Life After the Gulf: A Paradigm Shift?
The Canada Institute held its thirteenth energy forum on July 22 in Toronto in collaboration with the Canada West Foundation and Global Public Affairs. The forum explored the impact of the Deepwater Horizon oil spill in the Gulf of Mexico on public trust toward energy companies and governments. More than 35 senior level Canadian and U.S. officials, energy experts, and representatives from the energy industry were in attendance.
Panelist and participant remarks were off-the-record.
Measuring the Gulf Spill's Impact on Public Opinion
Participants reached a consensus that the Gulf spill would not result in a paradigm shift in North American energy usage and production. Nevertheless, as one panelist pointed out, this depends on how a paradigm shift is defined. If one's definition is simply increased costs and stricter regulations to produce oil and gas in the wake of the Gulf crisis, then the spill fits the parameters of a paradigm shift. However, if the definition centers on a shift to renewable sources, it falls well short. Participants suggested that public outrage over the incident will fade over time and that implementation of new regulations to address the issue may come after public discontent has peaked.
Determining the impact of the Gulf oil spill on public opinion toward stronger regulations on the oil and gas industry and attitudes on alternative fuels will be particularly difficult to determine given the varying cultural, political, and economic views on the subject across North America. While some analysts stated that the Gulf spill may benefit Alberta by allowing its oil sands to appear less environmentally risky, that has proven not to be the case in some instances. In contrast, some members of the environmental community have drawn a parallel not distinction between the two, calling the oil sands an "intentional disaster."
One panelist argued that another recent headline—that of China overtaking the United States as the world's largest energy consumer—could be a more significant event toward an eventual shift to a low-carbon economy.
Panelists agreed that the oil and gas industry can expect a strong legislative response in several areas as a result of the Gulf spill, which is widely considered the worst environmental disaster in U.S. history. In addition to launching several investigations into the catastrophe, U.S. legislators will seek to increase the current liability limit on a spill; propose tougher environmental and safety regulations on the industry; enforce stricter spill response requirements; and call for more funding toward research and development that would help prevent and mitigate the effects of any future spills. The Gulf spill has also shifted focus away from enacting climate change legislation and divided the environmental movement into those who view the disaster as justification for a faster transition to clean energy and those who favor more extreme measures to end fossil fuel use, such as immediately ceasing all drilling in the United States.
The Gulf spill is also to blame for an anticipated increase in the cost of energy insurance. In addition to the Gulf spill and new legislation, several other factors are currently contributing to an increasingly volatile energy insurance market including the Gulf of Mexico hurricane season and increased reinsurance cost.
In general, panelists agreed that oil and gas companies will have a more difficult time maintaining and expanding their U.S. operations in a now very uncertain regulatory environment. In addition to the federal government, coastal states are in the process of reviewing the strength of their own offshore oil regulations and some could push for stronger oversight in this area.
The Future of Oil and Gas in Canada and the United States
Although the Gulf spill will not likely result in a paradigm shift, panelists did agree the catastrophe has undermined public trust in government and the oil and gas industry. One panelist cautioned against enacting new environmental regulations before all the facts are known regarding the causes of the Gulf oil spill. Failure to wait for a final report could result in costly and unnecessary regulations that could slow or restrict oil and gas development at a time when global energy demand is increasing. Sound environmental legislation must strike a balance between environmental, energy, and energy security goals.
From an industry perspective, the Canadian government has taken a measured response to the Gulf spill. Nonetheless, the forum's discussion suggested that the oil and gas industry must continue to strive to improve its environmental and safety performance. The Canadian public expects oil sands development to continue, said one panelist, but in a responsible and transparent manner. Industry will have to make a concerted effort to restore public trust in its operations following the Gulf spill and convince the public that industry is part of the solution to a cleaner energy future.
To this end, key members of the oil and gas industry are meeting regularly to try and prevent another Gulf spill and improve its response should another major spill occur. Industry task forces have been created for this purpose in the areas of offshore equipment, offshore operating procedures, subsea well control and containment, and oil spill response. In addition to industry activity, U.S. government agencies have been very active in the wake of the spill. The U.S. Department of the Interior has been particularly busy, implementing new safety and environmental planning requirements since the spill, as well as continued efforts to implement a moratorium on new offshore drilling.
The forum also featured a luncheon with remarks from T. Boone Pickens of BP Capital Management. Pickens maintained that the United States' lack of a comprehensive energy plan is a major reason why the country has remained dependent on foreign oil for decades. He called on the United States to focus on the development of its abundant domestic supply of natural gas as a means of reducing dependency on foreign oil and lowering the country's carbon emissions.
By Ken Crist, Program Associate, Canada Institute