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Energy return of ultra-deepwater Gulf of Mexico oil and gas | Peak Energy & Resources, Climate Change, and the Preservation of Knowledge

Numerous studies have shown royalties paid to the government for GoM offshore production are among the lowest rates paid to any fiscal system in the world [52,53]. The government is effectively subsidizing the most profitable corporations in the world at the expense of public taxpayers. These subsidies provide false market signals to continue energy supply processes that otherwise would not be competitive, thereby reducing economic efficiency [54]. This encourages oil companies to go after low EROI oil reserves that would likely not be produced without subsidies. Such subsidies further obscure reality by causing alternative energy markets to be less cost competitive [55].

Another indirect cost not accounted for in this study includes the cost of the loss of the value of ecosystem services as a result of federal offshore energy production. Air and water pollution attributed to the oil and gas industry are market externalities that in reality have costs borne by society. Ecosystem degradation in the form of wetland loss, partly as a result of oil and gas industry infrastructure, has increased the risk of natural disasters to coastal communities [56]. Batker et al. [57] carried out a partial assessment of the value of ecosystem services of the Mississippi River delta. They reported an annual value of ecosystem services of $12 to $47 billion and a minimum natural capital asset value of the delta of $330 billion to $1.3 trillion.

The damage to marine and coastal environments associated with the Macondo Prospect blowout is substantial. Commercial fisheries production and economic losses to the coastal tourism sector are expected to cost tens of billions of dollars. Including such costs in the analysis would likely cause the Macondo Prospect EROI to be negative. Ecosystem service values are largely outside the scope of the market economy, thereby discounting their importance to society.

Source: Energy return of ultra-deepwater Gulf of Mexico oil and gas | Peak Energy & Resources, Climate Change, and the Preservation of Knowledge

Regarding the first paragraph… why do we never see these subsidies on the chopping block by anyone?  Seems like every other week someone wants to cut some service to poor people but no one ever mentions cutting all the corporate welfare.  Why?   (Hint: You KNOW why… say it out loud.)

Regarding paragraph two, I have heard people use this argument as justification for giving a dollar value to everything in the natural world – that is not a proper justification for putting a value on common goods (or should be common goods) like trees, old growth forests (POLAND!), ecosystems, and animals which are all, quite frankly, priceless.

Regarding paragraph #3….  why would it be worth it for negative return?  Cut the !@#$ing subsidies and that’ll do more than just about anything else to #leaveitintheground.

Good paper, highly recommended reading.



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