Big Oil: Rigging the Game

Do we have the will – or ability – to deal with the oil multinationals ?

by Gordon Campbell

Everyone has been appalled by the BP oil rig disaster in the Gulf of Mexico. The dismay has been mixed with incredulity at how BP could so easily get away with skimping on the necessary safeguards, and with flouting the regulations that were meant to govern its activities. The only good news is that at least it wasn’t BP that recently won the drilling rights to look for natural gas and oil in the deep waters off our own coastline, north of East Cape.

Last month, the state-owned Brazilian firm Petrobras won the sole right to explore and drill for five years in the Raukumara Basin – a 12,000 square kilometre patch of ocean that runs from just north of the Bay of Plenty/East Cape region, to locations some 110 kilometres out at sea. The not-so-good news is that some observers (such as the influential Bloomberg Business Week) regard the reliance of Petrobras on deep water drilling as something of a potential risk in itself:

State-controlled Petróleo Brasileiro (PBR) is by far the world’s biggest oil producer in waters deeper than 1,000 feet. In 2009, Petrobras, which is based in Rio de Janeiro, pumped 20 percent of all oil from deep waters….This deepwater dominance leaves Petrobras more exposed than any oil company on the planet to the risk of an accident similar to the Deepwater Horizon spill in the Gulf of Mexico, the largest in U.S. history. Undeterred, the company is sticking with its aggressive schedule of deepwater drilling…

While Business Week goes on to praise the current safety record and practices of Petrobras, the company has begun to pay attention to such matters only recently. The US business magazine Forbes for instance, reported on a catastrophic Petrobras oil platform explosion that killed ten workers in 2001 in these unflattering terms:

The accident will exacerbate existing problems for the oil giant, giving its unions new negotiation leverage and further soiling the company’s poor safety record, which already included several oil spills. There is also the possibility that this explosion could cause a 400-million-gallon spill that will be expensive to clean up. The accident gives a new weapon to angry unions, says Merrill Lynch analyst Frank McGann. The unions contend that Petrobras has been negligent about employee safety by hiring non-union workers who are not as well trained as their union counterparts. Some count as many as 80 accident-related deaths since 1998, and oil spills have stained Brazilian beaches. Indeed, Petrobras’ accident rate is higher than the average of 1.6 accidents per million man-hours reported by the American Petroleum Institute.

Petrobras may have cleaned up its act since then, but the company is still not without critics. In this May 25 Reuters report leading petroleum sector academics in Rio de Janeiro raised concerns about some of Petrobras’ current plans and actions. At the nearly 7 kilometre depths it intends to operate in a field situated offshore from Brazil, too much is unknown for Petrobras to be able to proceed in safety :

Depth is associated with the failure rate of the BOP (blow-out preventer), which showed itself to be inadequate at preventing a leak in the case of BP,” said Segen Estefen, a naval engineering professor with the COPPE, an institute linked to the Federal University of Rio de Janeiro. “The entire industry thought (the blow-out preventer) was adequate, but it wasn’t enough,” he said. “We need more effective equipment than the current BOP,” Estefen said.

Another participant, Professor Alessandra Magrini, said Brazil had not made sufficient legal provisions to deal with an eventual oil disaster and was a signatory to few international treaties related to petroleum.

The good news is that the Raukumara Basin drilling will be 1,500 – 3,000 metres deep, less than half the depth of that Puti field off the coast of Brazil that is so worrying to Professor Segen Farid Estefen. The bad news – besides the fact that Petrobras is reckless enough to proceed with the Puti drilling in the current climate – is that the shallower part of its work in the Raukumara Basin would be at the same depth as BP’s Deepwater Horizon drilling in the Gulf of Mexico, and the rest of the work would occur at up to nearly double the depth.

Furthermore, the Petrobras platform would be operating further out in the open sea than Deepwater Horizon was in the Gulf. Any problems would therefore be more difficult to fix, and help would take that much longer to arrive, as this report points out.

That’s the basic gamble being taken by Energy Minister Gerry Brownlee. Like Brazil, New Zealand has almost no capacity to cope with the impact of a major oil spill, or any adequate and enforceable means of compensation. Given the degree of uncertainty, do we have any way of telling whether the returns will justify the risk?

Around the globe, the severity of accidents and environmental damage resulting from deepwater drilling reflects the fact that the world’s safely accessible fields of oil and natural gas are rapidly being depleted. Given the global economy’s dependence on oil, the risks and costs of extraction are now rising – far faster than coastal nations are able to devise conventions to regulate the activity, or extract adequate compensation when inevitably (given the deep and dangerous waters now being probed) things start to go wrong.

