A New Energy Third World in North America?

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This post originally appeared on Tom Dispatch.


The “curse” of
oil wealth is a well-known phenomenon in Third World
petro-states where millions of lives are wasted in poverty and the environment
is ravaged, while tiny elites rake in the energy dollars and corruption rules
the land. Recently, North America has been repeatedly hailed as the planet’s twenty-first-century “new
Saudi Arabia” for “tough energy”deep-sea oil, Canadian tar sands,
and fracked oil and natural gas. But here’s a question no one considers: Will
the oil curse become as familiar on this continent in the wake of a new
American energy rush as it is in Africa and
elsewhere? Will North America, that is, become not just the next boom continent
for energy bonanzas, but a new energy Third World?

Once upon a
time, the giant U.S. oil
companies — Chevron, Exxon, Mobil, and Texaco — got their start in North
America, launching an oil boom that lasted a century and made the U.S. the
planet’s dominant energy producer. But most of those companies have long since
turned elsewhere for new sources of oil.

Eager to escape ever-stronger environmental restrictions and dying oil
fields at home, the energy giants were naturally drawn to the economically and
environmentally wide-open producing areas of the Middle East, Africa, and Latin
America — the Third World — where oil deposits were plentiful, governments
compliant, and environmental regulations few or nonexistent.

Here, then, is
the energy surprise of the twenty-first century: with operating conditions
growing increasingly difficult in the global South, the major firms are now
flocking back to North America. To exploit
previously neglected reserves on this continent, however, Big Oil will have to
overcome a host of regulatory and environmental obstacles. It will, in other
words, have to use its version of deep-pocket persuasion to convert the United States into the functional equivalent of
a Third World petro-state.

observers are already noting the first telltale signs of the oil industry’s
“Third-Worldification” of the United
States. Wilderness areas from which the oil
companies were once barred are being opened to energy exploitation and other
restraints on invasive drilling operations are being dismantled. Expectations
are that, in the wake of the 2012 election season, environmental regulations
will be rolled back even further and other protected areas made available for
development. In the process, as has so often been the case with Third World petro-states, the rights and wellbeing of
local citizens will be trampled underfoot.

to the Third World of Energy

Up until 1950,
the United States was the
world’s leading oil producer, the Saudi Arabia of its day. In that
year, the U.S.
produced approximately 270 million metric tons of oil, or about 55% of the
world’s entire output. But with a postwar recovery then in full swing, the
world needed a lot more energy while America’s most accessible oil
fields — though still capable of growth — were approaching their maximum
sustainable production levels. Net U.S. crude oil output reached a peak of about 9.2 million barrels per day in 1970 and then
went into decline (until very recently).

This prompted
the giant oil firms, which had already developed significant footholds in Indonesia, Iran,
Saudi Arabia, and Venezuela, to
scour the global South in search of new reserves to exploit — a saga told with
great gusto in Daniel Yergin’s epic history of the oil industry, The Prize. Particular attention was
devoted to the Persian Gulf region, where in 1948 a consortium of American
companies — Chevron, Exxon, Mobil, and Texaco — discovered the world’s
largest oil field, Ghawar, in Saudi
Arabia. By 1975, Third World countries were producing 58% of the world’s oil supply, while the U.S. share had
dropped to 18%.

concerns also drove this search for new reserves in the global South. On
January 28, 1969, a blowout
at Platform A of a Union Oil Company offshore field in California’s Santa Barbara Channel produced
a massive oil leak that covered much of the area and laid waste to local
wildlife. Coming at a time of growing environmental consciousness, the spill
provoked an outpouring of public outrage, helping to inspire the establishment
of Earth Day, first observed one year later. Equally important, it helped spur
passage of various legislative restraints on drilling activities, including the
National Environmental Policy Act of 1970, the Clean Water
of 1972, and the Safe
Drinking Water Act
of 1974. In addition, Congress banned new drilling in
waters off the Atlantic and Pacific coasts and in the eastern Gulf of Mexico
near Florida.

During these
years, Washington
also expanded areas designated as wilderness or wildlife preserves, protecting
them from resource extraction. In 1952, for example, President Eisenhower
established the Arctic
National Wildlife Range
and, in 1980, this remote area of northeastern Alaska was redesignated
by Congress as the Arctic
National Wildlife Refuge
(ANWR). Ever since the discovery of oil in the
adjacent Prudhoe Bay area, energy firms have
been clamoring for the right to drill in ANWR, only to be blocked by one or
another president or house of Congress.

For the most
part, production in Third World countries
posed no such complications. The Nigerian government, for example, has long
welcomed foreign investment in its onshore and offshore oil fields, while
showing little concern over the despoliation of its southern coastline, where
oil company operations have produced a massive environmental disaster. As Adam
Nossiter of the New York Timesdescribed the resulting situation, “The Niger Delta, where
the [petroleum] wealth underground is out of all proportion with the poverty on
the surface, has endured the equivalent of the Exxon Valdez spill every year
for 50 years by some estimates.”

