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Americans may be torn up by the BP oil spill and its destruction of the Gulf of Mexico’s natural habitat – and torn up we should be – but that habitat has not been pristine for decades. In many ways, Louisiana made its deal with the devil long ago.
“big oil plays an unnatural role in our politics. … Oil elects presidents, drives our foreign policy, our domestic policy, our climate change policy. … It’s led us to terrible energy policies and a breakdown of regulation. We look to the Niger Delta as an example of what an oil state does to its own environment, but it’s precisely what we’re doing to our own environment.”
Louisiana has paid a steep price for its bargain with the oil industry
By STEVEN MUFSON
Washington Post
July 24, 2010, 3:54PM
Huey Long, the famous Louisiana populist, launched his political career by waging war on the big oil companies, especially what he called Standard Oil’s “invisible empire.”
“I would rather go down to a thousand impeachments than to admit that I am the governor of the state that does not dare to call the Standard Oil Company to account,” he declared in a 1929 campaign circular.
But the threat of a thousand impeachments notwithstanding, Long later built his own invisible oil empire: In 1934, while he was a senator, he and his political associates formed the Win or Lose Corp. The company — which had a reputation of never losing – bought up state mineral leases and resold them to oil companies at a healthy profit, while keeping a share for itself. Although Long died in 1935, his family and friends received royalties for decades.
This dividend came at a price for the rest of Louisiana. The oil leases Long and his associates sold were generally in wetlands; in the process of tapping the oil and gas below, oil companies built a sprawling network of roads and canals, leaving behind a trail of damaged marshes. Wildcat wells came to dot the state’s landscape, and refineries and port facilities followed. Today, thousands of wells have been drilled within three miles of the far-from-pristine shoreline.
But it was a price Louisianans went along with: Since oil was first discovered there, the state has produced 159.5 trillion cubic feet of natural gas and 17.5 billion barrels of oil, according to the Louisiana Department of Natural Resources. That’s as much oil as the entire United States has produced over the past nine years.
Americans may be torn up by the BP oil spill and its destruction of the Gulf of Mexico’s natural habitat – and torn up we should be – but that habitat has not been pristine for decades. In many ways, Louisiana made its deal with the devil long ago.
And what a bad deal it was. Long before the oil spill, the state’s embrace of the petroleum industry cast it under what economists call “the resource curse”: the paradox that countries rich in minerals or petroleum tend to grow more slowly and have lower living standards than other nations. Simply put, Louisiana is the closest thing America has to a petro-state.
Instead of blessing Louisiana with prosperity, the oil industry fostered dependency, corruption and an indifference to environmental damage. Our bayou sheikdom’s oil and gas riches – like those of the Niger Delta, the Orinoco belt in Venezuela and the Iraqi marshes – also stunted its development, leaving it far behind states with fewer natural resources.
According to the Census Bureau and Harvard University health data, Louisiana ranks 49th among the states in life expectancy, has the second-highest rate of infant mortality, comes in fourth in violent crime, ranks 46th in percentage of people older than 25 with college degrees, and ties for second in percentage of people living below the poverty line.
Oil riches didn’t create these problems, of course, but it is striking that they didn’t ameliorate them. “We’ve always been a plantation state,” said Oliver Houck, an environmental law professor at Tulane University. “What oil and gas did is replace the agricultural plantation culture with an oil and gas plantation culture.”
Even though Louisiana’s oil and gas production peaked in 1970 and many companies moved their offices to Houston, refineries, oil import facilities on the coast and a web of thousands of miles of pipelines continue to make the industry a powerful force in the state. It is embedded in Louisiana’s mental and economic infrastructure, and remains one of its leading employers. The recent development of shale gas in the northern, poorer part of the state will bolster its influence even further.
All this explains why, even as the oil spill threatens Louisiana’s tourism, fisheries and shoreline, local politicians have continued to speak up on behalf of continued offshore drilling: They, and their state, are addicted to oil.