The international conventions and maritime regulatory frameworks that do exist belong to an earlier era. They speak of general obligations (eg Law of the Sea article 192) to “protect and preserve” the marine environment. While that point is elaborated on in UNCLOS article 208 (which says that states are responsible for “artificial islands, installations and structures under their jurisdiction”) there is no legal or administrative framework to police and enforce these vague exhortations. To date, the oil spill risk has been seen almost entirely in terms of discharges and sinkings of oil tankers as they move through international waters – as with the Exxon Valdez in Alaska in 1989, and with the huge Amoco Cadiz and Erika spills that occurred off the coast of Brittany in 1978 and 1999, respectively.

However, deepwater oil platforms are not like ships in transit – they are parked semi-permanently, often in chronically difficult conditions. At the time of writing, the International Maritime Organisation was meeting to try and finalise an update of its Code for the Construction and Equipment of Mobile Drilling Units – but at present, there are no binding international rules, standards or practices for oil rig platforms.

Therefore, when Energy Minister Gerry Brownlee is giving out assurances that industry best practice will be observed and would be enforced with respect to the likes of Petrobras and Exxon-Mobil, he is uttering empty assurances in a void. At the level of technical expertise, no one knows how to devise BOPs (blowout preventers) guaranteed to work at such depths and in such open sea conditions. In addition, there are no international or local framework of design standards and operating procedures that can be enforced, even if there was a will to do so.

As for adequate compensation for fishing and tourism operators whose livelihoods might be destroyed by oil spills …the Exxon Valdez case should be a sobering warning about the inadequacy of the current compensation mechanisms, as I’ll explain later in this article.

In May, shortly after the BP spill began, the New York Times noted the glaring gap in international law in these terms:

“There is a tremendous body of international law addressing oil pollution, dealing with matters including construction and seaworthiness of ships, safety of navigation, pollution response, and liability,” said Tim Stephens, a senior lecturer on the law faculty at the University of Sydney and the co-author of a forthcoming textbook on the law of the sea.

However, the international maritime conventions ….do not apply to accidents involving oil platforms, like the Deepwater Horizon spill. “It is definitely an omission,” Mr. Stephens said, adding that only “tentative” steps have been taken so far to make the maritime agency’s rules applicable to platform spills.

A key area for exploration and production-related spills is liability. “There is no global convention governing this issue,” said Sergei Vinogradov, a senior lecturer at the Center for Energy, Petroleum and Mineral Law and Policy at the University of Dundee, in Scotland. By contrast, liability from tanker spills is covered by two 1992 conventions, one dealing with civil liability and the other with an oil-pollution compensation fund…

Given this situation, many are urging a halt to any new deepwater drilling operations. “We should hold off on exploring in some of the deeper basins,” Tina Hunter, an assistant law professor at Bond University in Queensland who studies offshore oil regulation, said in this Bloomberg Business Week article in mid June.

“The last thing we need is to go into deeper waters and risk something like what happened in the U.S.”

Other countries are following suit and taking heed of the risks that we, for now, are choosing to ignore. A week after Brownlee gave the green light to Petrobras for its future drilling off the East Cape/Bay of Plenty, Norway’s Oil Minister Terje Riis-Johansen announced a ban on any deepwater drilling in new areas, until the cause of the BP spill is known. The week before Brownlee’s statement, Russia’s Energy Minister Sergei Shmatko said that his country may also tighten the rules on oil drilling. In the US, President Barack Obama has announced a six month moratorium on any fresh drilling in the Gulf Of Mexico, though at time of writing the US courts have placed a temporary restraining order on that moratorium, pending further legal argument.

Essentially, New Zealand is crossing its fingers and hoping that the rest of the world will have solved most of these problems in the next three or four years, before Petrobras or Exxon Mobil really get down to serious business. Trust Big Oil – surely by then, it must know what it is doing. People in the Nigerian delta and Ecuador – who have had to live for decades with the wholesale destruction to their habitats caused by the current best practices of Big Oil – would probably tell us this would be very unwise.

In its Raukumara exploration, Petrobras will be looking primarily for natural gas. This project is part of its regional strategy to expand Brazil’s potential sources of LNG, given that the country’s demand for natural gas is being forecast to triple by 2020. To that end, Petrobras just paid $39 million in April for a drilling proposal in Australia, and made an additional $41 million investment in a gas development off the Western Australia coast.

