February 29, 2024 • 47 mins
Doug founded Earth Track to more effectively integrate information on energy subsidies. For the past three decades, he has written extensively on natural resource subsidies for organizations such as the International Institute for Sustainable Development, the Organization for Economic Cooperation and Development, United Nations Environment Programme (UNEP), Sierra Club, the Natural Resources Defense Council, and the Stockholm Environment Institute. He has analyzed scores of government programs and made important developments in subsidy valuation techniques. He has provided input on subsidy reform legislation, served as a peer reviewer on subsidy papers from all over the world, and has published his own work in major journals and as book chapters. In recent years, his work has focused on subsidies to fossil fuels, nuclear power, and the impact of multi-sector natural resource subsidies on biodiversity and critical habitats.
Working collaboratively with other organizations, Earth Track focuses on ways to more effectively align the incentives of key stakeholder groups and to leverage market forces to help address complex environmental challenges.
He holds an MBA from the Harvard Business School and a BA in economics from Wesleyan University.
Topics Discussed Include:
- Government subsidies - why they are important to think about as we try to decarbonize our economy.
- How oil and gas subsides work in general and why they are outdated and harmful to climate goals.
- How taxpayers’ subsidies distort the market for oil and gas produced in Permian Basin.
- The role of different levels of government in supporting oil and gas and whether there are specific challenges trying to reform state-level policies.
- How some subsides were passed in the 1920s when oil extraction was a new industry and haven’t been changed to match the times.
- How three quarters of the subsides support exploration and production, potentially creating a disincentive to phasing out fossil fuel energy.
- How transparency of information on costs and how is paid is often lacking
- Particularly egregious subsidies in the federal realm, in Texas, and New Mexico.
- Examples of federal and state regulations and environmental exemptions that allow the fossil fuel production pollution to walk away from their production pollution and how that is affecting the Permian Basin’s environment for the people.
Further Reading:
· The High Cost Well subsidy
· The Good Jobs First organization
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Gregory A. Williams (00:09):
Thanks for joining us for another episode
of climate money watchdog wherewe investigate and report on how
federal dollars are being spenton mitigating climate change and
protecting the environment. Weare a private, nonpartisan,
nonprofit organization that doesnot accept advertisers or
sponsors. So we can only do thiswork with your support. Please
(00:30):
visit us at climate moneywatchdog.org To learn more about
us and consider making adonation. My name is Greg
Williams, and I learned toinvestigate and report on waste,
fraud and abuse in federalspending. While working at the
project on government oversight,or Pogo 30 years ago, I learned
to do independent research aswell as to work with
(00:51):
confidential informants orwhistleblowers to uncover things
like overpriced spare parts likethe infamous $435 hammers, and
expensive military weaponssystems that didn't work as
advertised. I was taught by myco host, Dean eraser, who
founded Pogo in 1981, andfounded claim money watchdog
with me in 2022. Dena has spent40 years investigating and
(01:16):
sometimes recovering millions ofdollars wasted by the Defense
Department and other branches ofgovernment. While it Pogo as an
independent journalist, as anauthor, and as a professional
investigator.
Our guest tonight is Doug KoppLau, Doug founded Earth track to
more effectively integrateinformation on energy subsidies.
(01:40):
For the past three decades, he'swritten extensively on natural
resource subsidies fororganizations such as the
International Institute forSustainable Development, the
Organisation for EconomicCooperation and Development,
United Nations EnvironmentalProgram, Sierra Club, the
Natural Resources DefenseCouncil, and the Stockholm
Environment Institute. He'sanalyzed scores of government
(02:03):
programs, and made importantdevelopments in subsidy
valuation techniques. He hasprovided input on subsidy reform
legislation served as a peerreviewer on subsidy papers from
all over the world, and haspublished his own work and major
journals and his book chapters.
In recent years, his work isfocused on subsidies to fossil
fuels, nuclear power, and theimpact of multisection or
(02:27):
multisector natural resourcesubsidies on biodiversity and
critical habitats. Workingcollaboratively, collaboratively
with other organizations,earthcraft focuses on ways to
more effectively alignincentives of key stakeholder
groups, and to leverage marketforces to help address complex
environmental challenges. Heholds an MBA from the Harvard
(02:49):
Business School, and a BA ineconomics from Wesleyan
University. Dean, is thereanything else you'd like to
share about why we're excited tohave Doug with us? Yes, I
Dina Rasor (03:02):
really appreciate it. We're on a committee that
works together. And I was gladhe was willing to take his time
to do this. I am I know thisfrom pawing through the Pentagon
investigating the Pentagon foryears and stuff, rules,
regulations, subsidies, andagreements with private
(03:24):
companies is in the federalgovernment and state government
is visiting and everything else,but that's where the mischief
can happen. So I'm really gladthat Doug has dedicated himself
to talk about how there are somesubsidies that and other
(03:46):
programs buy back and pay backkind of programs that just
aren't well regulated, and havebeen purposely put in to help
them make the oil, fossil andfossil fuel make a lot of money.
And so it's what drives me nutsabout some subsidies and these
(04:07):
other all these other things isand regulations I saw in there
to where they can walk, oilcompany comes in, doesn't do
what they're supposed to do. Andthey're drilling, and walk away
from it and leave the mess ofthe federal government or state
governments to clean up. Andthat's really, yeah, yet they
(04:30):
make huge amounts of profit outof it, and nobody goes back and
forces them to clean it up. Andthey give them a waiver. And
that's when I my favorite one ofmy favorite phrases that I found
with working with companies thatwork for government is and in
general, the United States theywant to privatize the profits
(04:52):
but socialized losses. In otherwords, we made a lot of profit
out of pumping this oil out. Andnow we're going to walk away and
leave the federal governmentstate government holding the
bag. So anyway, I'm Doug, I'mvery glad you're here. And maybe
we you want to say a few thingsbefore we get into the
(05:13):
questions.
Doug Koplow (05:15):
First of all, very happy to be here. I've been a
consumer of pogos work for along time. And some of the work
that they've done on naturalresource leasing has, I think,
has been amazing. So I'm happyto be here. And the world of
subsidies is Byzantine arcane,but that's also what makes it
fascinating. I think humans areat their most creative when they
(05:39):
figure out ways to direct cashflow back to themselves. So it's
often quite an interestingpuzzle to try and tease out.
Dina Rasor (05:49):
Okay, good. Well, I'm, you know, I'm glad that,
you know, I have a thing I weall have our expertise in
various forms, when we'reinvestigators and have the
ability to look up that kind ofstuff is really worth I think
the hidden gold is whether acompany is doing what they
should do. So can you provide usa little more background on
(06:12):
government subsidies in generaland why they're important, as we
recognize,
Doug Koplow (06:17):
I think it's good to start kind of at a really
high level. And basically, whatgovernments do think they have
three main things that they do,they can raise and allocate
revenue, they can establish andrun entities themselves to
provide goods and services totheir population. And they set
rules for economic and otheractivity in the marketplace. And
(06:39):
in all these areas, you can haveextensive subsidization. It's
useful. Remember that not allsubsidies are bad. So if you
know we're having governmentprograms that are identifying
and developing cures for cancer,and they're doing more of it,
that's a great thing. My focusis really on environmentally
(07:01):
harmful subsidies. And, youknow, roughly these are
government actions, that eitherby design or effect, accelerate
the production or consumption ofnatural resources or undermine
the ecosystems that supportplanetary health. A lot of times
when people think aboutsubsidies, they're thinking
about cash grants, I wish itwere that easy cash grants, you
(07:23):
can usually see how big they areand where they're going. But we
also see critical and much morecomplicated mechanisms that
governments use, such as taxbreaks credit markets, giving
below market access to publiclyowned natural resources, and
shifting risks that should beborne by private businesses onto
(07:45):
taxpayers. And that last one, ishugely important. From the
perspective of the politiciansand the recipients of the
subsidies, it's actually better.
If these things are hard to see,the more obscure they are, the
harder it is for other people tovalue them, the harder it is for
other people to get rid of them.
And the lower the political costto the grantor. So to them, this
(08:07):
is a feature and not a bug. Andalso, they will lobby hard to
protect and expand the subsidy.
So there there's a lot ofimpediments to getting rid of
it. But if you can see them, andyou can get rid of them. It's a
very powerful lever toaccomplish goals that we're all
working for around the world interms of decarbonisation, or
protecting our natural resourcesin general.
Dina Rasor (08:33):
Okay, good. Well, that's you just your you and
natural workforce ResourcesDefense Fund just came out with
a report on subsidies in the NGfor the oil and gas market in
the in the Permian Basin, whichis where people don't know it's,
(08:57):
it's hot. It's one of thebiggest oil producers areas in
the world have driven throughit. It's abysmal. And it's part
of the lower south southeastpart of Mexico and in the
basically a big portion inwestern Texas. So you decided to
(09:19):
take a look at the tax subsidiesand programs that we're going to
use for that area, because it'sthe big one of the biggest
polluters biggest problems and,and the workers are pretty
unhappy with the big one ofthose things they call the
sacrifice zones. So maybe youcan explain how they distort the
process.
