For most of its existence, the UN hasn’t dealt with oil, gas or mining much. It has gotten involved on mostly small scale, small bore development projects, and, of course, the disastrous oil-for-food program in Iraq. Natural resource development is considered an internal matter, and one involving the private sector — a part of the universe the UN has had little to do with. But with the high number of extremely bad and dangerous situations involving natural resources, the UN cannot and should not stay on the edges of the issue much longer.

Right now, it has a small grant from the EU to try to address conflict and natural resources, including extraction resources, water, and land. A small group is working on a handbook on dealing with natural resources and conflict for relevant country offices. It’s tiny, but it’s a start.

The UN can’t, and never will be allowed to, police natural resource situations even if it had the desire, which I doubt it has. It is caught between the desire of its member states for internal sovereignty and control over its own territory and the howling needs of the people of those countries, stuck in a situation where they have no control over what happens to the land they live on or the water they drink.

I have a few starting suggestions on what could it say to alleviate the situation with extractabler resources, especially non-confrontationally. Of course, all situations are individual and each will take on a life of its own in response to the specific situation

1) Establish tighter universal environmental guidelines that protect land and water at Western levels or beyond, that include environmental studies of local impact. Sometimes corruption allows for lax protections but much of the time it is lack of government capacity and intimidation by the company. Tighter standards are the problem of the extraction companies (meaning they are the ones who pay the costs), and while they always whine and moan how environmental protection means they can’t afford to drill, somehow they always find a new creative way to meet new and tighter standards. And they still make money.
2) Make sure the contract includes mutually acceptable emergency plans and backstops for accidents and disasters.
3) Make sure the plan includes reclamation plans that are locally specific and enforceable. This is also paid for by the company.
4) Offer detailed information about the extraction process, especially its environmental impact, to the people of the area, the national and local media, civil society groups and the government, so everyone knows what to expect.
5) Offer informational and supportive workshops to local civil society so they can determine and control the local impact of the project — socially, economically, environmentally. Support their involvement in the negotiation process.
6) Push for independent economic and environmental impact assessment requirements before the contract is signed or the project starts.
7) Help everyone manage expectations about how long a good contract takes to write and, especially,  about the money. Governments — everyone — see oil or gold or whatever as the pot of gold at the end of the rainbow. It isn’t. Honest economic projections and financial commitments should be done ahead of time. And one selling point that companies (and some governments) always announce is that the project will create jobs. Extraction processes rarely do and most of the jobs will be turned over to skilled outsiders.
8) Develop an inter- or intra-state oversight commission that can deal with emergent and on-going situations to deal with problems as they happen.
9) Identify where water is being wasted, misused or could be recycled.

And this is a more expanded list of possibilities.

1) Support international transparency initiatives by the World Bank and other groups. Dishonest governments (and their cronies) don’t want to say where the money is going; international corporations view secrecy as normal business practice. But governmental accountability is the bedrock of good governance and economic development — think of where Nigeria would be today if the $400 billion stolen over time through corruption had actually gone to infrastructure and the people. Corporations are slowly coming around to the idea, but need more reassurance (and pressure) to come clean.
2) Bring civil society into the contract negotiations. Defuse a potential conflict situation by takimg into account the concerns and needs of the people. This does lengthen the time it takes to complete a contract negotiation. But as a little old woman in my country of Pennsylvania was supposed to have said while holding out for better terms on a gas contract, “The gas has been there for billions of years. It’ll be there next year.”
3) Offer conflict prevention/resolution training to the personnel (of all levels) in the extraction company. Many international actors go into these development situations offering a school or clinic (that soon falls into disrepair); the Chinese have been building roads. This is PR and not substantive.
4) Broker the creation of an ombudsman office to help bring civil society and the corporations’ representatives (ones with some power to make things happen) together, especially on a regular basis.
5) Recommend that the country contractually obligate the extraction company to use local workers whenever possible.
6) Help the government develop a plan to share a portion of the wealth with the local community. Increasingly, countries are finding that, for peace, it is essential to offer to give the communities involved a cut in the royalties. This is the plan in Ghana, Uganda, and now Nigeria. There are a number of ways the income can be distributed and it should be up to the community involved.

Does anyone have any other ideas?

There is a potentially dramatic change in the location and availability of natural gas globally. If all comes to pass as predicted, it would alter the geopolitical power of some countries like Russia, while lessening American, and possibly Chinese, Indian, and European, dependence on foreign oil and gas. Unlike normal natural gas, which is often found with oil fields (as well as alone), this “unconventional” gas is embedded in shale, a sedimentary rock located thousands of feet below the surface.

 

There was no easy way to get such gas out since it was trapped in dense clay rock until a few years ago. Halliburton devised a way to not only fracture the rock to release the gas, but to drill horizontally so each well could access much more gas. This made it economically feasible to go after the gas.Most of the shale gas that is being developed is in the US.

