersed or evaporated, Allen said. The team will attempt to assess where all the oil has gone to make sure it is accounted for. This will allow the Coast Guard to see where oil needs to be recovered and also help with assessments of long-term ecological effects.
The spill led to a government moratorium on new drilling in the deep waters of the Gulf, and BP announced Friday that it is establishing a $100 million fund to help rig workers affected by the ban.
The Rig Worker Assistance Fund will be administered through a supporting organization of the Baton Rouge Area Foundation, the company said.
The Associated Press contributed to this story.
This post was written by Jennifer Dlouhy of the Washington bureau
Lawmakers from Texas are playing a high-profile role today as the House debates a broad energy bill inspired by the Deepwater Horizon disaster. For the Texans, the legislation strikes close to home (and to their constituents back home) by making major changes to the laws governing offshore drilling and responding to the Gulf of Mexico oil spill.
Here is a sampling of their comments on the House floor today:
Rep. Kevin Brady, R-Texas:
“This bill is a thinly disguised permanent roadblock to American energy. It will drive american companies out of the Gulf, delay future drilling, increase dependence on foreign oil, kill 300,000 good-paying U.S. energy jobs, levy a new $22 billion tax on American energy but not on foreign oil.”
“It includes a protectionist measure that the White House itself is troubled about, that invites retaliation, that will kill jobs.”
“This is a choice between american energy workers and foreign oil. No Texas lawmaker — no Gulf state lawmaker — can support this bill and say they truly care about energy workers jobs in America.”
Rep. Gene Green, D-Texas:
Diana Carlton/Hearst Newspapers
Rep. Gene Green
“It will kill jobs and increase our reliance on foreign oil and has become a vehicle for controversial and extraneous provisions that do not address the issue at hand: the safety of our offshore oil and gas production.”
“I strongly support making production safer and cleaner, whether it’s offshore or on land or in our industrial facilities. (I have) no question at all about unlimited liability on the responsible party for environmental cleanups. But this bill goes so far that it would make it (liability) unlimited for economic damage.”
“It puts at serious risk the competitiveness of the Gulf of Mexico.”
“Effective legislation could have been achieved that would ensure continued development of the Gulf resources.”
Rep. Eddie Bernice Johnson, D-Texas:
Eddie Bernice Johnson
“While this legislation cannot stem the oil that continues to gush into the Gulf of Mexico, it takes solid strides forward to preventing an event from occurring in the future.”
“As a Congress, it is our duty to look forward and ensure we have protections in place for future similar spills in these deep-water areas. We also need to review the current oil and gas regulations and ensure that we have safe environmental protections in place for all types of offshore and onshore operations and facilities.”
“This will help to make sure we are better prepared going forward.”
Rep. Louie Gohmert, R-Texas:
Diana Carlton/Hearst Newspapers
“It’s going to cause more people to lose jobs.”
“At a time when we’re billions of dollars behind on what we need to spend to keep our parks on federal land that’s owned right now, this bill irresponsibly adds $900 million per year for 30 years (for park land purchases). It’s not enough that we’re going to put children for generations in debt, now we’re going to keep spending money that they don’t want spent.”
“Please, for goodness sake, let’s stop the bleeding, and, in this case, the gushing force of this nation’s blood and its tax dollars, and vote this down.”
Rep. Joe Barton, R-Texas:
Rep. Joe Barton
“I’m not opposed to improving safety and regulation in the OCS, but I do want OCS drilling to continue.”
“In my opinion, with the taxes in this bill, with the punitive nature of this bill, if it were to pass and become law, we would not have OCS drillin