Gregory A. Williams (09:41):
Sure, and maybe just by means of
introduction, I the PermianBasin has a particular timetable
in history, you know, it's verydifferent from, you know, the
early oil exploration in thenortheast and even you know, the
oil export exploration. Weassociated With Texas and oil
derricks everywhere, it's it's amuch more recent development, if
(10:05):
I understand correctly.
Doug Koplow (10:07):
So a couple of things, I think before I get
into the Permian, I just want togive your listeners an overview
of the scale of these things. Sosubsidies to oil and gas are
kind of like an anti carbon tax.
So you know, economists alwayswant to price carbon subsidies
that actually do the opposite.
We do see carbon pricing aroundthe world, the World Bank
(10:30):
estimates, maybe we're getting$95 billion in revenues from
carbon taxes and permits. Andthat's actually doubled over the
last few years. So that seemsgood. But actually, the
subsidies are 15 times higher.
So we're subsidizing oil and gasaround the world at a level of
about $1.4 trillion a year. Sowe've got a really big hole to
(10:50):
dig out of. And, and we'reseeing this at federal
governments and state, state andprovincial governments all over
the world. The Permian, there'sbeen oil there for a while, but
the development of fracking kindof reinvigorated production in
that area. And we wereinterested in looking at it.
(11:12):
Because there's been so muchproduction that's pouring out of
that region. And we wanted toknow, if governments were doing
things that were weresubsidizing it. And in fact,
they are, I wanted to highlightjust a couple of the general
ways that they do it. And maybelater on, we'll talk about some
(11:34):
of the specifics. But I thinkthe, the flaring issue is an
interesting one. So if you havea market that's driven by demand
for oil, a lot of times you'llhave gas that comes up, as well.
And, and in the beginning, thesefields didn't have good
(11:55):
connections to pipelines to movethe natural gas out. And even
though Texas in particular hadrules, saying you could only
flare for a certain amount oftime before you had to get the
pipelines in place. They weregenerous with the exceptions on
that. So these exceptions andalso the ability to flare gas
(12:18):
without having to pay royaltieson it resulted in a lot of these
fields being able to open muchmore quickly than they otherwise
would have been able to do. Andit really boosted the returns to
them in important ways. ThePermian also has a lot of
different subsidies that protectthe oil and gas developers, if
(12:41):
prices are low, if theirproduction levels are low, then
they start cutting deals on, onreductions and other taxes that
they're supposed to pay. And,you know, we in every single
industry, there's businesscycles, there's new companies
that come in and undercut theold ones, there's factories that
(13:03):
are less productive when theyage, and we don't have
governments coming in andcutting deals to keep them open.
But all throughout the PermianBasin, there are these subsidies
that help the wells stayoperating. Go ahead. Well, I
Gregory A. Williams (13:21):
just wanted to take a moment, if you would
explain to our listeners whatflaring is, and, and how, you
know, at some point, I think itwas a safety measure used by old
fashioned oil drilling, butit's, and it's often I think,
excused in that fashion. But itinvolves burning tremendous
(13:41):
amounts of natural gas withoutany sort of environmental
mitigation.
Doug Koplow (13:47):
Yeah, I mean, flaring it, and you're burning
it off is definitely better thanjust releasing it for sure. And
there's definitely a safetyelement to it. But but you're
wasting a valuable naturalresource. And, you know, in
North Dakota, for example, theflaring was so high that you
could see it from space, thePermian Basin is similar. So
(14:09):
even when you successfully burnit to reduce the methane, you
are you're wasting a finiteresource that often the
companies don't need to pay fortheir loss. They don't have to
pay the severance taxes. Theydon't have to pay the royalties,
because it's, it's, quote, notreaching market, but they're
(14:30):
destroying the resource thatcould reach market and they're
doing it out of expediency sothat they can get get it to
market. They can't get it tomarket faster. So that's really
a big problem. Dean alsomentioned the whole issue of
leaving messages behind. So youknow, in a lot of the natural
(14:53):
resource extraction industriesat the end of life and
throughout the process, you havemore mines that need to be
closed up, you have oil and gaswells that need to be properly
plugged. Otherwise, you've gotenvironmental problems all over.
And the economics of these arethat in the beginning, you make
a lot of money towards the endof life, production is lower,
(15:16):
and the time that you have topay the cost to properly shut it
are rapidly approaching. Sounder the Resource Conservation
and Recovery Act, at least forsome industries, the US
government said, Hey, this is acommon problem in these types of
industries. And we need to havefinancial bonds and financial
(15:37):
insurance to make sure that ifthe company goes under, we can
clean it up. The problem is thatin oil and gas, even though we
have bonding, the levels arejust dramatically too low. So
New Mexico has bonds for wellclosure that are about 1% Of the
estimated cost. Texas doesn'teven publish the data on what
(15:59):
their face value of bonds isrelative to the liability. But
there's there's great work thatanother group Carbon Tracker did
trying to map out state bystate, how big these liabilities
are they and they estimated forTexas and New Mexico, there's
about $110 billion of liabilitycosts associated with these
(16:22):
wells. Now, not all of them willend up on the state. But if you
are bonding at such a low level,a lot of them well. And that's a
problem, because they ought tobe incurring those insurance
costs at the outset. And itshouldn't be reflected in the
economics of their production.
Gregory A. Williams (16:41):
So my understanding, is this a problem
that, that affects the energysector, across the board, and
particularly in the context ofnuclear power plants, you wind
up with this sort of artificialeconomy of companies that
specialize in decommissioning,and they come in, they buy up
old nuclear power plants, andthen try to decommission them at
(17:04):
the least cost possible, whichnormally is a great economic
incentive. But in this case,they're cutting all kinds of
corners in order to have as muchof that initial bonding left
over for them to just pocket hisprofit. Does that affect the you
know, the extractive industry aswell?
Doug Koplow (17:23):
I mean, Greg, you raise a very interesting point,
I spent a lot of time this pastsummer looking at that specific
issue. Before the privatecompanies came in as
decommissioning contractors, theUS system for plant
decommissioning was actually oneof the best in the world. So we
had funds that were collectedfor the whole life of the
(17:45):
reactors. And they were heldoutside independent of the
companies. So even if they wentbankrupt, there were funds
there. Once the privatecompanies came in, there were
all these problems, oil and gas,and, and old refineries and
things in, you know, a varietyof facilities like that. We
don't even have the fundingadequacy in place that it hasn't
(18:08):
been adequately bonded, ithasn't been adequately insured.
So we have a deficit right fromthe outset. That's likely to be
massive.
Gregory A. Williams (18:21):
You had your hand up?
Dina Rasor (18:22):
Yeah. So just so the listeners can realize that this
isn't something new. Why did Iwas surprised as I read your
report, of course, new stuff hasbeen put in, but a lot of this
stuff was, was basically therewhen they in the 20s and 30s,
when they actually started theindustry up in the automobile
(18:44):
and everything else. And so I'mreally surprised that after all
these years, you know, I can seesubsidizing a new industry, but
I think they're past their pastnew industry. Now. What do you
what do you think why, you know,is it just because these rules
get entrenched and started tochange them?
Doug Koplow (19:05):
That's, that's absolutely the case. There's a
concentrated set ofbeneficiaries, and they get
significant financial benefit,and they organize to protect
their benefits. And that's,that's what happened. So, you
know, you do have states thatrecognize their bonding levels
are too low. And then they tryto increase the levels. And, and
(19:29):
they run into a lot of politicalheadwinds when they tried to do
it. Now, one other thing I didwant to just mention about the
Permian is there's a lot ofstuff coming down the pike. So
this is this is not as you don'thave a set of subsidies and
they're just there. There'scontinually new stuff that comes
in and the that part of thecountry is likely to be the
(19:52):
largest location forsequestering captured carbon,
and there's going to be reallylarge subsidies primarily
through 45. Q and the tax creditthat's going to flow to that
sector. And it's going to haveall sorts of problems. And I
know you had a guest on one ofyour early shows who went into
(20:12):
detail about that, but this isgoing to be really, really a
significant subsidy to oil andgas in the Permian area.
Dina Rasor (20:21):
Okay, well, in the end, that leads me the next
time, one of the things thatalso that we're fine finding out
in other areas, but of course,finding it here is transparency
of the information on costs, andhow much should be paid? Because
some of this is federal, federalland, and, you know, and plus
what the prices of whatever hasthat effect, you know, exactly,
(20:45):
because it says your comments,your costs, didn't know how much
money you spend is go to withtheir subsidies. And so I I'm
just seeing that in this otherareas, like pipelines and things
like that. They are not keepingtrack. It's hard to track the
(21:05):
federal government and and knowhow much to pay.
Doug Koplow (21:10):
Yeah, so I mean, there's a few elements that I
think what you're saying, numberone is that you're dealing with
probabilistic events, right? Soyou've got a bunch of
facilities, a bunch of oil andgas wells, you don't really know
how much each one's going tocost. And it makes it harder to
set to estimate the subsidies orset the requirements. And, you
(21:34):
know, I think in that situation,it's useful to look at like our
car insurance, right? We don'tknow exactly how much we're
going to cause in an accident.
