Letter to The Advocate: Gulf oil, gas value exaggerated

On February 23, The Advocate published my Letter to the Editor written in response to an article the paper published asking leaders of the anti-deep water drilling moratorium leaders to explain how tax collections were up and unemployment down in the state and in the markets where the moratorium was predicted to spread economic calamity.


Here's the text of the letter:

Advocate Capitol news bureau reporter Michelle Millhollon’s Feb. 15 article on reality not conforming to the hysteria generated by critics of the deep-water drilling moratorium served a valuable purpose beyond forcing those critics to confront the facts that their scare campaign against the moratorium was a hoax perpetrated against the people of this state.

The oil and gas industry, its lobbyists and public officials dependent on the industry for political funding fanned the anti-moratorium hysteria.

The signs of the hoax can be found in the lawsuit filed to overturn the moratorium a month after it was declared.

When 37 companies joined Hornbeck International in the suit against the moratorium, it looked like an industrywide revolt against the moratorium.

The reality was that those 37 companies were owned or controlled by two prominent Louisiana Republicans, Boysie Bollinger and Gary Chouest. Bollinger controlled 21 of the companies, Chouest 16.

Gov. Bobby Jindal directed state Attorney General Buddy Caldwell to file an amicus brief in the case in which Caldwell and his attorneys lied to Judge Martin Feldman.

On page four of that June 20 brief, in his “Statement of the Case” Caldwell declared: “Because of the moratorium, many thousands of Louisiana workers have lost their employment and many more are at risk of losing it in the near future.”

The only problem with the statement is that it was not true. The Louisiana Workforce Commission weekly reports on new unemployment claims never mentioned the moratorium at any time during the spring and summer of 2010 because thousands of jobs were not lost. In fact, new unemployment claims fell through most of the summer.

Lobbyists such as Don Briggs, of Louisiana Oil and Gas Association, can be forgiven; after all, they are paid to spin stories so as to put their clients in the best light. But those supposedly independent organizations that joined in fanning the fears last summer — Greater New Orleans Inc., the Greater Lafayette Chamber of Commerce, the LSU Center for Energy Studies — have had their credibility seriously damaged.

Public officials who were active players in this hoax — Gov. Bobby Jindal, then-interim Lt. Gov. Scott Angelle and Caldwell — must also be held accountable. Either they were knowing participants in this hoax or their industry patrons duped them.

All of this raises the possibility that we might have all been victims of a larger, longer-running hoax.

In light of the moratorium’s failure to cripple our economy, could it be that the economic importance of the offshore oil and gas industry to the state has been vastly overstated all these years?

Who can we now trust to give us an honest answer on this?

Mike Stagg
independent IT consultant
Lafayette

Waritorium: The Deep Water Moratorium Threatens Two of the State's Republican Oligarchs

Any chance for good cooperation between the federal government and the state of Louisiana in the response to the BP Gulf Gusher died on May 30 when the U.S. Department of the Interior declared a six-month moratorium on deep water drilling in the Gulf of Mexico in the wake of the then month-old disaster.

Although the New York Times reported that Governor Bobby Jindal's personal dissatisfaction with the federal response to the disaster had gone public by May 3, the moratorium ratcheted up the pressure in the already tense situation by threatening losses in the industry that had caused the disaster.

The logic of the moratorium was impeccable. Here was an on-going gusher on the floor of the Gulf of Mexico from a well that was owned by one of the major energy companies, BP, and it was out of spewing ever larger quantities of oil into the Gulf. The best minds in the industry were helping BP develop strategies to cap the well, but nothing appeared to be working. And, in fact, nothing has worked yet.

There were published reports of at least one other deep water rig with safety issues. The emergency response plans of the other major operators in the deep water areas open to drilling looked suspiciously like BP's which mentioned the need to protect walruses that might be impacted by a potential spill. Walruses in the Gulf of Mexico, remember?

So, the moratorium looked like the prudent call until the cause of the BP Gulf Gusher could be identified, the well capped, and a new set of safety rules issued based on what was learned from this incident.

But, alarm about the potential impact from the moratorium quickly went up along the coast and from within state government. Tens of thousands of jobs were threatened if the moratorium was allowed to stand. The job loss numbers fluctuated but trended downward in the first weeks after the moratorium was announced.

Jindal assigned his newly minted Lieutenant Governor Scott Angelle the task of heading up the effort to generate public opposition to the moratorium. Angelle formed a coalition and had an online petition created. He traveled across the southern part of the state rallying opposition. He met with federal officials, parroting dire predictions of the impact of the moratorium. He followed Jindal's lead and bashed the President.