“There are no risk-free ways of producing the energy we rely on today,” Sen. Mary Landrieu, D-La., wrote in a June letter asking President Barack Obama to lift his moratorium on deepwater offshore drilling. She said the impact of idling 33 deepwater exploration rigs was “like closing 12 large motor vehicle assembly plants, all at once.”
Like Landrieu, Gov. Bobby Jindal and Sen. David Vitter, both Republicans, have called for an end to the moratorium, and Vitter has warned that the drilling halt “could kill thousands of Louisiana jobs.”
It’s an argument with rare bipartisan support in an age of bitter division. A Rasmussen Reports poll last month showed that 79 percent of Louisiana voters think offshore drilling should continue, far higher than the 60 percent who say the same nationwide.
Some of these voters will undoubtedly be among those who turn out to celebrate the 75th annual Louisiana Shrimp and Petroleum Festival in Morgan City this fall. The festival’s Web site says it is “an event that will prove that oil and water really do mix.”
Louisiana’s dysfunctional relationship with oil dates to 1901, when a farmer near Jennings noticed some bubbles in his rice field. He took an old stovepipe out to the field, threw a match inside and the bubbles ignited. With that, the rush was on. As word of his discovery spread, local businessmen bought up adjoining property, brought in a Texas driller and struck oil – so much that it flooded the farmer’s field, creating a small oil lake and ruining several acres of rice.
This pattern of rich oil and gas rewards coupled with environmental damage continued. “The oil and gas industry basically crisscrossed our wetlands with canals to make it easier to go out with service rigs and explore,” said Adam Babich, a law professor and director of the Tulane University environmental law clinic. Babich said the companies left dredged material “piled up on the side of the canals, making little berms all over the place, which has completely screwed up the hydrology of the wetlands.”
As the companies continued to develop the wetlands, more and more land was lost. The disposal of chemical drilling materials and equipment further polluted the state’s delicate ecosystem.
“We got all this great oil and gas production and we’ve let those guys rape our state,” says Foster Campbell, Louisiana’s public service commissioner. “They say they gave us jobs. Yeah, but they made billions.”
As in foreign petro-states, those billions have sparked quarrels over tax and royalty revenues. When Harry Truman was president, Louisiana powerbrokers rejected a revenue-sharing deal on offshore oil extracted from federal waters; after a lengthy court battle, the state ended up with nothing.
So Louisianans believed they got their due when they extracted a deal similar to the one the state rejected half a century ago. In 2006, in negotiations over drilling in a new section of the Gulf’s federal waters, Landrieu got the federal government to give 37.5 percent of the royalties to Gulf states to preserve and restore coastal habitats.
This time it was lawmakers from other states who were upset about the government giving up tens of billions of dollars of future revenue. The whole revenue flap echoed, in a more civil manner, the disputes between the Niger Delta states and Nigeria’s central government, or between the Kurds, Shiites and Sunnis over the division of oil revenue in Iraq.
Although the oil industry plays an outsized role in Louisiana’s economy, the money it brings in has decreased in recent years, and the state has struggled to make up for the resulting shortfall. The Louisiana Mid-Continent Oil and Gas Association says that the industry accounts for 13 percent of state revenue, down from 40 percent when oil and gas output was higher. And unlike oil-rich nations such as Norway, which has squirreled away about $437 billion from its oil sales in pension and sovereign wealth funds, Louisiana has no stash of money for investments or rainy days.
Nor have Louisianans managed to diversify their economy. There is no Silicon Valley here, no northern Virginia tech corridor. In the 1990s, when Louisiana realized it needed new sources of tax revenue to make up for declining oil receipts, the best idea it could come up with was to expand riverboat gambling.
The economic reach of the oil industry has helped it win over the state’s political establishment, which has supported the industry and been supported by the industry in return.
“There is certainly a friendly relationship between elected officials and the industry,” former senator Bennett Johnston, D-La., told me. “The fact that you were a friend of an industry that is important to your state doesn’t mean you didn’t believe it,” he said. “I think the oil and gas industry is very important to my state and, I think, to the country.”
