FRONT PAGE CONTRIBUTOR
Rep. Ed Markey (D) on the BP/Russia Deal
Anyone can be misinformed, or suffer a mental lapse resulting in an incorrect statement. Any of us might be stricken with poor judgment, and take a questionable position on an important matter of state from time to time.
But occasionally prejudice, bad judgment and contorted logic become woven together into a tapestry of wrong-headed thinking. And sometimes the people who issue these statements hold responsible government jobs. Scary.
As an example, here is the entire text of a polymorphously boneheaded statement from Rep. Ed Markey (D-MA), with analysis below the fold:
WASHINGTON (January 14, 2011) – Reacting to reports of a major share-swap between BP and the Russian state-owned oil company Rosneft, Rep. Edward J. Markey (D-Mass.) issued the following statement. Rep. Markey, who is the top Democrat on the House Natural Resources Committee, called for a thorough analysis of the agreement. If the deal is found to affect the operations of BP America, Rep. Markey says the Committee on Foreign Investment in the United States, a Treasury Department entity tasked with reviewing and acting upon the national security implications of foreign investments, should analyze the deal. In 2009, BP was the top petroleum supplier to the United States military.
“Even following the largest oil spill in U.S. history, and potentially billions of dollars in fines still outstanding, the Russian Bear is apparently bullish about BP. This acquisition will almost certainly complicate the politics of levying and collecting damages from BP following their Gulf of Mexico oil spill.
“BP once stood for British Petroleum. With this deal, it now stands for Bolshoi Petroleum.
“The details of this deal and its impacts on the operations of BP America need to be thoroughly examined. If this agreement affects the national and economic security of the United States then it should be immediately reviewed by the Committee on Foreign Investment in the United States. Additionally, the U.S. State Department should closely monitor this transaction.”
[Bolding in original. Italics mine.]
Where to begin?
- “In 2009, BP was the top petroleum supplier to the United States military.” My preference would be for the U.S., not just the military,to be less dependent on foreign sources. Russia’s involvement concerns me, too, but oil is a world-wide commodity, and Russia is the world’s #1 producer of oil. The U.S. imports some 70% of its oil needs, and the imports have to come from somewhere.
- “…[The] Russian Bear is apparently bullish about BP. … BP once stood for British Petroleum. With this deal, it now stands for Bolshoi Petroleum.” Not hardly. BP owns more of Rosneft than vice versa. And Rosneft was “bullish about BP” because BP’s shares were savaged in the stock market. Caveat emptor. From a WSJ Article (link may require subscription):
The deal makes Rosneft the single largest BP shareholder. … Rosneft will be issued new BP shares equivalent to a 5% stake, valued at $7.8 billion, while BP will receive a 9.5% stake in Rosneft, in addition to the 1.3% it already holds.
- “This acquisition will almost certainly complicate the politics of levying and collecting damages from BP following their Gulf of Mexico oil spill.” So your primary interest in the financial health of BP is their ability to pay the as-yet-unspecified fines that you plan to levy against them? How about keeping them healthy to pay American taxes, supply America’s oil and provide good-paying jobs? Plus, why will collecting fines be more difficult?
- BP must also be concerned about its future. Resource companies must replace production or die. As the American environmental, regulatory and legal climate have made the U.S. a hostile operating arena for all operators, and BP in particular, they are bound to look elsewhere.
[WSJ]: The deal entrenches BP’s position in Russia, at a time when the Gulf spill has raised doubts about the company’s ability to grow in the U.S. … The deal gives BP access to an area long seen as the final frontier for energy exploration. A 2008 report by the U.S. Geological Survey found that the area north of the Arctic Circle contains just over a fifth of the world’s undiscovered, recoverable oil and gas resources. It said the Arctic has an estimated 1,670 trillion cubic feet of gas—nearly two-thirds the proved gas reserves of the entire Middle East—and 90 billion barrels of oil.
- BP is the biggest operator in the U.S. sector of the North Slope of Alaska and a leading operator in the Deepwater Gulf of Mexico. Virtually every other domestic basin with the world-class exploration potential that companies like BP need to sustain themselves is off limits.
[WSJ]: Under the tie-up, BP and Rosneft will jointly explore three license blocks owned by Rosneft in the South Kara Sea, an area covering 125,000 square kilometers. BP said the license area was comparable to the U.K. North Sea —which contains some 60 billion barrels of oil and gas—in terms of its size and potential.
Rep. Markey and his Democratic colleagues have always been deeply distrustful of the American oil and gas industry. They have done nothing to help build energy security for our nation, and have permanently put our own resources off-limits, while putting us at the mercy of hostile regimes. If they were truly interested in “the national and economic security of the United States”, they would bypass another round of pointless committee hearings, and get on with the real business of opening access to American resources for American firms. We must also realize that our inattention to energy policy has put us in a position where we need BP’s oil so badly that we lose a vote on who they do business with, and when they do it.
Cross-posted at VladEnBlog.