As vividly laid
out by Peter Maass in Crude World, a similar pattern is evident in many
other Third World petro-states where anything goes as compliant government
officials — often the recipients of hefty bribes or other oil-company favors
— regularly look the other way. The companies, in turn, don’t trouble
themselves over the human rights abuses perpetrated by their foreign government
“partners” — many of them dictators, warlords, or feudal potentates.

But times change. The Third World
increasingly isn’t what it used to be. Many countries in the global South are
becoming more protective of their environments, ever more inclined to take ever
larger cuts of the oil wealth of their own countries, and ever more inclined to
punish foreign companies that abuse their laws. In February 2011, for example,
a judge in the Ecuadorean Amazon town of Lago
Agrio ordered Chevron to pay $9 billion in damages for
environmental harm caused to the region in the 1970s by Texaco (which the
company later acquired). Although the Ecuadorians are unlikely to collect a
single dollar from Chevron, the case is indicative of the tougher regulatory
climate now facing these companies in the developing world. More recently, in a
case resulting from an oil spill at an offshore field, a judge in Brazil has seized the passports of 17 employees of Chevron and U.S.
drilling-rig operator Transocean, preventing them from leaving the country.

In addition,
production is on the decline in some developing countries like Indonesia and Gabon, while others have
nationalized their oil fields or narrowed the space in which private
international firms can operate. During Hugo Chávez’s presidency, for example,
Venezuela has forced all foreign firms to award a majority stake in their
operations to the state oil company, Petróleos de Venezuela S.A. Similarly, the Brazilian
government, under former President Luiz Inácio Lula da Silva, instituted a rule
that all drilling operations in the new “pre-salt” fields in the Atlantic Ocean
— widely believed to be the biggest oil discovery of the twenty-first century
— be managed by the state-controlled firm, Petróleo de Brasil

Our Way to a Toxic Planet

Such pressures
in the Third World have forced the major U.S. and European firms — BP,
Chevron, ConocoPhillips, ExxonMobil, Royal Dutch Shell, and Total of France —
to look elsewhere for new sources of oil and natural gas. Unfortunately for
them, there aren’t many places left in the world that possess promising
hydrocarbon reserves and also welcome investment by private energy giants.
That’s why some of the most attractive new energy markets now lie in Canada and the United States, or in the waters off
their shores. As a result, both are experiencing a remarkable uptick in fresh
investment from the major international firms.

Both countries
still possess substantial oil and gas deposits, but not of the “easy” variety
(deposits close to the surface, close to shore, or easily accessible for
extraction). All that remains are “tough” energy reserves (deep underground,
far offshore, hard to extract and process). To exploit these, the energy
companies must deploy aggressive technologies likely to cause extensive damage
to the environment and in many cases human health as well. They must also find
ways to gain government approval to enter environmentally protected areas now
off limits.

The formula for
making Canada and the U.S. the “Saudi Arabia” of the twenty-first
century is grim but relatively simple: environmental protections will have to
be eviscerated and those who stand in the way of intensified drilling, from
landowners to local environmental protection groups, bulldozed out of the way.
Put another way, North America will have to be

Consider the
extraction of shale oil and gas, widely considered the most crucial aspect of
Big Oil’s current push back into the North American market. Shale formations in
Canada and the U.S. are
believed to house massive quantities of oil and natural gas, and their accelerated
extraction is already helping reduce the region’s reliance on imported

Both energy
sources, however, can only be extracted through a process known as hydraulic
fracturing (“hydro-fracking,” or just plain “fracking”) that uses powerful jets
of water in massive quantities to shatter underground shale formations,
creating fissures through which the hydrocarbons can escape. In addition, to
widen these fissures and ease the escape of the oil and gas they hold, the
fracking water has to be mixed with a variety of often poisonous solvents and
acids. This technique produces massive quantities of toxic
, which can neither be returned to the environment without
endangering drinking water supplies nor easily stored and decontaminated.

The rapid
expansion of hydro-fracking would be problematic under the best of
circumstances, which these aren’t. Many of the richest sources of shale oil and
gas, for instance, are located in populated areas of Texas,
Arkansas, Ohio,
Pennsylvania, and New York. In fact, one of the most promising
sites, the Marcellus formation, abuts New York
City’s upstate watershed area. Under such
circumstances, concern over the safety of drinking water should be paramount,
and federal legislation, especially the Safe Drinking Water Act of 1974, should
theoretically give the Environmental Protection Agency (EPA) the power to
oversee (and potentially ban) any procedures that endanger water supplies.