"Mr. President, I get the fact that you don't like big oil and gas," said Jindal's recently appointed interim lieutenant governor, Scott Angelle. "But this is not about the stockholders of BP and Shell and Exxon and Chevron. This is about the Cheramises and the Callaises and the Boudreauxs and the Thibodeauxs!"

Still, the moratorium stuck.

Oligarchs In The Open

Then Hornbeck Offshore Services, LLC, of Covington, announced its intention to file suit challenging the moratorium. It was assigned to Federal District Court Judge Martin Feldman in New Orleans and the rest is history. Feldman overturned the moratorium.

Hornbeck was joined in the challenge by 37 other companies in the challenge, giving the impression that a broad swath of the industry opposed the moratorium. The governor's office filed a brief in support of Hornbeck's claim.

In retrospect, it was something of a charade. The 37 companies that joined Hornbeck in the suit were owned by two families, both headed by second-generation scions to empires that their fathers built from scratch. Donald T. Bollinger (21) and Gary Chouest (16) and their families controlled all 37 companies that joined the Hornbeck challenge. The companies are mostly based in Louisiana with one Bollinger company in Texas, a Chouest company in Mississippi and one in Florida. All but two of the companies at limited liability corporations, meaning that they are personally controlled by the people heading the LLCs.

For the relevant corporate documents (PDFs) on each of the Bollinger companies that took part in the challenge, click on the name: Bee Mar-Worker Bee LLC; Bee Mar LLC; Bollinger Algiers, LLC; Bollinger Marine Fabricators, Inc.; Bee Mar-Bayou Bee LLC; Bollinger Amelia Repair, LLC; Bee Mar-Bee Hive, LLC; Bee Mar-Queen Bee, LLC; Bollinger Shipyards, Inc.; Bee-Mar-Honey Bee LLC; Bee Mar-Busy Bee LLC; Bee Mar Crews LLC; Bee Mar-Bumble Bee LLC; Bollinger Texas City, LP; Bollinger Calcasieu, LLC; Bollinger Shipyards Lockport, LLC; Bollinger Quick Repair, LLC; Bollinger Morgan City, LLC; Bollinger Gretna, LLC; Bee Mar-Bee Sting LLC; and Bollinger Fourchon, LLC.

Here are the names of the Chouest companies (click names for corporate details): North American Fabricators, LLC; Offshore Support Services, LLC; Martin Holdings, LLC; Sea Fluids, LLC; C-Port 2, LLC; C-Port, LLC; Fourchon Heavy Lift, LLC; C-Innovation, LLC; Clean Tank, LLC; North American Shipbuilding, LLC; Alpha Marine Services, LLC; Nautical Solutions LLC; Nautical Ventures, LLC; and Reel Pipe LLC. Two other Chouest companies took part in the challenge: Tampa Ship, LLC and Gulf Ship, LLC. Those links take you to pages on the Chouest web site.

The involvement of these 37 companies did not constitute a broad industry response. It was, instead, a shriek of anger at the federal government that had thrown into jeopardy the empires of two of the key members of the new Republican oligarchy that has been ascendant in Louisiana politics in recent years. The Bollingers and the Chouests were reliable heavy hitters for the party and its causes.

In trying to prevent another blowout in the hazardous deep water environment, President Obama had unwittingly delivered would could prove to be a lethal blow to some of some of the wealthiest arch conservative activists in the state. If the President did not realize the full extent of the in-state political implications of the moratorium, it did not take too long to become evident.

Joining the lawsuits either constituted political theater on the part of Bollinger and the Chouests, or significant parts of their compartmentalized empires are in real financial jeopardy if the moratorium stands. Their respective empires are segmented into numerous limited liability corporations which enables the owners to derive significant tax breaks from profitable ventures and to confine losses to under-performing companies in the event of an industry slow down — or a deep water drilling moratorium.

The companies owned by these men and their families generate huge sums of money. They have facilities scattered across south Louisiana. Their customers of their offshore supply vessels are the largest energy companies in the world. Increasingly, the companies compete against one another. Bollinger began as a boat building company and has now gotten into the offshore supply vessel business (the Bee Mar companies listed in the suit are mostly individual companies based on specific boats). Bollinger has built boats for Chouest. Now, Chouest has entered into the ship building business and competes against Bollinger. He's also chasing the deep water expansion getting ready to take place off the coast of Brazil.