 

No one doubts that, environmentally speaking, natural gas is the least unfriendly of the fossil fuels or that it leaves the lightest footprint where it is extracted.  

 

Two major concerns have arisen: one involves the use of certain toxic chemicals like benzene to fracture apart the clay of the shale (called “fracking”). The fear is that a spill or mistake could contaminate the land or, more likely the water table through which the gas well passes on its way to the shale.

 

The second is the unusually large quantity of water that is required to drill and frack a well that can be up to 15,000- 16,000 feet long. It can take a million gallons of water or more. Even if some of the water can be recycled, you’re still talking about a major withdrawal from the aquifer.

 

A million gallons of water is not a HUGE amount (geologists I have talked to relate it to swimming pool volume) if you live in the verdant Eastern seaboard or much of Europe. But it adds up especially when it comes to healthy flow and wildlife. It is a critical amount if you live in the American West or North Africa or much of Asia.

 

 One of the most desirable shale deposits in the US is the Marcellus play which stretches diagonally from upstate New York through Pennsylvania into West Virginia. Sober environmentalists, hysterical summer residents, hyperventilating politicians, and people who just plain old don’t trust any energy company have all been campaigning against drilling but they are fighting a losing battle.

 

 Millions of acres of the New York City watershed have already been safeguarded, but most land remains in private hands and the money is proving irresistible in this economically depressed region. According the New York Times, “There are already about 13,000 active oil and gas wells in New York, about half of them already using hydraulic fracturing.” There are also a huge number of wells over in Pennsylvania, which is much more pro-drilling than New York State, and whose streams and tributaries also feed into the water supply of New York, New Jersey and Philadelphia.

 

In a major decision, in late September, the New York State environmental regulator issued what they saw as acceptable guidelines for drilling wells to extract the natural gas of the Marcellus. The environmentalists do have one greatly important point — current federal standards and previous practices should concern anyone who cares about water safety.

“We need to have a zero-risk policy here, and it is not appropriate to allow drilling in such a unique and extraordinarily valuable resource,” said Kate Sinding, a senior attorney at the Natural Resources Defense Council. “The record in other states is so abysmal, and it doesn’t take much to do better than other states.”  (NYT)

 

 

Although drilling won’t be stopped, it would serve everyone much better if the state required area environmental impacts, extremely high drilling standards, emergency plans, fail-safes, and clean-up procedures to be in place before the rush starts in earnest. Energy companies can call their toxic mix a corporate secret, but they would be better served with greater transparency.

 It is also true that the volume of water requested by gas companies has been, to be kind, extravagant. A request for a million gallons a day for drilling purposes by energy giant Chesapeake was shot down by the interstate Delaware River Basin Commission a couple weeks ago. Chesapeake withdrew the request.

The role of water is rarely discussed in energy development. But huge amounts of water are also needed for cleaner coal plants (emissions control comes at the expense of water), biofuel, and solar. Water needs to be part of the equation from the beginning of any energy development.

 Thankfully, there are groups working feverishly in New York and Pennsylvania to iron out procedures to protect water, limit water use (much more can be recycled that often happens), and to figure out what to do with the contaminated water that cannot be recycled.

 Their work can help protect and set standards for those around the world who follow.

For decades now, speculators in oil have justified their bidding up oil futures with the concept of peak oil: to wit, we have discovered all the major fields that there are and soon there will be no new oil, and this will lead to wars and exorbitantly high prices, and so although not now, but SOMEDAY oil will be scarce and so we should pay more for it TODAY. (No kidding: this is the rationale.)

What to make of the fact, then, that in this year alone, hundreds of new fields — some sizable — have been discovered?

Oil has been discovered by big companies, little ones, national oil companies. It’s been found in expected places (Brazil, Nigeria, Iraq, the Gulf of Mexico), places thought defunct (Norway), and completely unexpected places (Uganda, Sierra Leone).

How does Economics 101 (supply and demand (greater volume available now and in the future), diminishing demand (the current recession, green energy, staggering quantities of natural gas globally)) account for the fact that oil is hovering at $70 a barrel instead of falling?

“Peak oil” has been around since the 1970s. Last week I heard it promoted again, this time at an event featuring Peter Maass, author of the new book, Crude World: The Violent Twilight of Oil. To the average layman, the idea sort of makes sense — doesn’t everything non-renewable have to have a limit?

But peak oil is a myth for speculators. Why oil companies and others keep pushing it? For the speculators and investment houses, it’s a way to make money —so much so that the Commodity Futures Trading Commission has considered limits on the futures contracts available to them.

For oil companies, who reap the rewards of high prices, it means large profits, but it also means capital.

