210
operations elsewhere if they didn’t get a favorable deal. Political leaders gave in,
fearful of losing elections over lost jobs and not realizing that moving mining operations was largely an empty threat because there are only a limited number of places
to obtain coal.
Nevertheless, a platform of saving “good coal jobs” became a part of many coal
country political campaigns without ever mentioning the actual costs of these jobs
to society and the taxpayers. Some MTR coal operators became billionaires, because
the economics of extracting coal this way are very favorable when there are no associated cleanup or restoration costs. As a result, a few people got extremely wealthy
while large swaths of Appalachia were devastated.
Like MTR coal mining, many of the costs from O&G operations are also externalized. As just one example, the process of divesting from wells that are declining
in production and turning these over to small operators who eventually abandon
them is one way companies avoid the costs of P&A. On a more massive scale, much
of the cleanup expense for large oil spills like the Exxon Valdez or the Deepwater
Horizon accidents was borne by government agencies and taxpayers. The affected
locals were typically stuck with indirect costs such as the loss of fisheries or tourism. Despite the courts leveling huge fines against the responsible parties, actual
corporate payouts were often substantially less.
Sadly, it is often far cheaper to retain a law firm to keep settlements tied up in the
courts until fines are reduced than it is to pay the full amount of damages initially
awarded. For example, an Alaska court initially fined Exxon $287 million for actual
damages and $5 billion in punitive damages for the Valdez spill. Through a series of
appeals, attorneys for Exxon were able to get the punitive amount reduced to $4
billion, then to $2.5 billion, and eventually to $507.5 million, which they paid, saving the company $4.5 billion over the original award (U.S. Supreme Court 2008).
Most of the $2 billion that Exxon actually spent on cleaning up the oil spill was
recovered through insurance claims associated with the grounding of the
Exxon Valdez.
Externalizing costs has become a habit with nearly all sources of energy, not just
coal. During the 1970s oil embargo, oil and gas producers received many favorable
tax breaks and incentives to develop domestic resources of hydrocarbons to offset
imports. Despite the amazing success of fracking that has made the United States
the top producer of both petroleum and natural gas in the world (refer back to Fig.
1.2), many of these 1970s tax breaks and incentives for domestic energy resources
are still on the books. Whenever anyone suggests that the subsidies be rescinded, oil
industry lobbyists respond with threats of energy shortages, job losses, sky-high
gasoline prices, and factory shutdowns. Congress, always fearful of losing elections, has kept them in place.
Some authors, such as Michael Liebreich of Bloomberg New Energy Finance
argue that an itemized bill from society to the fossil fuel industry for externalized
costs should include things like medical care for people suffering from the effects of
air pollution and the military cost of defending oil tanker shipping routes and other
hydrocarbon supply chains. He also claims that $69 trillion in climate-related damages will accrue between now and 2100, and if energy consumers and fossil fuel
11 Balancing Energy, Environment, and Economics
operations elsewhere if they didn’t get a favorable deal. Political leaders gave in,
fearful of losing elections over lost jobs and not realizing that moving mining operations was largely an empty threat because there are only a limited number of places
to obtain coal.
Nevertheless, a platform of saving “good coal jobs” became a part of many coal
country political campaigns without ever mentioning the actual costs of these jobs
to society and the taxpayers. Some MTR coal operators became billionaires, because
the economics of extracting coal this way are very favorable when there are no associated cleanup or restoration costs. As a result, a few people got extremely wealthy
while large swaths of Appalachia were devastated.
Like MTR coal mining, many of the costs from O&G operations are also externalized. As just one example, the process of divesting from wells that are declining
in production and turning these over to small operators who eventually abandon
them is one way companies avoid the costs of P&A. On a more massive scale, much
of the cleanup expense for large oil spills like the Exxon Valdez or the Deepwater
Horizon accidents was borne by government agencies and taxpayers. The affected
locals were typically stuck with indirect costs such as the loss of fisheries or tourism. Despite the courts leveling huge fines against the responsible parties, actual
corporate payouts were often substantially less.
Sadly, it is often far cheaper to retain a law firm to keep settlements tied up in the
courts until fines are reduced than it is to pay the full amount of damages initially
awarded. For example, an Alaska court initially fined Exxon $287 million for actual
damages and $5 billion in punitive damages for the Valdez spill. Through a series of
appeals, attorneys for Exxon were able to get the punitive amount reduced to $4
billion, then to $2.5 billion, and eventually to $507.5 million, which they paid, saving the company $4.5 billion over the original award (U.S. Supreme Court 2008).
Most of the $2 billion that Exxon actually spent on cleaning up the oil spill was
recovered through insurance claims associated with the grounding of the
Exxon Valdez.
Externalizing costs has become a habit with nearly all sources of energy, not just
coal. During the 1970s oil embargo, oil and gas producers received many favorable
tax breaks and incentives to develop domestic resources of hydrocarbons to offset
imports. Despite the amazing success of fracking that has made the United States
the top producer of both petroleum and natural gas in the world (refer back to Fig.
1.2), many of these 1970s tax breaks and incentives for domestic energy resources
are still on the books. Whenever anyone suggests that the subsidies be rescinded, oil
industry lobbyists respond with threats of energy shortages, job losses, sky-high
gasoline prices, and factory shutdowns. Congress, always fearful of losing elections, has kept them in place.
Some authors, such as Michael Liebreich of Bloomberg New Energy Finance
argue that an itemized bill from society to the fossil fuel industry for externalized
costs should include things like medical care for people suffering from the effects of
air pollution and the military cost of defending oil tanker shipping routes and other
hydrocarbon supply chains. He also claims that $69 trillion in climate-related damages will accrue between now and 2100, and if energy consumers and fossil fuel
11 Balancing Energy, Environment, and Economics