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08.02.11

Obama’s Oil Giveaway

After Democrats railed against letting energy companies keep their tax breaks in the debt deal, the Obama administration handed out more than $12 million for research to help oil and gas drilling.

On the same day that Democrats railed against letting oil and gas companies keep their tax breaks in the debt deal, the Obama administration handed out $12.4 million in research grants to help the industry improve the way it drills for oil and gas.

The National Energy Technology Laboratory, the Energy Department’s research arm, announced Monday the series of grants to 10 university and private companies, saying it wanted to help the industry develop better ways to extract natural gas through hydraulic fracturing (dubbed "fracking"), a controversial method that fractures bedrock with a mixture of water and chemicals.

Some of the projects, including one by GE, which will receive the largest chunk of the money, are designed to research the risks associated with fracking, including treating the water for contaminants like radiation. Others will focus on new extraction technology to access oil and gas in hard-to-reach places.

Ironically, at the same time the administration was doling out the money, Democrats such as House Minority Leader Nancy Pelosi were criticizing the debt deal for not raising taxes on the rich or on companies. “We compromised a great deal on cutting back spending, but I see no compromise in terms of allowing billionaires to pay their far share and allowing tax loopholes for oil and other large corporations to be closed,” Rep. Eliot Engel, D-N.Y., lamented to The Hill newspaper.

To environmentalists and budget hawks alike, the handouts were especially surprising in light of the $35.1 billion combined profit windfall that the world’s six largest fossil-fuel companies—Exxon, BP, Shell, Chevron, Total, and ConocoPhillips—saw in the second quarter of 2011. Profits for all of the companies, except for BP, set new records. Some wondered aloud why the energy companies weren’t left to fund the research themselves.

“These energy companies have done extremely well. Clearly this research and development will help them.”

“Many of these projects are for technologies that are directly going to benefit the bottom line of some of the biggest companies in the country,” says Steve Ellis, vice president with advocacy group Taxpayers for Common Sense. “These energy companies have done extremely well. Clearly this research and development will help them.”

Environmentalists also signaled their discomfort. “The taxpayers should not be spending money to help an industry increase its profits,” says Amy Mall, a senior policy analyst with the National Resources Defense Council. But the group noted the need for more independent and objective research on the environmental impacts of drilling.

In announcing the funding, the Department of Energy said that quantifying the risks will help make energy exploration safer and more efficient, especially while the country still relies on oil and gas for about 60 percent of the nation’s power. The results of the research will be available to all energy developers for free.

The White House defended the government grants, pointing to Obama’s 2011 Blueprint for a Secure Energy Future, which says that the Energy Department and the Environmental Protection Agency will fund occasional research to examine the environmental impacts of energy exploration.

Update: Damien LaVera, a spokesman for the Department of Energy, clarified that the projects are not being funded with taxpayer money, but instead a different internal fund that collects lease bonuses and royalties from gas and oil developers. "This funding is part of the administration's effort to ensure that America's energy resources are developed safely and responsibly,” says LaVera. “It supports mostly university research that will help inform best practices and ensure we continue to take steps to minimize environmental impacts, including protecting drinking water.”