But there's a distribution of itand our insurance isn't at the
average cost. We don't have tojust get insured for the average
cost of an accident, we have tobe insured at a much higher
level. So that overall, ifthere's an accident that a
(21:57):
higher level, we're stillinsured, and that's the approach
that should be used in oil andgas as well. But isn't. And I
think the second element is theissue of transparency. states
and the federal government cando a much better job identifying
how much money they're spending,what other types of subsidies
(22:18):
they're providing, and how muchthey're worth. But they don't
really have an incentive to doit, because it's politically
difficult. But, you know,there's a lot of people,
regardless of their views onclimate change, or clean energy,
they want the governments to bemore fiscally prudent. And so
there's a natural overlap, hetried to be between trying to
(22:43):
get rid of environmentallyharmful subsidies and try to
have more efficient government.
Gregory A. Williams (22:51):
Yeah, maybe gonna take a moment to explain
how government leases work andhow mineral extraction companies
rely on leasing public land todo their business.
Doug Koplow (23:03):
Sure. So in in onshore, the federal government
owns a lot of oil and gas landswith oil and gas that it leases
out, and they have lease optionsto do it. States also own land
with oil and gas, and sometimestheir joint leases and sometimes
(23:26):
their state leases. But there'sa couple of elements in terms of
the subsidies that are relevanthere. Number one is if the
government is charging a lowerroyalty lower percentage share
of the production than what aprivate market party would pay.
And the second element is if youhave not enough bidders for the
(23:51):
for the leases, then you're notgoing to get a fair market
price. So this is a significantproblem in the United States,
and pogo has done work,certainly on the offshore
looking at the small number ofbidders. But globally, it's an
even bigger problem, becausenational oil companies control
(24:12):
about 90% of the oil and gasreserves. So the the degree to
which they're leasing it belowmarket is generating a lot of
production that's going on tothe global markets.
Gregory A. Williams (24:27):
So in other words, the the citizens of
governments around the world,citizens of countries around the
world own most of these mineralresources. Yes. And through our
governments, we lease those welease access to those mineral
resources to these very wealthymultinational companies.
Doug Koplow (24:49):
Yes, and sometimes the companies are actually
national oil companies. Sothey're the government itself.
And on the one hand, you'd saywell, then the government itself
has an incentive. To make suretheir citizens get enough money
and get a fair deal, but thatisn't always what happens.
There's a lot of differingobjectives that they have. And
(25:11):
there's corruption in some ofthese companies, even if they're
state owned. So you end up withnot great outcomes.
Dina Rasor (25:21):
Yeah, okay. And then another part of this is that
we're supposed to be what we're,what our government is saying to
other people in the world, yougot to start pulling back,
pumping the oil, keep it in theground, you know, defending, and
there's been, you know,conferences and everything else.
And yet, the United States isjust pumping as fast as they
(25:45):
can. But I saw on your report,it said, three quarters of the
subsidies, support explorationand production. And so here we
are three quarters of thesubsidies to make these oil
companies and gas companieswhole. And they're putting it
into making more, I thought,Wait, aren't we supposed to be
(26:07):
trying to have subsidies toencourage them to make less? So
what was your comment on that?
Doug Koplow (26:15):
It's a big problem.
We do see tremendous subsidiesto exploration and production.
And, and it does make it muchmore difficult to move off of
oil. A couple of years ago, Iworked on a really interesting
study with the StockholmEnvironment Institute, where we
(26:35):
actually had oil field leveldata from ricette energy for
1000s of fields across thecountry. And we simulated how
removal of the subsidies wouldaffect the rate of return on
those fields, and basicallyfound that over half of the
fields were dependent on thesubsidies to hit their return
(26:58):
their hurdle, the hurdle rates,the minimum return, that their
investors needed for thoseprojects to move forward. But
that's, that's a pretty stunningfinding, because those fields
wouldn't have come online. Ifyou didn't have the subsidies,
and now you have situations withlike 45 Q, and most of the
(27:20):
carbon capture money is going togo to support. Basically, co2
coming off of oil and gasproduction sites that's
reinjected for enhanced oilrecovery, and it's going to
monetize the co2 streams insteadof taxing it. And that's gonna
(27:40):
make fields that wouldn't havebeen economic without this
carbon capture subsidy, economicand it's going to have the exact
perverse effect that you talkedabout Dana.
Dina Rasor (27:53):
So we're making it we're giving them money. And
the, the best subsidies you canget is in production and
exploration. So you make moremake more make more meanwhile,
like carbon capture, they'resaying, Oh, we had a cat burn
when we burn it, we got tocapture the carbon. So then they
turn around, and now we're doingbillions of dollars trying to
capture the carbon and put itback in the ground. And so it
(28:17):
just seems like this sort offull errand and on going round
around but of course, it whathas to do with is it's tough to
make money. And so could yougive us some examples of some of
the most egregious subsidiesthat the federal taxes in New
(28:38):
Mexico something that when youlooked at it, like when I looked
at it about, you know how muchyou can wave cleaning up and
walk away from these terriblefracking sites and oil pumping
sites, and then federalgovernment, Uncle sucker will
come and clean it up. And thatmean that thing right from the
beginning, jumped out at me, butwhat other ones see? What did
(29:00):
you have that feel like horrorstories?
Doug Koplow (29:04):
Now, one of the ones I thought was very
interesting was something calleda high cost well, subsidy in
Texas. So this gives reducedseverance tax. If you are a,
quote, high cost natural gaswell, and this the rules on it
have to do with how deep the oilis, and whether it's coming from
specific formations. It doesn'thave to do with whether or not
(29:27):
the well is profitable withoutthe subsidy, because often often
they are. And so this is this isa state level subsidy. I guess.
One general point is that mostof the studies that have been
done on fossil fuel subsidiestend to focus on the national
level. But there's a lot ofstuff going on at the States and
(29:47):
in other countries at theprovincial levels. And these are
sometimes very large. This oneis is very large. The state
itself estimates that between2009 and and their projections
for 2028. This will be about $17billion in subsidies to natural
gas industry. Another reallykind of interesting thing and
(30:11):
frustrating thing is that Texashas arcane rules on what tax
breaks need to be reported. Andbecause they divide natural gas
and oil subsidies, even ifthey're coming from the same
well under different statutorycodes, it's resulted in some
years where this particularsubsidy was a billion dollars,
(30:31):
but didn't show up in their taxexpenditure budget. The Well,
plugging that I mentionedearlier is all across the
country. It also applies to oldcoal mines. And it's really
hundreds of billions of dollarsand very frustrating that
nothing has been done in orderto internalize those costs. So
(30:55):
we talked mostly about the workthat I did for NRDC on the
Permian Basin, I also did areview of subsidies in
California. Because you know,California is the clean energy
state, but they do have oilproduction as well. And they
also have oil subsidies. And oneof the interesting things is
that there's only two states inthe country with no tax on oil
(31:17):
and gas extraction, Pennsylvaniaand California. And it makes
really no sense. Californiaclaims that they have a property
tax instead, but the amounts arelower. So they're still
generating a very significantsubsidy to the oil industry
there. Another interesting thingabout California is that they
(31:39):
have oil and gas wells that arelocated sometimes very close to
people's homes and schools andhospitals. And they finally put
in a rule that you have to havea buffer zone of 3200 feet
between your well and thesebuildings. The industry fought
back hard, and and it's now in areferendum. So it's been delayed
(32:00):
at least two years. But what Iwas interested in is who's
insuring for environmental andhealth damages from these wells?
And I contacted probably 20Different organizations to say,
what's required of them? Do theyhave to have insurance? And no
one could give me an answer. Ithink that was pretty stunning.
(32:22):
Yeah, well, I,
Dina Rasor (32:24):
you know, just a lot of these subsidies, things,
we're looking at the subsidiesand everything else. And I have
one complaint that I have when Italk to activists, like, like
Trump, you know, they're tryingto shut down a coal plant and
replace it with somethingenvironmentally friendly, is
that even though the national,federal government is saying,
(32:45):
yes, yes, we want to helpeverybody's in a disadvantaged
area, we're going to cut throughthe paperwork, we're going to
make sure there's people hiredlocally, and blah, blah, blah.
They're finding out that thelocal federal officials who have
to live with the pressure fromthe oil companies and
politicians and everything, arenot giving the local advocates
(33:08):
kind of information, they needto be able to try to make an
informed thing with the oldcanard which is very popular on
the Pentagon have. This isproprietary information. So the
local people need to realizethat they're, you know, you, if
(33:28):
you're having trouble gettinginformation, they should give us
a call because we're we'reworking on trying to get the
local, federal people to abideby the law. So
Doug Koplow (33:41):
super important. I just want to touch on one other
thing that you mentioned, whichwas environmental exemptions.
And, you know, this is somethingthat my NRDC co authors did a
bunch of the work on, butthere's very widespread
exemptions for most of theenvironmental laws for oil and
gas production sites. Sostormwater runoff permit
(34:02):
requirements are waived underthe Clean Water Act, Superfund
if substances occur naturally inoil and gas and cause pollution,
but if they're naturally an oiland gas, you can take action
under Superfund frackingchemicals, which are all over
the map. Lots of toxics addadditives, you don't have to
disclose them under theemergency planning and right to
(34:24):
know act, although,interestingly, Pennsylvania is
just putting in the firstregulations at the state level
that's going to force them to dothat. So, you know, we have a
lot of these exemptions, and,like with subsidies, they tend
to come into play slowly overtime, one by one by one and in
the end, you have a situationwhere there's a lot of things
(34:45):
that are supporting the industryand very hard to get rid of.
