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Statement: Drilling operations induce seismic activity, even where it does not normally exist. This has been documented by studies in Denver.
Comment: The earthquakes in the Denver area were not caused by drilling operations and the withdrawal of subsurface fluids. Studies have indicated that the small magnitude earthquakes were caused by high volume and high pressure injection of waste material from the Rocky Mountain Arsenal into deep disposal wells drilled into existing fracture system in basement rocks.
Statement: Subsidence of an area around or near oil drilling operations has occurred on a number of occasions. The 28-foot drop in Long Beach was attributed to oil drilling? And subsidence, associated with oil drilling was instrumental in the break of the Baldwin Hills Dam.
Comment: Subsidence of an area around or near oil drilling operations has occurred only in rare instances. The 28-foot drop in Long Beach has been attributed by most investigators to withdrawal of subsurface fluids and the consequent reduction of subsurface pressure. Technology is now available to prevent subsidence and to predict the potential for its occurrence at a particular site. For example, in the City of Los Angeles, precise ground surface leveling surveys are required and are being conducted routinely as a means of detecting subsidence at an early date in the producing life of an oil field and to determine the necessity of repressuring operations.
In connection with the rupture of the Baldwin Hills Dam, earth movements had been in progress for many years prior to the construction of the dam, geologists predicted the dam would fail before it was built, and it was regarded by some geologists as inevitable that the dam should fail.
Statement: A blowout from an oil platform would further pollute the ocean, damage marine life essential to man, and ruin our beaches.
Comment: A blowout at an oil platform during which oil was introduced into the ocean would cause further pollution, and, if the oil reached the beaches, would undoubtedly cause some harm and would possibly damage marine life in the ocean and in the intertidal zone. Only a few polluting blowouts, however, have occurred during the drilling of over 18,000 offshore wells in the last 26 years. And production of over 6 billion barrels of oil and over 23 trillion cubic feet of natural gas has been accomplished.
Scientific studies have shown that there has been no permanent damage to either marine life or to the beaches, and only in one instance did massive pollution of the beaches and shore occur. Studies have shown that six times as much oil is introduced into the ocean each year from naturally occurring oil seeps as is introduced by offshore operations.
Crude oils from seeps have been contributed to the marine environment at least through recent geological time, and analysis of the ocean for hydrocarbons reveals their presence in extremely low concentrations. Destructive mechanisms exist, e.g., biodegradation, photo-oxidation, which have prevented the buildup of petroleum hydrocarbons in the ocean. Studies indicate that increased additions of hydrocarbons through man's activities to the ocean are destroyed by these mechanisms.
Statement: An oil spill from a tanker would create the same bad effects as a platform blowout, and a ruptured pipeline, moving the oil underwater to the shore, would also have the same severe effects.
Comment: Tanker spills are potentially more dangerous to the environment than spills from blowouts. A tanker spill has the potential of instantaneous release of large quantities of oil, whereas a blowout would provide a lower volume continuous release over a longer period of time. Because an oil spill tends to spread out with time, a continuous release is more susceptible to effective action by oil spill cleanup equipment. Also, the type of oil involved in a tanker spill would be important, in that a spill of refined products would be potentially more dangerous than a spill from a blowout. Refined products are more toxic to marine organisms than crude oil.
A spill resulting from a ruptured pipeline would be insignificant in comparison to either a tanker spill or a blowout because of the shut-in devices employed in offshore pipelines. The volume of oil spilled from a pipeline rupture would be very small in comparison with other types of accidents. It is much safer, furthermore to transport oil by pipelines than by small tankers. Regardless of the means of transport, it must be remembered that the same volume of oil will have to be provided to meet consumer demand in southern California.
Statement: Dredging for pipeline construction to the shore could play havoc with the water quality.
Comment: Dredging for pipeline construction would produce local sediment in the water column, but this is very small compared to the amount of sedimentation produced by wave action in near shore areas and by the discharge of sediment from streams and rivers. There is no evidence that water quality is significantly changed. Any effect of dredging operations on water quality wouid be very localized and of limited duration.
Statement: Construction of pipeline terminals, storage tanks and refineries will require extensive amounts of coastline land, threatening the intent of the California Coastal Zone Conservation Act.