What is true is that oil is not and cannot be as cheap as it once was, no matter how plentiful. A lot has changed since the first oil well in the 1850s Pennsylvania was found just dozens of feet below the surface. Now oil is tens of thousands of feet down in terrible conditions, like the Arctic Circle or off the Continental Shelf. Governments and landowners now want more money for their treasure. And drilling is not cheap — offshore drilling costs between $500-600 per foot.

So what is the conclusion to draw? The world isn’t running out of oil, but don’t think for a minute it will ever be cheap again. It’s amazing what enough money will find.

One of the greatest bones of contention about extracting fossil fuels — in the industrialized world anyway — is the damage it can or will do to the environment. The industries resist the idea.

Do the costs of environmental protections cripple the production of newer, more unconventional fields, as the industry has long proclaimed?

Apparently not.  For example: the Associated Press reported this week that Chevron, a partner in the joint venture, had agreed to meet the 28 environmental conditions Australia set for the development of the offshore Gorgon gas field, worth $41 billion in gas exports to China. One of the condition is a safeguard for a rare turtle.

Similarly, in northern Pennsylvania, Hess has just signed a deal with a large group of farmers, in the Marcellus shale play. Their environmental demands included much stronger safeguards for their farmland and water supplies than required by state or federal law, and stringent demands on waste disposal. Responding to public pressure, the regional water authorities there have also set much tougher regulations to limit water use.

In the contracts offered by extraction companies, environmental protections are played down, although according to energy lawyers I have talked to, these contracts are still infinitely better than those signed years ago. These lawyers also say that the worst offenders aren’t the energy super-giants, but the smaller scrappier companies who have leaner margins and are willing to take greater risks in developing small or questionable fields.

Unsurprisingly, all these contracts serve the financial interests of the company. Meaningful environmental considerations, especially site specific ones, are conveniently limited. A number of developing countries seem to just accept this — perhaps they lack capacity or perhaps they are ill-informed or, for some of the worst dictatorships, they just don’t care. But they don’t have to accept these terms and shouldn’t.

Similarly, the landmen who travel through the US seeking unsuspecting homeowners in resources-rich areas willing to sign over their mineral rights for a pittance also offer environmentally inadequate terms.

Most companies will start with the gambit that strong environmental protections make any given project economically unfeasible. Occasionally, this is true. However, increasingly, though, this argument seems like a negotiating tactic — untrue and dishonest. The rationale that it’s just business to glean every penny even at the cost of environmental damage is even worse than ripping people off financially. It ruins their homes, their lives.

Fortunately, more and more, it seems that if a country or group of contiguous landowners sitting on a sizeable deposit worth extracting comes up with its own thought-out and locally appropriate environmental demands and sticks to them, sooner or later an energy company will come along willing to meet the terms.

Oil and gas companies have historically managed to develop truly astonishing technology to get oil under the conditions that they face. Some of these will be the environment and they can and do rise meet these challenges — but only if they must. It is up to the governments that set the environmental laws to make them.

Russian President Dmitry Medvedev attempted to allay global fears that Moscow is trying to amass access to natural resources this week during a trip through Egypt, Nigeria, Namibia and Angola as he signed billion dollar energy deals providing Russia a greater foothold in Africa .

In Angola, Medvedev emphasized that these resource contracts were important to coordinate “action in the context of the world crisis.”

In Nigeria, he boasted to his hosts about the economic benefits of the investment stating “the prospects are very good” that Russian investment within the country could be worth “billions of dollars”

In Namibia, during prepared remarks he stated “we must do everything possible to promote trade and economic ties” between the two countries, while mentioning energy only as one of the fields where Russia would invest. The list also included tourism and agriculture, hardly strategic imperatives.

Despite Medvedev’s touting of cooperation and economic benefits, it’s hard to see Mededev’s actions other than a …..click here to read more

The European Union plans to announce today that it sees possible disruptions for its gas supplies from Russia via Ukraine, a liklihood we identified earlier this year. What’s worse, Gazprom is now demanding $230 in debt payments from Belarus, another key gas transit route to western Europe.

The payments from Belarus may stem from a political dispute over disagreements including Minsk’s failure to follow Russia’s lead in recognizing the independence of Georgia’s break-way republics and Moscow’s freezing of a $500 million loan for Belarus. However, due to the opacity of the gas trade in eastern Europe, Gazprom’s debt may be legitimate.

The saga of the dispute in eastern Europe is likely to play out in political circles over the summer until the weather gets cold. But for those in Europe looking for a warm apartment in the winter, they should follow Ukraine’s purchases from Russia over the summer. Ukraine’s national gas company, Naftogaz, will unlikely have the cash to pay to fill its storage capacity for the winter heating season. The Ukrainian newspaper Sehodnia reports that the company may not have the funds by as early as July. Unless Ukraine buys its required amount, a new flare-up is in the offing, which portends a few weeks of cold in western Europe.