Dina Rasor (34:50):
Okay, well, your report also has a bunch of
recommendations. And maybe youcould, you know, I always want I
always don't want to not do Justwhat you call it eight an awful
story, you know, everything'sbad, isn't that okay? Let's talk
about what can be done andimplemented. You feel that it
(35:10):
realistically to be implementedit and then also the problems to
get that done.
Doug Koplow (35:19):
So I think there's been positive movement and in a
few areas, I think that thefederal activity on methane
emissions, where they are nowregulating it and charging for
it, even though it's not aperfect system, I think are
really important. And I thinkthat that will make a
difference. They are beingsupported in their work by the
(35:42):
rise of satellite monitoring. Sothere's a bunch of satellites
that are now able to see methaneand nitrous oxide and pinpoint
where it's coming from. And I'msure you'll be surprised to hear
that the levels that werereported by the companies don't
actually match what was comingoff their their sites. And in
(36:04):
some cases, they didn't evenseem to know that there were big
leaks from their sites. So Ithink on remote, more remote
monitoring and the emissionscontrols in this area, I think
that there's a lot ofopportunity, I think New Mexico
had some significant potentialsubsidies associated with how
(36:28):
they calculate severance taxes,and that they would allow
companies to deduct thetransport and processing costs
to go from the wellhead to themarket. It's in their interest
to do this, well, it's not clearthat they have enough auditing
firepower to do it. It's acommon issue of cost across a
(36:49):
lot of oil and gas producingstates. But I think that's an
area as well with maybe someimproved clarity and definitions
from some national environmentalgroups that a lot of state
governments would findattractive to pursue. And, you
know, a couple of other areas,you know, a lot of our
(37:11):
recommendations had to do withtransparency. And transparency
unfortunately, runs into thebeneficiaries not really wanting
the information to come out.
But, you know, as you mentioned,Dean, I think, if you can get
people on the ground to startasking questions, I think it
does make a difference. So ifyou live near a polluting
facility, if you live near anoil well, and you want to know,
(37:33):
what is their insurance, askthem. And if they don't tell you
ask the regulator, and if theydon't, if the regulator still
doesn't tell you make it public,that they're not telling you.
And I think, you know,particularly if you're a school
or a hospital, and you want toknow what emissions are, and you
want to know what insurance is,it looks pretty bad if the
facility doesn't give you basicinformation. Same thing for if
(37:56):
you are in an area with lots offracking and lots of heavy
trucks, and you're noticing thatyour roads are getting damaged,
because they are gettingdamaged. Ask your government
who's paying to fix it. Ask themwhether they have special road
use management agreements withthe with the companies that are
sending heavy trucks on theroad. So the damage is have to
(38:17):
be repaid by them as opposed toyou. And I guess, the last
really important area oftransparency is who are the
people behind these oil and gasoperations near your home,
trying to ask their LLCs. But alot of times what can happen is
someone will have an LLC,they'll abandon a well and some
(38:40):
of the partners of that LLC willstart a new one. And then
they'll have another productionsite. And they never are held
responsible for the first wellthat they abandoned. So I think
that there's a lot of work thatcan be done on a local level, to
try to bring these things to thefore and increase the leverage
to get rid of subsidies and alsoachieve better environmental and
(39:03):
health outcomes.
Dina Rasor (39:07):
Yeah, and I think that's one of the things that
you have to realize is thatbecause they are claiming that
they want to make activists andadvocates involved us that is a
thing to try to get in here andto you know, with fracking, it's
just ridiculous. You can't youknow, what they're putting into
(39:28):
the ground goes proprietary, youknow, a lot of that stuff can be
challenged. And I think thatit's it, now's the time for the
lope for local people to get upand say, you know, we want to
find out exactly what's goingon.
Doug Koplow (39:43):
So one of the things we're doing at the
national level is looking at,are there ways to make your tax
returns not quite asconfidential as they are now. So
there's there's definitely aneed for people's time. Tax
Returns not to be made public.
But if you're claiming taxcredits, and there are lots of
(40:04):
states that make tax creditspublic, and they tell how much
specific companies are getting,and those companies have not
gone out of business, and theyhave not suffered at the federal
level, that's not possible rightnow. But we're talking about tax
credits under the inflationReduction Act, that are going to
be 10s, or hundreds of billionsof dollars and money coming from
(40:25):
the federal treasury. So inthose types of situation, and
some of it is refundable, whichmeans that if you don't have
enough tax liability, theTreasury will pay you. So it's
really not very different frombudget spending, it makes no
sense that, that taxpayers areunable to see the patterns and
(40:45):
who's getting those credits, tosee the scale to see whether
they're actually accomplishingwhat they were supposed to
accomplish when they were put inplace. So that's we're trying to
look for leverage points to doit in a way that gets this
transparency while alsoprotecting the privacy, the core
elements of tax privacy.
Dina Rasor (41:09):
So that Okay, so that's one of your name, big
next pushes, is there a subjectarea, you're starting to look
into that if anybody has anyinformation, they should send it
to you?
Doug Koplow (41:23):
My general finding is that anytime I look longer at
a geographic area, I see moresubsidies. So I have no belief
that my work in California orTexas, or New Mexico has
actually uncovered all that'sthere. And if you are in one of
(41:43):
those states, or you're inanother oil and gas production
producing state where you knowthat there's significant
subsidies, even if they seemarcane, send me an email, I
would love to hear about them.
And sometimes you just seesomething that just looks
strange. And that's the initialthread that you start following.
And all of a sudden, it turnsout that it's hundreds of
(42:06):
millions or billions of dollarsof subsidies that people weren't
aware of before.
Gregory A. Williams (42:13):
And so is that fundamentally, what
motivates this difference on onbehalf of governments is the
traditional pursuit of of taxrevenues, they would rather
have, you know, revenueproducing company in their
district and in an adjacentdistrict, or is it something
more nefarious than that?
Doug Koplow (42:32):
Yeah, it's a great question. There is absolutely
tax competition. And there's aDC group called good jobs first.
And what it does is it tracksgovernment subsidies across all
sectors that are being thrownout there to try and get job
creation. And they're saying,Well, you ought to try and get
good jobs first, not just theones dependent on subsidies. But
(42:53):
there's a bunch of other things,too. So sometimes it's you have
a natural resource endowment, oryou had a need in 1920, or 1940.
That led you to pursue certainpolicies. And maybe those
policies make no sense anymore.
But they're entrenched. Andthere's a group that's dependent
on them. And there's a groupthat's lobbying to protect them.
And so they stay. I mean, tobring in a defense example,
(43:16):
isn't it the case data that themilitary sometimes wants to get
rid of weapon systems, but thepoliticians won't stop doing
them? Because it's got all theall the jobs in their districts?
Yeah,
Dina Rasor (43:30):
yeah. In fact, that used to be one of the things we
used to do regularly in the1980s is find maps and lobby
plan, wait a lobby plan, didvarious lobby plans. And, you
know, we'd like the divid antiaircraft gun. And they actually
would have the picture of wherethe plant was, but then they had
a map of the United States andhow many jobs were in each one.
(43:54):
So they were like, you can'tcancel this, because, you know,
it's this that we did get itcancelled, but not in a good
way. It was because it was,government had to pick up most
of the funding on it. But yeah,it's, it was way it is with the
government. And I quite frankly,think when you look at Biden
(44:15):
passing one of the best lawsever. But on the other hand, it
seems like we had to pay off thewolves. And to pay so much of
the money's going to fossil fuelindustry, we should be running
down rather than running up. Andeven though there's a huge
amount of stuff that's neverbeen funded before, I still find
(44:37):
that we're almost like hostageto pay various subsidies and
extra money to these people. Tobe able to even start getting a
clean economy. It's frustrating.
Doug Koplow (44:50):
Yeah, the challenge is that you know, it would have
been much more efficient to havea tax on the pollution and it
would have sent a much betterprice signal. And that when you
start subsidize Using people inthe non polluting business, then
lots and lots of people go intothe non polluting business and
it's pretty hard to measure whatthey're actually providing.
Dina Rasor (45:13):
Well, is there any other any other subjects, you
want us to talk about projectsyou're working on it, you want
to talk about,
Doug Koplow (45:20):
I'll say a brief mention about the
environmentally harmfulsubsidies more broadly, I did a
big assessment looking at kindof global trends across
subsidies to water andagriculture and forestry and
energy. came out about a yearand a half ago. The the, the key
(45:44):
point here is these things areadditive. So if you if you have
a bunch of subsidies coming fromdifferent levels of government
that are all flowing to aparticular region or a
particular industry, a lot oftimes only that factory owner or
that producer knows the fulltake that they're getting from
(46:05):
the federal government. But youneed to look not nationally, you
need to look locally, and youneed to look across multiple
sectors in order to see howthese things are really
affecting critical ecosystemsaround the world. And I, you
know, I do worry about habitatloss from from climate change,
(46:27):
and also from depletion from alot of driven by a lot of these
subsidies. So that's an areathat I've been focusing on, and
one that I hope will continue toget a lot more attention going
forward. Well,
Dina Rasor (46:39):
when you're ready, come back. And we'll do another
show just on that, because Iknow that's ever like literally
important set of things to Ithink the agriculture thing is
really been overlooked. And it'sgoing to be the thing that
causes some most panic. And wecan't get beyond it's the very
basis of life. Oh, we're gonnahave a food shortage. We have a
toilet paper shortage in thiscountry, people stuck up for two
(47:02):
years or the toilet papers. Ican't imagine what happens when
this if that food system breaksdown from climate change.