Comment: Construction of onshore facilities will require commitment of some land, estimated to be one acre per 125,000 barrels storage capacity. Only a small amount would necessarily be in the sensitive nearshore areas. Most of the facilities would be located in areas zoned for industrial activity. In any event, a proposal to construct onshore facilities within the Coastal Zone of California must, perforce, comply with the requirements of the Coastal Zone Conservation Act. The fact that oil can be and is transferred by use of pipelines, allows maximum flexibility when locating terminals and storage facilities. Terminals can be built offshore with storage inland. Simple observation of the present harbor facilities should reveal that oil handling and bulk storage require a minimum amount of space as compared to the most modern methods of handling other type cargo, e.g., containers and barges.
With respect to pipelines for natural gas transmission, lines will be buried and will be routed through city streets or rights of way to tie into existing gas transmission lines. If compressor stations are required, they will be built inland from the coast and will be designed to have minimum impact on the environment. Liquified natural gas will be brought into terminals already planned by the local gas distribution company.
Statement: Oil leaks or spills from these onshore facilities would be a danger to the health, welfare and safety of the people.
Comment: Existing records of the operations of these facilities reveal an excellent safety performance. Emergency plans, equipment and trained personnel are available in the event of any unforeseen catastrophe. It is fair to state that the oil industry is unsurpassed by any industry in regard to the ability and performance when necessary to act in emergencies of any nature.
To illustrate that record and performance, the City of Los Angeles and its urban drilling operations serve as a pertinent example. Within the city, oil and gas are produced in a multiplicity of urban environments at no sacrifice and jeopardy to health, welfare and safety of the citizens of Los Angeles.
Statement: These facilities on shore, where planned, would create potential fire hazards in our highly populated coastal area.
Comment: Facilities that may be planned for onshore locations will generally not be in highly populated areas but rather in areas zoned for industry. Present fire codes have been sufficient in the prevention of loss of other properties and lives. Again, the City of Los Angeles and its urban oil operations furnish the best example.
Statement: If State oil pools, inside the three-mile limit, are tapped by drilling in federal waters, which is highly probable, the State will be obliged to open competitive bidding for drilling on the State tidelands-even in present sanctuaries.
Comment: At the present time, a buffer zone three-quarters of a mile wide is proposed between state lands and those where federal leases would be offered. Only under unusual circumstances of geologic continuity within the buffer zone would oil fields within state lands be subject to drainage as a result of the development of federal leases. In general, the geology of southern California oil producing areas is characterized by both structural and stratagraphic discontinuities, with the result that drainage of oil producing reservoirs over long distances is unusual. A buffer zone like that proposed should be sufficient to protect state lands from drainage.
By statute, the State of California is prohibited from granting leases covering any portions of the sanctuaries established along the southern California coastline unless it determines . . . first, that oil or gas deposits are believed to be contained in such lands. second, that the same are being drained by means of wells upon adjacent lands, and third, that leasing of the same for the production of oil and gas will be in the state's best interests. Even where drainage is Occurring, the State Lands Commission has some discretion as to allowing drilling on drainage portions of the State sanctuaries. If the state elects to allow such
drilling, it is generally required to keep to a minimum the area in which such drilling is allowed.
Statement: The federal government neither has the authority, nor is it seeking the authority, to inspect oil company training programs or to conduct and validate training exercises on drilling platforms to (a) protect against the possibility of an oil spill, or (b) provide for immediate action required to initiate cleanup procedures.
Comment: It is not true that the federal government neither has the authority nor is seeking the authority to inspect oil company training programs, or to conduct or evaluate training exercises on drilling platforms to protect against the possibility of an oil spill. The authority of the federal government and its intent are demonstrated by numerous regulations governing the conduct of operations with reference to the training of company employees or operating personnel. Proposed OCS, Order No. 2, Pacific Area, of the United States Geological Survey, having to do with supervision and training is as follows:
The company and contractor drilling supervisor shall have completed a well-control school or seminar within the previous year and shall have passed a proficiency test. The operator shall require well-control training for drilling other than the required weekly blowout prevention drills. Written certification shall be filed immediately with the (Federal) supervisor on compliance. . . .
Statement: Under present federal plans, financial liability of the oil companies will be restricted specifically to only cleaning up any oil spill-and does not include payment for damages to the environment.
Comment: It is not true that under present federal law (federal plans are irrelevant), that financial liability of the oil companies is restricted to only cleaning up any oil spills. The Outer Continental Shelf Lands adopts by reference the laws of California in determining liability for conduct on the OCS. Under the laws of California, the person responsible for damage done by a tort is responsible not only for clean-up of the debris, but for injuries done to third parties as a result. Thus, in the cases arising out of the Platform A Santa Barbara Channel spill, the oil companies cleaned up the beach, and have also paid upwards of $10 million in settlements for various sorts of damage.