These and other major offshore investments are in fact, putting the entire financial stability of Petrobras under extreme pressure. Marketwatch reported here on the company, and outlined the events driving the tumble in its share price late last month, while the Economist reported on Petrobras’ same problems in these terms :

Petrobras postponed until September a planned share issue that is expected to raise $25 billion. Questions have been asked about the energy company’s $224 billion spending commitments on various projects, such as developing offshore-oil assets. Petrobras said it was putting the share issue on hold because of a delay in a government valuation of its offshore reserves.

If Petrobras recovers and does proceed with its plans in the Raukumara Basin, the firm is expected to spend about $118 million on seismic studies, and in the drilling of one well during the next five years, with potential for further renewal. While the likelihood of success in this exploration remains something of a long shot, there are promising signs – eg, oil seepage, and potentially hydrocarbon-bearing sands more than 10 kilometres wide – at according to estimates made by our state-owned GNS Science division and published in 2008.

Local councils in Gisborne and Tauranga are already eyeing the possible spin-off advantages to their local economies of hosting Petrobras. However, predictions by the Tauranga Chamber of Commerce that the Petrobras project will create high paying jobs for locals are unlikely to bear fruit, given the global tendency for oil platform operators to import their own skilled workers. Being close to oil drilling activity, as Louisiana residents are currently discovering, can also be a very mixed blessing. Those with an interest in preserving the golden beaches of the Bay of Plenty and East Cape should be mindful that major oil spills are not the only concern, since less dramatic pollution as a consequence of normal activity is also possible – as this spill from the Tui field in Taranaki has shown in the past. Six months after the Tui field spill, blobs of oil were still reportedly evident along the Taranaki coast.

With some justification, Ngati Porou are now calling the Raukumara deal a breach of the Treaty of Waitangi. Ngati Porou will, after all, be experiencing the direct damage to their coastline from any pollution that results from the exploration. At the same time, they have not been consulted about their share of the proceeds (or about any compensation plan) for the resources extracted from their territory in the course of the deal that the Crown has struck.

Logically, one might have thought the prospect of paying the cleanup cost of a major oil spill would act as some kind of check upon oil company behaviour. Not really – given that such costs are usually a mere drop in the bucket compared to the massive profits involved. Even BP, which has been forced into paying $20 billion into a Gulf of Mexico spill fund, can do so with relative ease.

That’s because BP’s profits last year exceeded those of Apple and Google combined, and the company has reportedly generated $91 billion in cash flow from its operations over the last three years. More to the point, such cleanup costs are usually tax deductible items for the oil companies concerned:

Not only is liability capped on compensatory damages from oil spills, but payment of punitive damages is also tax deductible. Courts can impose punitive damages against a company when its actions cause harm. The tax code, however, lets companies write off their payment, which produces an after-tax savings worth about 40 percent.

Take the case of the Exxon Valdez, a tanker ship that ran aground and released nearly 11 million gallons of oil into Alaska’s Prince William Sound in 1989. Following this spill a court set punitive damages at $5 billion. Exxon litigated the decision for nearly 20 years until 2005 when the Supreme Court slashed the company’s punitive damages to $500 million. Of that, Exxon paid about $300 million after taking its tax deduction for punitive damages. Exxon’s profits that same year totaled $36.1 billion.

Given the grave economic and environmental risks posed by oil company activity, several countries have recently taken steps to ensure that the agencies that enforce safety and environmental requirements for oil rigs are not involved in any way with the negotiation of oil and gas leases, or with the setting of royalty levels and their collection. Thus, in the wake of the glaring failures of the oversight role played by the US Minerals Management Service in its monitoring of BP, the Obama administration is now moving to split up the agency, as the New York Times has recently reported.

This [dual role] is a conflict of interest, and the Obama administration plans to split the agency, which is part of the Department of the Interior, into two parts in order to address the problem.

[Similarly] Australia created a special offshore safety agency in 2005, called the National Petroleum Safety Authority, to minimize conflicts of interest. Norway created its Petroleum Safety Authority in 2004, for similar reasons. Britain also walled off the functions of safety and revenue-collection following a deadly 1988 explosion of the Piper Alfa rig in the North Sea. It moved safety oversight from the Department of Energy to the Health and Safety Executive.