Gregory A. Williams (47:10):
Alright, well, thank you very much for
joining us here tonight. We hopeto see you again soon. And in
the meantime, we invite ourlisteners to check out the links
that we're going to include inthis podcast and learn what you
can about your state and localenergy subsidies. Anything else
(47:31):
you'd like to say in closing?
Doug Koplow (47:33):
Thank you for the opportunity to be here.
Dina Rasor (47:36):
And thank you for what you do.
Thanks for joining us for another episode
of climate money watchdog wherewe investigate and report on how
federal dollars are being spenton mitigating climate change and
protecting the environment. Weare a private, nonpartisan,
nonprofit organization that doesnot accept advertisers or
sponsors. So we can only do thiswork with your support. Please
(00:30):
visit us at climate moneywatchdog.org To learn more about
us and consider making adonation. My name is Greg
Williams, and I learned toinvestigate and report on waste,
fraud and abuse in federalspending. While working at the
project on government oversight,or Pogo 30 years ago, I learned
to do independent research aswell as to work with
(00:51):
confidential informants orwhistleblowers to uncover things
like overpriced spare parts likethe infamous $435 hammers, and
expensive military weaponssystems that didn't work as
advertised. I was taught by myco host, Dean eraser, who
founded Pogo in 1981, andfounded claim money watchdog
with me in 2022. Dena has spent40 years investigating and
(01:16):
sometimes recovering millions ofdollars wasted by the Defense
Department and other branches ofgovernment. While it Pogo as an
independent journalist, as anauthor, and as a professional
investigator.
Our guest tonight is Doug KoppLau, Doug founded Earth track to
more effectively integrateinformation on energy subsidies.
(01:40):
For the past three decades, he'swritten extensively on natural
resource subsidies fororganizations such as the
International Institute forSustainable Development, the
Organisation for EconomicCooperation and Development,
United Nations EnvironmentalProgram, Sierra Club, the
Natural Resources DefenseCouncil, and the Stockholm
Environment Institute. He'sanalyzed scores of government
(02:03):
programs, and made importantdevelopments in subsidy
valuation techniques. He hasprovided input on subsidy reform
legislation served as a peerreviewer on subsidy papers from
all over the world, and haspublished his own work and major
journals and his book chapters.
In recent years, his work isfocused on subsidies to fossil
fuels, nuclear power, and theimpact of multisection or
(02:27):
multisector natural resourcesubsidies on biodiversity and
critical habitats. Workingcollaboratively, collaboratively
with other organizations,earthcraft focuses on ways to
more effectively alignincentives of key stakeholder
groups, and to leverage marketforces to help address complex
environmental challenges. Heholds an MBA from the Harvard
(02:49):
Business School, and a BA ineconomics from Wesleyan
University. Dean, is thereanything else you'd like to
share about why we're excited tohave Doug with us? Yes, I
Dina Rasor (03:02):
really appreciate it. We're on a committee that
works together. And I was gladhe was willing to take his time
to do this. I am I know thisfrom pawing through the Pentagon
investigating the Pentagon foryears and stuff, rules,
regulations, subsidies, andagreements with private
(03:24):
companies is in the federalgovernment and state government
is visiting and everything else,but that's where the mischief
can happen. So I'm really gladthat Doug has dedicated himself
to talk about how there are somesubsidies that and other
(03:46):
programs buy back and pay backkind of programs that just
aren't well regulated, and havebeen purposely put in to help
them make the oil, fossil andfossil fuel make a lot of money.
And so it's what drives me nutsabout some subsidies and these
(04:07):
other all these other things isand regulations I saw in there
to where they can walk, oilcompany comes in, doesn't do
what they're supposed to do. Andthey're drilling, and walk away
from it and leave the mess ofthe federal government or state
governments to clean up. Andthat's really, yeah, yet they
(04:30):
make huge amounts of profit outof it, and nobody goes back and
forces them to clean it up. Andthey give them a waiver. And
that's when I my favorite one ofmy favorite phrases that I found
with working with companies thatwork for government is and in
general, the United States theywant to privatize the profits
(04:52):
but socialized losses. In otherwords, we made a lot of profit
out of pumping this oil out. Andnow we're going to walk away and
leave the federal governmentstate government holding the
bag. So anyway, I'm Doug, I'mvery glad you're here. And maybe
we you want to say a few thingsbefore we get into the
(05:13):
questions.
Doug Koplow (05:15):
First of all, very happy to be here. I've been a
consumer of pogos work for along time. And some of the work
that they've done on naturalresource leasing has, I think,
has been amazing. So I'm happyto be here. And the world of
subsidies is Byzantine arcane,but that's also what makes it
fascinating. I think humans areat their most creative when they
(05:39):
figure out ways to direct cashflow back to themselves. So it's
often quite an interestingpuzzle to try and tease out.
Dina Rasor (05:49):
Okay, good. Well, I'm, you know, I'm glad that,
you know, I have a thing I weall have our expertise in
various forms, when we'reinvestigators and have the
ability to look up that kind ofstuff is really worth I think
the hidden gold is whether acompany is doing what they
should do. So can you provide usa little more background on
(06:12):
government subsidies in generaland why they're important, as we
recognize,
Doug Koplow (06:17):
I think it's good to start kind of at a really
high level. And basically, whatgovernments do think they have
three main things that they do,they can raise and allocate
revenue, they can establish andrun entities themselves to
provide goods and services totheir population. And they set
rules for economic and otheractivity in the marketplace. And
(06:39):
in all these areas, you can haveextensive subsidization. It's
useful. Remember that not allsubsidies are bad. So if you
know we're having governmentprograms that are identifying
and developing cures for cancer,and they're doing more of it,
that's a great thing. My focusis really on environmentally
(07:01):
harmful subsidies. And, youknow, roughly these are
government actions, that eitherby design or effect, accelerate
the production or consumption ofnatural resources or undermine
the ecosystems that supportplanetary health. A lot of times
when people think aboutsubsidies, they're thinking
about cash grants, I wish itwere that easy cash grants, you
(07:23):
can usually see how big they areand where they're going. But we
also see critical and much morecomplicated mechanisms that
governments use, such as taxbreaks credit markets, giving
below market access to publiclyowned natural resources, and
shifting risks that should beborne by private businesses onto
(07:45):
taxpayers. And that last one, ishugely important. From the
perspective of the politiciansand the recipients of the
subsidies, it's actually better.
If these things are hard to see,the more obscure they are, the
harder it is for other people tovalue them, the harder it is for
other people to get rid of them.
And the lower the political costto the grantor. So to them, this
(08:07):
is a feature and not a bug. Andalso, they will lobby hard to
protect and expand the subsidy.
So there there's a lot ofimpediments to getting rid of
it. But if you can see them, andyou can get rid of them. It's a
very powerful lever toaccomplish goals that we're all
working for around the world interms of decarbonisation, or
protecting our natural resourcesin general.
Dina Rasor (08:33):
Okay, good. Well, that's you just your you and
natural workforce ResourcesDefense Fund just came out with
a report on subsidies in the NGfor the oil and gas market in
the in the Permian Basin, whichis where people don't know it's,
(08:57):
it's hot. It's one of thebiggest oil producers areas in
the world have driven throughit. It's abysmal. And it's part
of the lower south southeastpart of Mexico and in the
basically a big portion inwestern Texas. So you decided to
(09:19):
take a look at the tax subsidiesand programs that we're going to
use for that area, because it'sthe big one of the biggest
polluters biggest problems and,and the workers are pretty
unhappy with the big one ofthose things they call the
sacrifice zones. So maybe youcan explain how they distort the
process.
Gregory A. Williams (09:41):
Sure, and maybe just by means of
introduction, I the PermianBasin has a particular timetable
in history, you know, it's verydifferent from, you know, the
early oil exploration in thenortheast and even you know, the
oil export exploration. Weassociated With Texas and oil
derricks everywhere, it's it's amuch more recent development, if
(10:05):
I understand correctly.
Doug Koplow (10:07):
So a couple of things, I think before I get
into the Permian, I just want togive your listeners an overview
of the scale of these things. Sosubsidies to oil and gas are
kind of like an anti carbon tax.
So you know, economists alwayswant to price carbon subsidies
that actually do the opposite.
We do see carbon pricing aroundthe world, the World Bank
(10:30):
estimates, maybe we're getting$95 billion in revenues from
carbon taxes and permits. Andthat's actually doubled over the
last few years. So that seemsgood. But actually, the
subsidies are 15 times higher.
So we're subsidizing oil and gasaround the world at a level of
about $1.4 trillion a year. Sowe've got a really big hole to
(10:50):
dig out of. And, and we'reseeing this at federal
governments and state, state andprovincial governments all over
the world. The Permian, there'sbeen oil there for a while, but
the development of fracking kindof reinvigorated production in
that area. And we wereinterested in looking at it.