As respects damages "to the environment", the same rules apply: that is, that the oil companies are liable when other people would be. For instance, air pollution injures the "environment". Where a particular person creating air pollution creates what is known as a "nuisance", he is liable for damages caused by it. But the ordinary person who, by driving a car, adds something to air pollution, is not generally liable for that injury to the "environment". The oil companies, operating in the Outer Continental Shelf, would be liable to the same extent as anybody else.
Statement: Oil production will cause deterioration of residual communities, tourist meccas and general downgrading of property values as happened at Venice.
Comment: There are some instances where communities situated in or about oil production have deteriorated. Examples include Wilmington, Huntington Beach and Venice. Although oil production may be one contributing factor to this decay, it is not necessarily the only one in that many of these localities are afflicted by other types of heavy industries. Wilmington is a case in point. Modern oil well drilling and production carried on in an urban environment do not affect the surrounding community in an adverse way. The City of Los Angeles contains 17 urban drill sites enclosing a total of more than 350 wells and surface property values adjacent to these drill sites remained unchanged. With proper protective measures oil operations can be made compatible with virtually any onshore environment.
It is true that oil production in the community of Venice caused serious problems and is probably responsible for the decline that swept through the Venice Peninsula commencing in 1930. At the same time it must be recognized that operations such as those at Venice are no longer permitted in the City of Los Angeles and are not representative of modern development drilling as conducted by the oil industry.
Statement: What may be gained in federal revenues will be small in comparison to possible property damages.
Comment: The reverse is true. Federal revenues will be many times the values associated with any possible property damage. These revenues will consist primarily of lease payments, royalties, federal income taxes and other taxes. It is estimated that lease payments plus royalties derived from leasing to
relatively shallow-water portions of offshore southern California, will be on the order of $11 billion. When deeper waters are developed, the resources received from such operations may be several times greater.
Federal income taxes paid by the oil industry may amount to $5 billion. One estimate of the costs associated with the offshore sale is from 0.1 to 0.2 billion dollars in possible property damage as a consequence of unattractive aesthetics.
Other gains accruing from the sale of offshore leases are a secure source of crude supply, improvement in our balance of payments, greater employment and an increase in state and local revenues.
Statement: The recent energy crisis turned out to be a benefit to major oil producers in the following ways:
(a) The Alaskan pipeline;
(b) Independent service stations failing;
(c) Profits up to 400 percent over prior years;
(d) OCS accelerated development; and
(e) Drilling should be approved anywhere regardless of environmental impact. Comment: (a) Major oil producers as a group could not be said to benefit from the recent energy crisis in the form of approval of the Trans Alaskan Pipeline.
In the first place, only a very few of the major integrated oil companies have a significant position on the North Slope of Alaska. The bulk of the major oil companies might be placed at a competitive disadvantage relative to those few firms which have substantial North Alaskan holdings at the time that oil reaches the market place. The fact that most oil spokesmen representing both large and small oil interests advocated the pipeline was a manifestation of what they perceived as petroleum experts to be in the nation's interest.
Secondly, although final House and Senate action was probably hastened by the embargo, it was clear prior to the recent Arab-Israeli war that the intention of both houses was to enact the necessary legislation for the pipeline. In July the Senate passed a bill paving the way for the pipeline by a margin of 77–20. A similar bill was passed by the House in early August by a margin of 356-60. (Passage of the final bill by margins of 80-5 in the Senate and 361-14 in the House again indicated the overwhelming belief of Congress that the pipeline is in the public interest.)
(b) Major oil producers have not benefitted from the recent energy crisis in the form of independent service station failures.
By means of both the mandatory gasoline allocation system and through the implementation of the price control program Federal authorities have protected independent marketers. Data which have recently become available suggest that independent gasoline marketers have actually improved their position vis-a-vis the majors. The Lundberg survey, the authoritative source of gasoline market share information, shows that nonbranded marketers increased their market share 21 percent between February 1972 and February 1974. During that same period, according to Lundberg, total industry gallonage decreased approximately one and a half percent.
(c) Recent events in the energy markets have substantially raised oil industry profits; however, through the first half of 1974 no company that can reasonably be classified as a major oil producer received anything like a 400 percent increase.