In New Zealand, no comparable separation of powers is on the cards. The main petroleum industry lobby group in this country is the Petroleum Exploration and Production Association of New Zealand, or PEPANZ. In its submissions in February on the Key government’s Petroleum Plan of Action 2010 document, PEPANZ appears to accept that more state agencies are likely to become involved with the petroleum exploration trade, but it would prefer that any new functions are carried out by the same old bureaucrats as before :

Having fewer agencies from which to gain approvals would assist industry and improve the efficiency of the sector. Looking ahead, Government proposals for greater regulation in the EEZ make it likely that we are likely to have to deal with more agencies, not fewer. There are opportunities to ensure those new functions are administered by agencies with which the industry already deals, such as Maritime NZ – and these should be carefully considered.

Still, let’s not assume too readily that this is a sign of bureaucratic capture by the oil industry. After all, the PEPANZ submission also points out that the Crown Minerals Division is understaffed and under-resourced to cope with the task of properly managing New Zealand’s petroleum resources, and is also too divorced from the policy decisions being made further up the chain of command in the Ministry of Economic Development. In a nod to the need to resolve some of the potential conflicts of interest mentioned earlier, PEPANZ also makes this observation :

Crown Minerals (as an organisation) has relatively little experience in administering what effectively amounts to a complex “tax”. Crown Minerals are also the issuer of petroleum permits, leading to potential perceptions of conflict in terms of the administration of the royalty regime. On this basis, PEPANZ submits that Inland Revenue should take responsibility for administration of the petroleum royalty regime.

Unfortunately, this doesn’t go anywhere near far enough. “Administration” would still allow a range of activities – the setting of the royalty regime, the granting of leases and a grab bag of other potentially conflicting oversight and enforcement duties, scientific estimates and promotional activities – to fall into the same old uneasy nexus of Crown Minerals and Maritime New Zealand.

What to do? Arguably, a stand-alone agency with teeth and a mandate to accurately monitor and prosecute for any damage resulting from resource extraction is necessary. Such an agency (as I will explain below) is also necessary to ensure that the oil (and mining) companies are filing accurate returns about what they are extracting.

As things stand, New Zealand is simply not taking the necessary steps to separate the economic and environmental dimensions of petroleum exploration to the same degree as Australia, the UK, Norway and (belatedly) the United States are now doing. Anyone who has watched the mining in national parks debacle this year – and the capitulation by Conservation Minister Kate Wilkinson to the lure of economic gains from resource extraction – can have no faith in the government’s ability (or desire) to strike a better balance with respect to oil and gas exploration.

As mentioned, Petrobras is not the only oil multinational currently interested in drilling in New Zealand waters. So is Anadarko, off Otago. By year’s end, Exxon-Mobil will have decided whether to exercise its option to carry out exploration in the deep and stormy waters of the Great South Basin – a location that happens to be on the migratory path of several species, including some endangered ones such as southern right whales, beaked whales, Hector’s dolphins, four species of endangered albatross and other migratory seabirds and mammals.

Essentially, Exxon-Mobil’s activities in the southern oceans pose the same risks of damage and destruction to the Bluff fishing industry as are now wreaking havoc on the fishing industry in the Gulf of Mexico. Does, for instance, the Government seriously think that Exxon-Mobil would be unduly fazed if an oil spill from their operations happened to wipe out the livelihood of the Bluff fishing fleet, and our bureaucrats then came looking for compensation, armed only with a copy of the Maritime Transport Act? Corporate knees, I’m fairly sure, would not be knocking.

Exxon-Mobil hasn’t been noticeably concerned in the past. Twenty one years after the Exxon Valdez went aground and spilled its load, oil seepage is still visible in the areas most affected – courtesy of a drunken captain oil tanker who on one dark night in 1989, spilled his tanker’s cargo onto the pristine Alaska coastline, thus ruining the local marine environment and the fishing industry that depended on it.

In 2008, Alaska’s battle with Exxon-Mobil ended up in the US Supreme Court, to test whether Exxon-Mobil really did have to cough up the $2.5 billion in punitive damages awarded by lower courts. New Zealanders could well benefit from pondering just how Exxon-Mobil mounted its defence – if only to learn what kind of creature we have now invited into one of our most ecologically valuable and vulnerable regions.

In the wake of the Alaskan oil spill, Exxon-Mobil did pay an initial $500 million in compensatory damages. This was quite separate from the $5 billion punitive damages penalty it had also originally faced, and which bounced around the US court system for 14 years afterwards. Lower courts reduced that punitive award to $2.5 billion, a figure that represented about four weeks of Exxon-Mobil’s 2008 annual profits. Exxon-Mobil refused to pay anything at all in punitive damages. Basically, its bottom line offer was to meet the cost of a basic clean-up, and move on. (In the case of the massive pollution in Ecuador, Chevron/Texaco struck exactly the same deal : it paid for a basic cleanup, then cut and ran. Ecuador is still chasing Chevron for $27 billion in compensation.)