(11:12):
Because there's been so muchproduction that's pouring out of
that region. And we wanted toknow, if governments were doing
things that were weresubsidizing it. And in fact,
they are, I wanted to highlightjust a couple of the general
ways that they do it. And maybelater on, we'll talk about some
(11:34):
of the specifics. But I thinkthe, the flaring issue is an
interesting one. So if you havea market that's driven by demand
for oil, a lot of times you'llhave gas that comes up, as well.
And, and in the beginning, thesefields didn't have good
(11:55):
connections to pipelines to movethe natural gas out. And even
though Texas in particular hadrules, saying you could only
flare for a certain amount oftime before you had to get the
pipelines in place. They weregenerous with the exceptions on
that. So these exceptions andalso the ability to flare gas
(12:18):
without having to pay royaltieson it resulted in a lot of these
fields being able to open muchmore quickly than they otherwise
would have been able to do. Andit really boosted the returns to
them in important ways. ThePermian also has a lot of
different subsidies that protectthe oil and gas developers, if
(12:41):
prices are low, if theirproduction levels are low, then
they start cutting deals on, onreductions and other taxes that
they're supposed to pay. And,you know, we in every single
industry, there's businesscycles, there's new companies
that come in and undercut theold ones, there's factories that
(13:03):
are less productive when theyage, and we don't have
governments coming in andcutting deals to keep them open.
But all throughout the PermianBasin, there are these subsidies
that help the wells stayoperating. Go ahead. Well, I
Gregory A. Williams (13:21):
just wanted to take a moment, if you would
explain to our listeners whatflaring is, and, and how, you
know, at some point, I think itwas a safety measure used by old
fashioned oil drilling, butit's, and it's often I think,
excused in that fashion. But itinvolves burning tremendous
(13:41):
amounts of natural gas withoutany sort of environmental
mitigation.
Doug Koplow (13:47):
Yeah, I mean, flaring it, and you're burning
it off is definitely better thanjust releasing it for sure. And
there's definitely a safetyelement to it. But but you're
wasting a valuable naturalresource. And, you know, in
North Dakota, for example, theflaring was so high that you
could see it from space, thePermian Basin is similar. So
(14:09):
even when you successfully burnit to reduce the methane, you
are you're wasting a finiteresource that often the
companies don't need to pay fortheir loss. They don't have to
pay the severance taxes. Theydon't have to pay the royalties,
because it's, it's, quote, notreaching market, but they're
(14:30):
destroying the resource thatcould reach market and they're
doing it out of expediency sothat they can get get it to
market. They can't get it tomarket faster. So that's really
a big problem. Dean alsomentioned the whole issue of
leaving messages behind. So youknow, in a lot of the natural
(14:53):
resource extraction industriesat the end of life and
throughout the process, you havemore mines that need to be
closed up, you have oil and gaswells that need to be properly
plugged. Otherwise, you've gotenvironmental problems all over.
And the economics of these arethat in the beginning, you make
a lot of money towards the endof life, production is lower,
(15:16):
and the time that you have topay the cost to properly shut it
are rapidly approaching. Sounder the Resource Conservation
and Recovery Act, at least forsome industries, the US
government said, Hey, this is acommon problem in these types of
industries. And we need to havefinancial bonds and financial
(15:37):
insurance to make sure that ifthe company goes under, we can
clean it up. The problem is thatin oil and gas, even though we
have bonding, the levels arejust dramatically too low. So
New Mexico has bonds for wellclosure that are about 1% Of the
estimated cost. Texas doesn'teven publish the data on what
(15:59):
their face value of bonds isrelative to the liability. But
there's there's great work thatanother group Carbon Tracker did
trying to map out state bystate, how big these liabilities
are they and they estimated forTexas and New Mexico, there's
about $110 billion of liabilitycosts associated with these
(16:22):
wells. Now, not all of them willend up on the state. But if you
are bonding at such a low level,a lot of them well. And that's a
problem, because they ought tobe incurring those insurance
costs at the outset. And itshouldn't be reflected in the
economics of their production.
Gregory A. Williams (16:41):
So my understanding, is this a problem
that, that affects the energysector, across the board, and
particularly in the context ofnuclear power plants, you wind
up with this sort of artificialeconomy of companies that
specialize in decommissioning,and they come in, they buy up
old nuclear power plants, andthen try to decommission them at
(17:04):
the least cost possible, whichnormally is a great economic
incentive. But in this case,they're cutting all kinds of
corners in order to have as muchof that initial bonding left
over for them to just pocket hisprofit. Does that affect the you
know, the extractive industry aswell?
Doug Koplow (17:23):
I mean, Greg, you raise a very interesting point,
I spent a lot of time this pastsummer looking at that specific
issue. Before the privatecompanies came in as
decommissioning contractors, theUS system for plant
decommissioning was actually oneof the best in the world. So we
had funds that were collectedfor the whole life of the
(17:45):
reactors. And they were heldoutside independent of the
companies. So even if they wentbankrupt, there were funds
there. Once the privatecompanies came in, there were
all these problems, oil and gas,and, and old refineries and
things in, you know, a varietyof facilities like that. We
don't even have the fundingadequacy in place that it hasn't
(18:08):
been adequately bonded, ithasn't been adequately insured.
So we have a deficit right fromthe outset. That's likely to be
massive.
Gregory A. Williams (18:21):
You had your hand up?
Dina Rasor (18:22):
Yeah. So just so the listeners can realize that this
isn't something new. Why did Iwas surprised as I read your
report, of course, new stuff hasbeen put in, but a lot of this
stuff was, was basically therewhen they in the 20s and 30s,
when they actually started theindustry up in the automobile
(18:44):
and everything else. And so I'mreally surprised that after all
these years, you know, I can seesubsidizing a new industry, but
I think they're past their pastnew industry. Now. What do you
what do you think why, you know,is it just because these rules
get entrenched and started tochange them?
Doug Koplow (19:05):
That's, that's absolutely the case. There's a
concentrated set ofbeneficiaries, and they get
significant financial benefit,and they organize to protect
their benefits. And that's,that's what happened. So, you
know, you do have states thatrecognize their bonding levels
are too low. And then they tryto increase the levels. And, and
(19:29):
they run into a lot of politicalheadwinds when they tried to do
it. Now, one other thing I didwant to just mention about the
Permian is there's a lot ofstuff coming down the pike. So
this is this is not as you don'thave a set of subsidies and
they're just there. There'scontinually new stuff that comes
in and the that part of thecountry is likely to be the
(19:52):
largest location forsequestering captured carbon,
and there's going to be reallylarge subsidies primarily
through 45. Q and the tax creditthat's going to flow to that
sector. And it's going to haveall sorts of problems. And I
know you had a guest on one ofyour early shows who went into
(20:12):
detail about that, but this isgoing to be really, really a
significant subsidy to oil andgas in the Permian area.
Dina Rasor (20:21):
Okay, well, in the end, that leads me the next
time, one of the things thatalso that we're fine finding out
in other areas, but of course,finding it here is transparency
of the information on costs, andhow much should be paid? Because
some of this is federal, federalland, and, you know, and plus
what the prices of whatever hasthat effect, you know, exactly,
(20:45):
because it says your comments,your costs, didn't know how much
money you spend is go to withtheir subsidies. And so I I'm
just seeing that in this otherareas, like pipelines and things
like that. They are not keepingtrack. It's hard to track the
(21:05):
federal government and and knowhow much to pay.
Doug Koplow (21:10):
Yeah, so I mean, there's a few elements that I
think what you're saying, numberone is that you're dealing with
probabilistic events, right? Soyou've got a bunch of
facilities, a bunch of oil andgas wells, you don't really know
how much each one's going tocost. And it makes it harder to
set to estimate the subsidies orset the requirements. And, you
(21:34):
know, I think in that situation,it's useful to look at like our
car insurance, right? We don'tknow exactly how much we're
going to cause in an accident.
But there's a distribution of itand our insurance isn't at the
average cost. We don't have tojust get insured for the average
cost of an accident, we have tobe insured at a much higher
level. So that overall, ifthere's an accident that a
(21:57):
higher level, we're stillinsured, and that's the approach
that should be used in oil andgas as well. But isn't. And I
think the second element is theissue of transparency. states
and the federal government cando a much better job identifying
how much money they're spending,what other types of subsidies
(22:18):
they're providing, and how muchthey're worth. But they don't
really have an incentive to doit, because it's politically
difficult. But, you know,there's a lot of people,
regardless of their views onclimate change, or clean energy,
they want the governments to bemore fiscally prudent. And so
there's a natural overlap, hetried to be between trying to
(22:43):
get rid of environmentallyharmful subsidies and try to
have more efficient government.
Gregory A. Williams (22:51):
Yeah, maybe gonna take a moment to explain
how government leases work andhow mineral extraction companies
rely on leasing public land todo their business.