However, oil
companies seeking to increase profits by maximizing the utilization of
hydro-fracking banded together, put pressure on Congress, and managed to get
itself exempted from the 1974 law’s provisions. In 2005, under heavy lobbying
from then Vice President Dick Cheney — formerly the CEO of oil services
contractor Halliburton — Congress passed the Energy Policy Act, which prohibited the EPA from
regulating hydro-fracking via the Safe Drinking Water Act, thereby eliminating
a significant impediment to wider use of the technique.


Since then,
there has been a virtual stampede to the shale regions by the major oil
companies, which have in many cases devoured smaller firms that pioneered the
development of hydro-fracking. (In 2009, for example, ExxonMobil paid $31 billion to acquire XTO Energy, one of the leading
producers of shale gas.) As the extraction of shale oil and gas has
accelerated, the industry has faced other problems. To successfully exploit
promising shale formations, for instance, energy firms must insert many wells,
since each fracking operation can only extend several hundred feet in any
direction, requiring the establishment of noisy, polluting, and potentially hazardous drilling
operations in well-populated rural and suburban areas.

While drilling
has been welcomed by some of these communities as a source of added income,
many have vigorously opposed the invasion, seeing it as an assault on
neighborhood peace, health, and safety. In an effort to protect their quality
of life, some Pennsylvania communities, for example, have adopted zoning laws
that ban fracking in their midst. Viewing this as yet another intolerable
obstacle, the industry has put intense pressure on friendly members of the state legislature to
adopt a law depriving most local jurisdictions of the right to exclude fracking
operations. “We have been sold out to the gas industry, plain and simple,” said Todd Miller, a town commissioner in South Fayette
Township who opposed the

If the energy
industry has its way in North America, there
will be many more Todd Millers complaining about the way their lives and worlds
have been “sold out” to the energy barons. Similar battles are already being fought elsewhere in North America, as energy firms seek to overcome
resistance to expanded drilling in areas once protected from such activity.

In Alaska, for example, the
industry is fighting in the courts and in Congress to allow drilling in coastal
areas, despite opposition from Native American communities which
worry that vulnerable marine animals and their traditional way of life will be
put at risk. This summer, Royal Dutch Shell is expected to begin test drilling in the Chukchi Sea,
an area important to several such communities.

And this is
just the beginning. To gain access to additional stores of oil and gas, the
industry is seeking to eliminate virtually all environmental restraints imposed
since the 1960s and open vast tracts of coastal and wilderness areas, including
ANWR, to intensive drilling. It also seeks the construction of the much disputed Keystone XL pipeline, which is to transport
synthetic crude oil made from Canadian tar sands — a particularly “dirty” and
environmentally devastating form of energy which has attracted substantial U.S. investment — to Texas
and Louisiana
for further processing. According to Jack Gerard, president of the American
Petroleum Institute (API), the preferred U.S. energy strategy “would include
greater access to areas that are currently off limits, a regulatory and
permitting process that supported reasonable timelines for development, and
immediate approval of the Keystone XL pipeline.”

To achieve
these objectives, the API, which claims to represent more than 490 oil and
natural gas companies, has launched a multimillion-dollar campaign to sway the 2012 elections,
dubbed “Vote 4 Energy.” While describing itself as nonpartisan, the
API-financed campaign seeks to discredit and marginalize any candidate,
including President Obama, who opposes even the mildest version of its
drill-anywhere agenda.

“There [are]
two paths that we can take” on energy policy, the Vote 4 Energy Web site
proclaims. “One path leads to more jobs, higher government revenues and greater
energy security — which can be achieved by increasing oil and natural gas
development right here at home. The other path would put jobs, revenues and our
energy security at risk.” This message will be broadcast with increasing
frequency as Election Day nears.

According to
the energy industry, we are at a fork in the road and can either choose a path
leading to greater energy independence or to ever more perilous energy
insecurity. But there is another way to characterize that “choice”: on one
path, the United States will increasingly come to resemble a Third World
petro-state, with compliant government leaders, an increasingly money-ridden
and corrupt political system, and negligible environmental and health
safeguards; on the other, which would also involve far greater investment in
the development of renewable alternative energies, it would remain a First
World nation with strong health and environmental regulations and robust
democratic institutions.

How we
characterize our energy predicament in the coming decades and what path we
ultimately select will in large measure determine the fate of this nation.

Michael T.
Klare is a professor of peace and world security studies at Hampshire College,
TomDispatch regular, and the author of The Race for What’s Left: The Global Scramble for the World’s
Last Resources
just published by Metropolitan Books. To listen to
Timothy MacBain’s Tomcast audio interview in which Klare discusses his new book
and what it means to rely on extreme energy, click
here, or download it to your iPod here. Klare can be followed on Facebook.

TomDispatch on Twitter @TomDispatch and join us on Facebook.

Copyright 2012
Michael T. Klare

Image by Robert Croft, licensed under Creative Commons

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