There are two significant points to be made about the profit improvements which did occur. The first is that the large increases are unrepresentative in the sense that they reflect "unique" circumstances such as profits on reevaluation of inventory and gains on foreign currency fluctuations. Treasury Secretary William Simon recently testified to a Senate Committee with regard to first quarter 1974 profits that "After these special areas are separated out, the mainstream of business, the ongoing petroleum operations, is seen to have recorded an increase in profits of 21 percent." A figure such as the one yielded by Secretary Simon's analysis is a more realistic appraisal of the state of petroleum industry earnings.
The second point is that an earnings increase or decrease of any percentage is meaningless out of context. For instance, a 400 percent increase might mean that a company's earnings went from only one dollar to four dollars. The important consideration is whether or not the domestic petroleum companies are achieving sufficient earnings to support a healthy industry. In past years the domestic industry has been earning a lower rate of return on capital employed
than those typical of U.S. manufacturing. This rate of return was too low for a healthy industry and far too low to attract the massive capital needed for Project Independence.
(d) The oil industry will in the future as it has in the past strive to satisfy consumer demands for petroleum. If the supply necessary to meet future demands is not available from domestic sources, such as the Outer Continental Shelf, then it will come from abroad and be subject to the same risk of interrupted supply that currently imported oil is. The primary benefit to the oil industry of accelerated Outer Continental Shelf development is the same benefit the consumer receives, security of supply. Other than security considerations there are no particular advantages to accelerated OCS development for major producers. Statement: The world has a surplus of oil and no place to store it. Comment: Ever since the Middle East oil fields were developed, there has been a large reserve to production ratio there. World oil reserves similar to most natural resources, are basically stored in the ground until needed. Today the Middle East countries are restricting production since demand at today's prices, is less than the recent production rate there. Kuwait's minister of oil, Abdel Atiqi has stated, "If prices are determined by supply and demand, then we shall reduce the supply of our crude oil to increase the demand on it." The Middle East countries currently prefer to keep the oil in the ground for possible future benefits, rather than to produce more now at a lower price.
Although the Middle East has a large reserve to production ratio, the United States does not. We have been and will continue to be a large net importer of oil and now import 35 percent of our oil needs. This is despite our large reserves of other energy such as coal and shale oil.
U.S. production of oil peaked in 1970, and hence it will not be easy to decrease our imports to an acceptable level. OCS drilling is a necessary step towards being able to decrease our level of imports. Conservation and production of our other energy reserves represent other necessary steps.
Statement: Elk Hills could be used in the interim while researching alternative energy supplies and other oil and gas sources.
Comment: The Elk Hills Naval Petroleum Reserve could contribute to the West Coast domestic oil supply materially, if it were opened up for full production. However, in no sense could it be regarded as a large enough source to bridge the gap between the present and some future time when "alternative energy supplies and other oil and gas sources" are available in sufficient volume to fill West Coast energy requirements.
According to information provided to the Congress by the Comptroller General of the United States, Elk Hills has a present production capability of 100,000 barrels per day which could be built up with substantial additional effort to a maximum daily deliverable rate of 267,000 barrels per day. In either case, additional transportation facilities would also be required. Contrast this volume with present imports into District 5 in excess of 1.1 million barrels per day and a total District 5 demand of about 2.2 million barrels per day. Furthermore, even with substantial development of new production in the Southern California Outer Continental Shelf and in Alaska, District 5 will still require significant volumes of foreign imports in 1985.
Elk Hills production should not be regarded as a substitute for other new domestic production but rather should be regarded as a desirable supplement to other new developments such as the Southern California Outer Continental Shelf. Elk Hills Naval Petroleum Reserve should be considered not only for its oil but its natural gas as a means of meeting future energy requirements, if it should be decided by Congress that depletion of Elk Hills for non-military purposes would be a good policy. Natural gas production from Elk Hills would not provide interim assistance for the natural gas shortage now being experienced, and which should become acute in the next six years. The reason is that all gas reserves at Elk Hills will ultimately be cycled to maintain reservoir pressures and maximize Stevens Zone oil production. And even if it were possible to divert all gas to sales, it would compose only 5 percent of Southern California gas requirements for the rest of this decade.
Statement: A lawsuit is still pending by the State of California against Union Oil Company regarding the Santa Barbara spill.
Comment: The State of California's lawsuit against Union Oil Company has been settled.
Statement: In 1968 Congress passed the Public Information Act designed to make records and data available to the public and from which oil companies were exempted.