Doug Koplow (23:03):
Sure. So in in onshore, the federal government
owns a lot of oil and gas landswith oil and gas that it leases
out, and they have lease optionsto do it. States also own land
with oil and gas, and sometimestheir joint leases and sometimes
(23:26):
their state leases. But there'sa couple of elements in terms of
the subsidies that are relevanthere. Number one is if the
government is charging a lowerroyalty lower percentage share
of the production than what aprivate market party would pay.
And the second element is if youhave not enough bidders for the
(23:51):
for the leases, then you're notgoing to get a fair market
price. So this is a significantproblem in the United States,
and pogo has done work,certainly on the offshore
looking at the small number ofbidders. But globally, it's an
even bigger problem, becausenational oil companies control
(24:12):
about 90% of the oil and gasreserves. So the the degree to
which they're leasing it belowmarket is generating a lot of
production that's going on tothe global markets.
Gregory A. Williams (24:27):
So in other words, the the citizens of
governments around the world,citizens of countries around the
world own most of these mineralresources. Yes. And through our
governments, we lease those welease access to those mineral
resources to these very wealthymultinational companies.
Doug Koplow (24:49):
Yes, and sometimes the companies are actually
national oil companies. Sothey're the government itself.
And on the one hand, you'd saywell, then the government itself
has an incentive. To make suretheir citizens get enough money
and get a fair deal, but thatisn't always what happens.
There's a lot of differingobjectives that they have. And
(25:11):
there's corruption in some ofthese companies, even if they're
state owned. So you end up withnot great outcomes.
Dina Rasor (25:21):
Yeah, okay. And then another part of this is that
we're supposed to be what we're,what our government is saying to
other people in the world, yougot to start pulling back,
pumping the oil, keep it in theground, you know, defending, and
there's been, you know,conferences and everything else.
And yet, the United States isjust pumping as fast as they
(25:45):
can. But I saw on your report,it said, three quarters of the
subsidies, support explorationand production. And so here we
are three quarters of thesubsidies to make these oil
companies and gas companieswhole. And they're putting it
into making more, I thought,Wait, aren't we supposed to be
(26:07):
trying to have subsidies toencourage them to make less? So
what was your comment on that?
Doug Koplow (26:15):
It's a big problem.
We do see tremendous subsidiesto exploration and production.
And, and it does make it muchmore difficult to move off of
oil. A couple of years ago, Iworked on a really interesting
study with the StockholmEnvironment Institute, where we
(26:35):
actually had oil field leveldata from ricette energy for
1000s of fields across thecountry. And we simulated how
removal of the subsidies wouldaffect the rate of return on
those fields, and basicallyfound that over half of the
fields were dependent on thesubsidies to hit their return
(26:58):
their hurdle, the hurdle rates,the minimum return, that their
investors needed for thoseprojects to move forward. But
that's, that's a pretty stunningfinding, because those fields
wouldn't have come online. Ifyou didn't have the subsidies,
and now you have situations withlike 45 Q, and most of the
(27:20):
carbon capture money is going togo to support. Basically, co2
coming off of oil and gasproduction sites that's
reinjected for enhanced oilrecovery, and it's going to
monetize the co2 streams insteadof taxing it. And that's gonna
(27:40):
make fields that wouldn't havebeen economic without this
carbon capture subsidy, economicand it's going to have the exact
perverse effect that you talkedabout Dana.
Dina Rasor (27:53):
So we're making it we're giving them money. And
the, the best subsidies you canget is in production and
exploration. So you make moremake more make more meanwhile,
like carbon capture, they'resaying, Oh, we had a cat burn
when we burn it, we got tocapture the carbon. So then they
turn around, and now we're doingbillions of dollars trying to
capture the carbon and put itback in the ground. And so it
(28:17):
just seems like this sort offull errand and on going round
around but of course, it whathas to do with is it's tough to
make money. And so could yougive us some examples of some of
the most egregious subsidiesthat the federal taxes in New
(28:38):
Mexico something that when youlooked at it, like when I looked
at it about, you know how muchyou can wave cleaning up and
walk away from these terriblefracking sites and oil pumping
sites, and then federalgovernment, Uncle sucker will
come and clean it up. And thatmean that thing right from the
beginning, jumped out at me, butwhat other ones see? What did
(29:00):
you have that feel like horrorstories?
Doug Koplow (29:04):
Now, one of the ones I thought was very
interesting was something calleda high cost well, subsidy in
Texas. So this gives reducedseverance tax. If you are a,
quote, high cost natural gaswell, and this the rules on it
have to do with how deep the oilis, and whether it's coming from
specific formations. It doesn'thave to do with whether or not
(29:27):
the well is profitable withoutthe subsidy, because often often
they are. And so this is this isa state level subsidy. I guess.
One general point is that mostof the studies that have been
done on fossil fuel subsidiestend to focus on the national
level. But there's a lot ofstuff going on at the States and
(29:47):
in other countries at theprovincial levels. And these are
sometimes very large. This oneis is very large. The state
itself estimates that between2009 and and their projections
for 2028. This will be about $17billion in subsidies to natural
gas industry. Another reallykind of interesting thing and
(30:11):
frustrating thing is that Texashas arcane rules on what tax
breaks need to be reported. Andbecause they divide natural gas
and oil subsidies, even ifthey're coming from the same
well under different statutorycodes, it's resulted in some
years where this particularsubsidy was a billion dollars,
(30:31):
but didn't show up in their taxexpenditure budget. The Well,
plugging that I mentionedearlier is all across the
country. It also applies to oldcoal mines. And it's really
hundreds of billions of dollarsand very frustrating that
nothing has been done in orderto internalize those costs. So
(30:55):
we talked mostly about the workthat I did for NRDC on the
Permian Basin, I also did areview of subsidies in
California. Because you know,California is the clean energy
state, but they do have oilproduction as well. And they
also have oil subsidies. And oneof the interesting things is
that there's only two states inthe country with no tax on oil
(31:17):
and gas extraction, Pennsylvaniaand California. And it makes
really no sense. Californiaclaims that they have a property
tax instead, but the amounts arelower. So they're still
generating a very significantsubsidy to the oil industry
there. Another interesting thingabout California is that they
(31:39):
have oil and gas wells that arelocated sometimes very close to
people's homes and schools andhospitals. And they finally put
in a rule that you have to havea buffer zone of 3200 feet
between your well and thesebuildings. The industry fought
back hard, and and it's now in areferendum. So it's been delayed
(32:00):
at least two years. But what Iwas interested in is who's
insuring for environmental andhealth damages from these wells?
And I contacted probably 20Different organizations to say,
what's required of them? Do theyhave to have insurance? And no
one could give me an answer. Ithink that was pretty stunning.
(32:22):
Yeah, well, I,
Dina Rasor (32:24):
you know, just a lot of these subsidies, things,
we're looking at the subsidiesand everything else. And I have
one complaint that I have when Italk to activists, like, like
Trump, you know, they're tryingto shut down a coal plant and
replace it with somethingenvironmentally friendly, is
that even though the national,federal government is saying,
(32:45):
yes, yes, we want to helpeverybody's in a disadvantaged
area, we're going to cut throughthe paperwork, we're going to
make sure there's people hiredlocally, and blah, blah, blah.
They're finding out that thelocal federal officials who have
to live with the pressure fromthe oil companies and
politicians and everything, arenot giving the local advocates
(33:08):
kind of information, they needto be able to try to make an
informed thing with the oldcanard which is very popular on
the Pentagon have. This isproprietary information. So the
local people need to realizethat they're, you know, you, if
(33:28):
you're having trouble gettinginformation, they should give us
a call because we're we'reworking on trying to get the
local, federal people to abideby the law. So
Doug Koplow (33:41):
super important. I just want to touch on one other
thing that you mentioned, whichwas environmental exemptions.
And, you know, this is somethingthat my NRDC co authors did a
bunch of the work on, butthere's very widespread
exemptions for most of theenvironmental laws for oil and
gas production sites. Sostormwater runoff permit
(34:02):
requirements are waived underthe Clean Water Act, Superfund
if substances occur naturally inoil and gas and cause pollution,
but if they're naturally an oiland gas, you can take action
under Superfund frackingchemicals, which are all over
the map. Lots of toxics addadditives, you don't have to
disclose them under theemergency planning and right to
(34:24):
know act, although,interestingly, Pennsylvania is
just putting in the firstregulations at the state level
that's going to force them to dothat. So, you know, we have a
lot of these exemptions, and,like with subsidies, they tend
to come into play slowly overtime, one by one by one and in
the end, you have a situationwhere there's a lot of things
(34:45):
that are supporting the industryand very hard to get rid of.
Dina Rasor (34:50):
Okay, well, your report also has a bunch of
recommendations. And maybe youcould, you know, I always want I
always don't want to not do Justwhat you call it eight an awful
story, you know, everything'sbad, isn't that okay? Let's talk
about what can be done andimplemented. You feel that it
(35:10):
realistically to be implementedit and then also the problems to
get that done.