In Alaska, small communities were left to bear the enduring cost. In the days after the Exxon Valdez spill, some 3,000 otters and 250,000 seabirds died, as did unknown numbers of harbour seals, killer whales and other wildlife.

The herring industry of the town of Cordova was destroyed. The basic Exxon-Mobil compensation package left the Cordova fishers with an amount equal to about one year’s salary, for the lifelong loss of their previous source of income.

Exxon-Mobil’s defence arguments were interesting, and highly relevant to New Zealand. For starters, the company tried to establish (via a case dating from 1818) the special nature of maritime law – ie, with ships operating far away from home, in an intrinsically difficult environment – and argued that this meant that owners should not be held responsible for the actions of their faraway sea captains and crew, and could not therefore be subjected to punitive awards. Moreover, the Exxon-Mobil lawyers argued, such employees are so minor in the company hierarchy that heads of corporations could not be held responsible for them – especially when employees did things that were clearly at variance from best company policy.

You can just hear how such arguments would be recycled if Exxon-Mobil staff ever did bad stuff in the stormy seas in faraway New Zealand, against the formal company instructions to, you know, be careful with that hose. Ultimately, the US Supreme Court slashed the $2.5 billion figure down to only $507,000 – to the utter dismay of the Alaskans most affected by the spill.

Meaning : in the very hostile weather conditions that routinely exist in our Great South Basin region, Exxon-Mobil could well expect to be treated quite sympathetically – assuming they could ever be dragged into court – when it came to the size of any damages for a spillage in such difficult foreign waters. Especially given the kid gloves treatment it received in this Exxon-Valdez case where it was clearly at fault, where it had ignored several prior warnings about its captain’s drinking problem, and where US citizens were on the receiving end.

In the light of all this, shouldn’t the government be requiring Exxon Mobil and Anadarko and Petrobras to post – as the most basic protection – a bond against any potential damage caused by their activities ? The Clark government was never interested in that idea. In the House on 19th July 2007, the then-associate Minister of Energy Harry Duynhoeven refused to consider a mandatory bond to cover any damage done by oil companies shaping up to do drilling in the Great South Basin. “In terms of a bond, that is not an issue because the Maritime Safety Act controls activities in our regions. It very clearly sets out the damages requirements and the remedial requirements if there is an oil spill.”

Oh right, that’s OK then. The thought that Exxon-Mobil, whose national turnover exceeds that of all but a relative handful of countries, being brought to heel by an Indiana Jones or Erin Brokovich from the Maritime Transport division would make for an exciting movie, but it bears no relationship to real life. Not when the maximum penalty under section 244 of the Maritime Transport Act tops out at $200,000.

That’s a ridiculously low figure, in the modern era.

Alaska, Ecuador, the Nigerian delta, Colombia, the Timor oil spill last year…. for any government, the common lesson is that governments need to be pro-active, and need to do more than merely put out a welcome mat for oil companies. The stakes are too high to assume that oil companies will be good corporate citizens, and toe the line. In the weeks and months leading up to the fatal April 20 explosion on Deepwater Horizon rig, there is mounting evidence that BP and its contractor either ignored or suppressed the warning signs, and skimped on some of the relevant safeguards.

The well’s BOP for instance, reportedly lacked the $500,000 acoustic shutdown switch that Brazil and Norway treat as mandatory on such wells – but which BP and other oil companies had successfully lobbied the US authorities to spare them from needing to install. Not to mention the ignoring/concealment of leaks on the rig and cracks on the seabed, and the alleged failure to carry out the requisite cementing specifications at the wellhead – apparently because full compliance on cementing would have reduced the chances of successful extraction of the oil.

All of which sat alongside the failures in regulatory oversight by officials from the Minerals Management Service who as long ago as 2008, were being condemned by the Interior Department’s own inspector-general for being both literally and figuratively in bed with the oil companies.

The IG report describes “a culture of ethical failure” in which staffers accepted vacations and other pricey gifts from oil companies, rigged contracts, did drugs with one another and had sex with industry reps.

The full story of the Obama administration’s failure to clean out the mess in oil industry oversight – and how this led inexorably to the Deepwater Horizon disaster has been laid out by Tim Dickinson in his brilliant article in Rolling Stone magazine – which, given its recent piece on General Stanley McChrystal and the Afghan war, seems to be entering a new golden era in its reporting.

