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My
Lunch with Big Oil
Mr.
Big Oil spilled the beans: Offshore oil drilling
means bupkis for Virginia. He ginned up the flap
here in the Old Dominion to win support for
opening up California, Alaska and the Gulf where
the big barrels are.
I
shouldn’t tell you this, but I have had a secret
source over the years. His name is Mr. Big Oil and
he calls me up from time to time to talk over
energy policies. M.B.O. phoned last week and asked
me to lunch. We met at Millie’s Diner, an
upscale eatery on the downside of Church Hill in Richmond.
When
I met him at Millie’s, M.B.O. looked sleek and
prosperous. He ordered a triple Scotch and a Cobb
salad. Since it was Big Oil, I asked for a
“There Will Be Bloody Mary” followed by a
“Devil’s Mess” omelette. M.B.O. was dying
for a cigarette but wasn’t allowed. The
following is an actual transcript of our
conversation:
Gooz
Views: “Well, how’s it going?”
Mr.
Big Oil: “Very, very, very well.”
G.V.:
“You must be raking in the dough. Ready for some
big policy changes?”
M.B.O.:
“We’re working on it and it looks good. Bush
is finally getting off the dime on the
Mid-Atlantic ban on offshore drilling. As you
probably know, The Minerals Management Service of
Interior says there could be 86 billion barrels of
oil and 420 trillion cubic feet of gas offshore
the whole country.”
G.V.:
“Sounds great but how much is off Virginia?”
M.B.O.
“Don’t know exactly, but there’s supposed to
be 3.82 billion barrel’s worth off the entire
East Coast.”
G.V.
“If all of that were tapped, what would it mean?
It would supply all our needs for maybe six
months?”
M.B.O.
“Probably, but you are missing the point, as
usual. First, there’s probably a lot more
natural gas out there than oil. A few years ago,
the Woods Hole Oceanographic Institution found
cracks in the Atlantic seabed suggesting lots and
lots of gas.
“As
far as oil, the point isn’t that the
Mid-Atlantic has lots of oil. The idea is to get
something moving out there so we can get more
leases in the Gulf of Mexico
and off California and Alaska. That’s where the big game is. That’s where
the Big Oil is.”
G.V.
“Yeah, I was kind of wondering why nothing’s
happened off Virginia if it’s such a hot
prospect that people like Jim Gilmore and
Congressman Eric Cantor are jumping up and down
trying to pass laws breaking the moratorium and
start drilling.”
M.B.O.
“Well, Gilmore’s not so good with numbers,
you know. Look at the car tax thing. As for
Cantor, he’s a muffin, but he’s our muffin.”
G.V.
“Michael Ward, exec director of the Virginia
Petroleum Council, wrote in the local rag the
other day that Louisiana received more than $400
million in royalties and more than $440 million in
severance taxes through its offshore development
program. He says Virginia should be getting some of this gravy.”
M.B.O.
“Goozer, you can be such a dolt sometimes.
Point One, nobody has an offshore program as big
as Louisiana’s and they never will. Point Two, state royalty
rights extend to maybe three to six miles
offshore. If the current leasing and drilling
plans go forward in Virginia, the rigs will be more than 50 miles out there.
What that means for Virginia’s royalties, I don’t know. Point Three, this
Mike Ward character is a paid lobbyist so of
course he’s going to paint the sky blue.”
G.V.
“But what happened to Virginia’s big oil projects over the years? You’d
think that if the promise of oil was so wonderful,
it’d have been exploited already.”
M.B.O.
“The reality is that there’s hasn’t been a
major oil project in this state since the old
Amoco oil refinery was built in Yorktown
in the 1950s. There was a tract that is now the
new Maersk shipping container unloading facility
on the Elizabeth River
in Portsmouth. It was once intended for an Exxon refinery but
it never got built. One guy, a slick wildcatter
type named John K. Evans, had wanted to build a
refinery in Suffolk in the late 1960s but shifted to this site. He
tried for years to get his new project, the
Hampton Roads Energy Company refinery, off the
ground, but it never happened. It would have
refined imported crude.
“Then,
after the Iranian crisis in 1979 and oil
shortages, big oil service companies such as Brown
& Root took options around Cape
Charles at the mouth of the Bay to fabricate giant
offshore oil rigs. There was some excitement then
about leasing off Virginia. But that never happened either. By the 1980s,
the moratorium on offshore leasing took effect.
The B&R site is now a pair of elite golf
courses and a community built by a rich real
estate dude from Virginia Beach.”
G.V:
“I read somewhere that despite the Cantors of
the world jumping up and down, Virginians will
actually get screwed if current leasing boundaries
go forward.”
M.B.O.
“Right you are. The way the Interior Department
has it set up, Virginia’s share of offshore
rights is very tiny compared to other states such
as North Carolina or Massachusetts. They’d lap
up most of the gravy. Somebody needs to revisit
that in Congress. But, hey, not my problem. We in
Big Oil don’t give a damn where the royalties go.
We just want a showcase rig out there off the East
Coast so we can bury this moratorium thing once
and for all. Then we can grab offshore California
or Alaska and
more of the Gulf of Mexico. Whatever is done off
the Old Dominion won’t get finished until about
2020 anyway and if we have any sense, there will
be a big shift in consumption patterns by then.”
G.V.
“You going to pick up the check?”
M.B.O.
“Of course."
--
July 21, 2008
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