Doug Koplow (35:19):
So I think there's been positive movement and in a
few areas, I think that thefederal activity on methane
emissions, where they are nowregulating it and charging for
it, even though it's not aperfect system, I think are
really important. And I thinkthat that will make a
difference. They are beingsupported in their work by the
(35:42):
rise of satellite monitoring. Sothere's a bunch of satellites
that are now able to see methaneand nitrous oxide and pinpoint
where it's coming from. And I'msure you'll be surprised to hear
that the levels that werereported by the companies don't
actually match what was comingoff their their sites. And in
(36:04):
some cases, they didn't evenseem to know that there were big
leaks from their sites. So Ithink on remote, more remote
monitoring and the emissionscontrols in this area, I think
that there's a lot ofopportunity, I think New Mexico
had some significant potentialsubsidies associated with how
(36:28):
they calculate severance taxes,and that they would allow
companies to deduct thetransport and processing costs
to go from the wellhead to themarket. It's in their interest
to do this, well, it's not clearthat they have enough auditing
firepower to do it. It's acommon issue of cost across a
(36:49):
lot of oil and gas producingstates. But I think that's an
area as well with maybe someimproved clarity and definitions
from some national environmentalgroups that a lot of state
governments would findattractive to pursue. And, you
know, a couple of other areas,you know, a lot of our
(37:11):
recommendations had to do withtransparency. And transparency
unfortunately, runs into thebeneficiaries not really wanting
the information to come out.
But, you know, as you mentioned,Dean, I think, if you can get
people on the ground to startasking questions, I think it
does make a difference. So ifyou live near a polluting
facility, if you live near anoil well, and you want to know,
(37:33):
what is their insurance, askthem. And if they don't tell you
ask the regulator, and if theydon't, if the regulator still
doesn't tell you make it public,that they're not telling you.
And I think, you know,particularly if you're a school
or a hospital, and you want toknow what emissions are, and you
want to know what insurance is,it looks pretty bad if the
facility doesn't give you basicinformation. Same thing for if
(37:56):
you are in an area with lots offracking and lots of heavy
trucks, and you're noticing thatyour roads are getting damaged,
because they are gettingdamaged. Ask your government
who's paying to fix it. Ask themwhether they have special road
use management agreements withthe with the companies that are
sending heavy trucks on theroad. So the damage is have to
(38:17):
be repaid by them as opposed toyou. And I guess, the last
really important area oftransparency is who are the
people behind these oil and gasoperations near your home,
trying to ask their LLCs. But alot of times what can happen is
someone will have an LLC,they'll abandon a well and some
(38:40):
of the partners of that LLC willstart a new one. And then
they'll have another productionsite. And they never are held
responsible for the first wellthat they abandoned. So I think
that there's a lot of work thatcan be done on a local level, to
try to bring these things to thefore and increase the leverage
to get rid of subsidies and alsoachieve better environmental and
(39:03):
health outcomes.
Dina Rasor (39:07):
Yeah, and I think that's one of the things that
you have to realize is thatbecause they are claiming that
they want to make activists andadvocates involved us that is a
thing to try to get in here andto you know, with fracking, it's
just ridiculous. You can't youknow, what they're putting into
(39:28):
the ground goes proprietary, youknow, a lot of that stuff can be
challenged. And I think thatit's it, now's the time for the
lope for local people to get upand say, you know, we want to
find out exactly what's goingon.
Doug Koplow (39:43):
So one of the things we're doing at the
national level is looking at,are there ways to make your tax
returns not quite asconfidential as they are now. So
there's there's definitely aneed for people's time. Tax
Returns not to be made public.
But if you're claiming taxcredits, and there are lots of
(40:04):
states that make tax creditspublic, and they tell how much
specific companies are getting,and those companies have not
gone out of business, and theyhave not suffered at the federal
level, that's not possible rightnow. But we're talking about tax
credits under the inflationReduction Act, that are going to
be 10s, or hundreds of billionsof dollars and money coming from
(40:25):
the federal treasury. So inthose types of situation, and
some of it is refundable, whichmeans that if you don't have
enough tax liability, theTreasury will pay you. So it's
really not very different frombudget spending, it makes no
sense that, that taxpayers areunable to see the patterns and
(40:45):
who's getting those credits, tosee the scale to see whether
they're actually accomplishingwhat they were supposed to
accomplish when they were put inplace. So that's we're trying to
look for leverage points to doit in a way that gets this
transparency while alsoprotecting the privacy, the core
elements of tax privacy.
Dina Rasor (41:09):
So that Okay, so that's one of your name, big
next pushes, is there a subjectarea, you're starting to look
into that if anybody has anyinformation, they should send it
to you?
Doug Koplow (41:23):
My general finding is that anytime I look longer at
a geographic area, I see moresubsidies. So I have no belief
that my work in California orTexas, or New Mexico has
actually uncovered all that'sthere. And if you are in one of
(41:43):
those states, or you're inanother oil and gas production
producing state where you knowthat there's significant
subsidies, even if they seemarcane, send me an email, I
would love to hear about them.
And sometimes you just seesomething that just looks
strange. And that's the initialthread that you start following.
And all of a sudden, it turnsout that it's hundreds of
(42:06):
millions or billions of dollarsof subsidies that people weren't
aware of before.
Gregory A. Williams (42:13):
And so is that fundamentally, what
motivates this difference on onbehalf of governments is the
traditional pursuit of of taxrevenues, they would rather
have, you know, revenueproducing company in their
district and in an adjacentdistrict, or is it something
more nefarious than that?
Doug Koplow (42:32):
Yeah, it's a great question. There is absolutely
tax competition. And there's aDC group called good jobs first.
And what it does is it tracksgovernment subsidies across all
sectors that are being thrownout there to try and get job
creation. And they're saying,Well, you ought to try and get
good jobs first, not just theones dependent on subsidies. But
(42:53):
there's a bunch of other things,too. So sometimes it's you have
a natural resource endowment, oryou had a need in 1920, or 1940.
That led you to pursue certainpolicies. And maybe those
policies make no sense anymore.
But they're entrenched. Andthere's a group that's dependent
on them. And there's a groupthat's lobbying to protect them.
And so they stay. I mean, tobring in a defense example,
(43:16):
isn't it the case data that themilitary sometimes wants to get
rid of weapon systems, but thepoliticians won't stop doing
them? Because it's got all theall the jobs in their districts?
Yeah,
Dina Rasor (43:30):
yeah. In fact, that used to be one of the things we
used to do regularly in the1980s is find maps and lobby
plan, wait a lobby plan, didvarious lobby plans. And, you
know, we'd like the divid antiaircraft gun. And they actually
would have the picture of wherethe plant was, but then they had
a map of the United States andhow many jobs were in each one.
(43:54):
So they were like, you can'tcancel this, because, you know,
it's this that we did get itcancelled, but not in a good
way. It was because it was,government had to pick up most
of the funding on it. But yeah,it's, it was way it is with the
government. And I quite frankly,think when you look at Biden
(44:15):
passing one of the best lawsever. But on the other hand, it
seems like we had to pay off thewolves. And to pay so much of
the money's going to fossil fuelindustry, we should be running
down rather than running up. Andeven though there's a huge
amount of stuff that's neverbeen funded before, I still find
(44:37):
that we're almost like hostageto pay various subsidies and
extra money to these people. Tobe able to even start getting a
clean economy. It's frustrating.
Doug Koplow (44:50):
Yeah, the challenge is that you know, it would have
been much more efficient to havea tax on the pollution and it
would have sent a much betterprice signal. And that when you
start subsidize Using people inthe non polluting business, then
lots and lots of people go intothe non polluting business and
it's pretty hard to measure whatthey're actually providing.
Dina Rasor (45:13):
Well, is there any other any other subjects, you
want us to talk about projectsyou're working on it, you want
to talk about,
Doug Koplow (45:20):
I'll say a brief mention about the
environmentally harmfulsubsidies more broadly, I did a
big assessment looking at kindof global trends across
subsidies to water andagriculture and forestry and
energy. came out about a yearand a half ago. The the, the key
(45:44):
point here is these things areadditive. So if you if you have
a bunch of subsidies coming fromdifferent levels of government
that are all flowing to aparticular region or a
particular industry, a lot oftimes only that factory owner or
that producer knows the fulltake that they're getting from
(46:05):
the federal government. But youneed to look not nationally, you
need to look locally, and youneed to look across multiple
sectors in order to see howthese things are really
affecting critical ecosystemsaround the world. And I, you
know, I do worry about habitatloss from from climate change,
(46:27):
and also from depletion from alot of driven by a lot of these
subsidies. So that's an areathat I've been focusing on, and
one that I hope will continue toget a lot more attention going
forward. Well,
Dina Rasor (46:39):
when you're ready, come back. And we'll do another
show just on that, because Iknow that's ever like literally
important set of things to Ithink the agriculture thing is
really been overlooked. And it'sgoing to be the thing that
causes some most panic. And wecan't get beyond it's the very
basis of life. Oh, we're gonnahave a food shortage. We have a
toilet paper shortage in thiscountry, people stuck up for two
(47:02):
years or the toilet papers. Ican't imagine what happens when
this if that food system breaksdown from climate change.
Gregory A. Williams (47:10):
Alright, well, thank you very much for
joining us here tonight. We hopeto see you again soon. And in
the meantime, we invite ourlisteners to check out the links
that we're going to include inthis podcast and learn what you
can about your state and localenergy subsidies. Anything else
(47:31):
you'd like to say in closing?
Doug Koplow (47:33):
Thank you for the opportunity to be here.
Dina Rasor (47:36):
And thank you for what you do.
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