After Johnston retired in 1996, he became more than a friend of the industry: He joined the boards of Chevron and Columbia Energy Group, a natural gas transmission company. In 2009, his lobbying firm, Johnston & Associates, received $160,000 from the American Petroleum Institute, according to data collected by the Center for Responsive Politics.
For his part, former senator John Breaux, D-La., says that the relationship is no different than those between Michigan politicians and auto companies or California politicians and the entertainment or high-tech industries. “We supported them and they supported us,” he told me.
After he left office in 2005, Breaux formed a lobbying firm with Republican Trent Lott. In 2009, the firm was paid $530,000 by Chevron, $330,000 by Royal Dutch Shell and $600,000 by Plains Exploration and Production, an independent oil company.
Because energy holdings are such a common presence in the investment portfolios of Louisiana’s leading citizens, including members of the judiciary, it can be hard to find an impartial judge to hear an oil case.
In late June, the New Orleans federal judge who suspended the Obama administration’s moratorium on offshore drilling disclosed that he had bought and sold shares of a variety of oil and gas companies. He hurriedly sold off shares of Exxon Mobil after realizing that the company was affected by the freeze.
And last October, the plaintiffs in an unusual case about global warming couldn’t get enough impartial appellate judges to hear their case, which alleges that, in emitting greenhouses gases, energy and chemical firms added to the “ferocity” of Hurricane Katrina, thereby inflicting extra damage on the plaintiffs’ property.
Half of the 16 judges on the U.S. Court of Appeals for the 5th Circuit in New Orleans recused themselves because of conflicts of interest. Moreover, disclosure forms show that four of the judges who did not recuse themselves had investments in energy partnerships or companies. One judge owned shares in five firms: BP, Chevron, ConocoPhillips, Devon Energy and Diamond Offshore Drilling.
At times, the industry’s influence has been even more brazenly displayed in the Louisiana legislature, as the recent experience of Tulane University’s environmental law clinic suggests. Students working there have won a range of cases involving coal plants, wetlands and landfills – and the oil industry. In one suit Tulane students filed, a judge found that a refinery operated by Exxon Mobil had 2,600 violations of the Clean Air Act.
Earlier this year, the Louisiana Chemical Association – whose members include Exxon Mobil, Shell and Chevron – supported a bill that would have blocked state funding for any university whose legal clinic sued a government agency, a business or an individual.
During hearings, the association’s president, Dan Borné, sat side by side with the bill’s sponsor, Republican state Sen. Robert Adley, who also owns Pelican Gas Management.
The measure, debated shortly after the BP spill began, died in committee. But before the legislative session ended, oil industry supporters did succeed in blocking a bill that would have allowed the state to retain outside counsel against BP.
In the 1970s, Venezuela’s oil minister predicted that oil, which he called “the devil’s excrement,” would lead his country to ruin. More than a generation later, the nation is ruled by a mercurial leader who doles out cheap gasoline in an effort to paper over persistent social inequality.
While Louisiana is a far cry from Venezuela, does it have any better chance of breaking free from its oil addiction?
According to Jeffrey Sachs, an economist who heads Columbia University’s Earth Institute and who has written about the resource curse, a better question is whether the rest of the country will. Sachs is no expert on Louisiana, but he says that the United States, once the world’s biggest oil producer and exporter, itself exhibits all the symptoms of “a pretty classic oil nation.”
Louisiana, in other words, is not alone in suffering the pathologies of oil dependence.
“We have lots of the characteristics of petro-states ourselves even though we use that term for others,” he says. He cites our overdependence on oil and a tax policy that keeps oil relatively cheap. Moreover, he adds, “big oil plays an unnatural role in our politics. … Oil elects presidents, drives our foreign policy, our domestic policy, our climate change policy. … It’s led us to terrible energy policies and a breakdown of regulation. We look to the Niger Delta as an example of what an oil state does to its own environment, but it’s precisely what we’re doing to our own environment.”
Mufson covers energy for The Washington Post. This article is reprinted with permission from the Post.
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