Similar hanky panky – or even the existence of a cosy working relationship between departmental officials and the private sector – is of course, unheard of in New Zealand. Seriously though, when it comes to weighing the costs of oil exploration against the returns, New Zealand has to consider at some point, whether the possible financial returns justify the risks involved.

Two factors seem central to that analysis. In our desire to attract the likes of Petrobras and Exxon-Mobil, are we pitching the royalty rate too low? And secondly, do we have the basic ability to monitor what foreign oil companies are actually doing out on the high seas? Taking these in turn, I pointed out in an earlier article the relatively low royalty rate that we are currently charging oil companies :

On May 1, 2007, the US Government Accountability Office (GAO) surveyed the oil and gas royalty regimes that governments have put in place within, and outside, the United States. Why such a royalties survey? In order to make a case for lifting them. As the GAO explains in its intro, oil companies can afford it. “Amid rising oil prices and reports of record oil industry profits, ” governments around the world “have taken steps to re-evaluate and in some cases increase their revenues they get from the rights to develop oil and gas on their lands and waters.”

How did New Zealand fare? Even based on the GAO’s use of 2002 figures that pre-date the subsequent royalty reduction ( not to mention the seismic data that we have given away to oil companies as sweeteners) New Zealand’s overall government ‘ take “ ( comprising royalties, rentals and taxes ) was at 37.51 %, already below most other countries listed by the GAO, and markedly below a large number of them. No wonder [Brownlee’s Energy Minister predecessor] Harry Duynhoeven was able to tell the Otago Daily Times in 2007 that New Zealand was offering a royalty regime that was one of the cheapest in the world.

Basically, the royalty regime in New Zealand requires companies to pay the Government 5 per cent of the value of the oil or 20 per cent of accounting profits, whatever figure is higher. Though this royalty and tax inducement regime is extremely generous by international comparison, Gerry Brownlee seems intent on making it even more attractive, as this report in April indicates:

The Government was consulting the industry over a new regime which could do more to encourage explorers by setting up special low tax rates and greater provision for write-offs for exploration.

New Zealand is unlikely to do any better when it comes to detecting how much of our resources the companies are actually extracting. Not even the United States seems able to do that competently. This problem has been recognized since 2006 at least (“Report Says Oil Royalties Go Unpaid”) as this New York Times story indicates. In March 2010, the US Government Accountability Office issued an updated (but equally scathing) report on the persistent lack of oversight of the amounts of oil and gas being extracted onshore and offshore, and condemned the inevitable effects this has on the collection and payment of proper royalties:

The GAO’s recent findings were outlined in accessible form in this New York Times piece a few days later.

And here’s another useful potted summary, which says:

The U.S. Government Accountability Office (GAO), which has spent the past five years conducting evaluations and issuing recommendations to the Secretary of the Interior on how to improve the agency’s management of oil and gas resources, has expressed concern over the agency’s ability to manage oil and gas resources, ensure safe operation of leases, provide adequate environmental protection, and provide reasonable assurance that the U.S. government is collecting the revenues to which it entitled.

The GAO….has raised questions about the Interior Department staff’s technical capacity to oversee increasingly sophisticated oil and gas activities on federal lands and water….. Interior also has not consistently trained staff it has hired and retained; one example is not requiring onshore and offshore petroleum engineers to undergo training on oil and gas measurement, which is critical to accurate royalty collections, and can be challenging due to the type of meter used, qualities of oil and gas being measured, and rate of production.

On what basis then, can we assume that New Zealand officials will have the experience, tools, platform access and mandate to measure and counteract the increasingly sophisticated methods that oil companies are using to mask their extraction rates, and the royalties they are liable to pay? The risks to the New Zealand environment from oil exploration and extraction can hardly be balanced by the economic returns, if we have inadequate means of detecting whether or not we are being diddled in these transactions.

Once more with feeling : is the government willing to create and equip a stand alone agency equal to the task – even if this incurs the displeasure of the oil industry ? I think we know the answer to that one already.

Finally, the willingness to proceed in the shadow of the Deepwater Horizon disaster and to take the risks involved with deepwater oil extraction around our shores stands in striking contrast to our “ no nukes” stance. After all, much of the resistance to nuclear power in this country is based on the enduring harm that a major leak would do to our natural environment, and to our way of life. Well…again, perhaps we should ask the people of the Nigerian delta or the rain forests of Ecuador about that. They would probably tell us that major oil spills mean goodbye to the natural habitat forever, too.

ENDS