Both companies have ventured out beyond the state line, but the bulk of their business is in this state. Chouest became a minority owner in the New Orleans Hornets a couple of years ago and has announced his intention to buy the team. One indicator of the severity of the impact on Chouest operations would be if the already-delayed was pushed further back or called off.

Party Animals

Both Donald Bollinger and Gary Chouest and their families have been major players in the Republican Party in recent years. Chouest was a $100,000 contributor to the Louisiana Committee for a Republican Majority back in the 2007 statewide campaign cycle. Bollinger was one of the original contributors to the group and went in for $77,500 over the 2006-07 span. LCRM head Joseph Canizaro named Bollinger to the board of directors of his bank at least in part in recognition of their political work together.

Bollinger also made numerous contributions to individual candidates through his various LLCs. Chouest and his family and various LLCs they control have made large financial contributions to the state Republican Party and to various campaigns and candidates.

In fact, with Bollinger and Chouest leading the way, the southeast Louisiana oil patch has become the money pot for Republican politicians in the state. In state and local elections, in particular, the Bollinger and Chouest method of making maximum legal political contributions through multiple LLCs has enabled them to amplify their influence in political campaigns across the state.

Jindal's 2007 gubernatorial campaign tapped heavily into this means of circumventing the spirit if not the letter of state campaign finance laws. Jindal drew big bucks out of the southeast Louisiana oil services industry during that campaign.

Jindal Gives Something Back

The Chouest family and their companies were solid supporters of candidate Bobby Jindal and all things Republican in the 2007 statewide election cycle, giving Jindal and others in the party more than $132,000.

Governor Bobby Jindal went right to work to repay the Chouests' largesse as soon as he took office.

A Chouest project at the Port of Terrebonne was the first new economic development project to receive funds from the new governor in 2008. First, there was a $10 million grant to the port for a portion of Chouest's LaShip project and immediately added $4 million to that total. The ethical questions raised about the self-proclaimed 'Ethics Governor' giving tax payer dollars to one of his biggest contributors were not the last raised by the project.

The project itself was delayed by ethics questions when one of the Chouest companies (North American Ship) submitted the low bid for a portion of the construction work on the LaShip project. Ethics flags were again raised, with this matter going to the State Board of Ethics, which ruled that giving the bid to Chouest's North American Ship to build a state funded project for Chouest's LaShip would constitute a conflict of interest. Gary Chouest did not see any problem with the original bid.

According to a story in the Houma Courier in 2009, the entire deal was set up so that the Chouest LaShip project had access to about $20 million in state funds through a combination of allocations, grants and low-interest loans. There are local dollars at work on the project as well, according to the Terrebonne Port Commission.

To The Barristers!

When Hornbeck filed their challenge to the deep water moratorium and the various Bollinger and Chouest companies joined in, they were acting on old industry loyalties as well as seeking to stave off potential financial ruin. Bollinger once built barges and boats for both Hornbeck and Chouest. Bollinger had also built boats for Tidewater, Inc., where two officers of Hornbeck had served prior to moving to that company in 1997.

When Jindal's office filed an amicus brief in support of Hornbeck, Bollinger and Chouest, the circle was closed legally and politically. Here was the governor allied with his biggest financial backers and party loyalists lined up in court to fight a drilling moratorium imposed by an administration they all opposed.

Interestingly, despite the public pronouncement of tens of thousands of potential job losses resulting from the moratorium, in their court filing Jindal and Attorney General Buddy Caldwell say the immediate losses would amount to 3,336 Louisiana jobs with an additional loss in support jobs totaling 7,656 jobs within five months. Job losses approaching the range of 20,000 are projected 12-to-18 months out by Jindal's Department of Economic Development, but no basis for that number is provided.

The bottom line is that when confronted with court standards for truth, Jindal had to ratchet down his job loss numbers.

Judge Feldman's court was not the only place the political stars aligned to cast the Louisiana Republican oligarchy in stark relief.

Jobs, Jobs, Jobs

Jindal appeared at an anti-moratorium rally at Port Fourchon on June 10 which, appropriately enough, was held in an Edison Chouest facility at the port. The event was rightly called a rally as that's how it was staged and its focus was purely political. Jindal was in his element. He was on friendly ground, in a facility owned by one of his stalwart patrons. The Governor was preaching to blue collar workers to unite to save their jobs by defending the interests of their common patrons — the Chouests, the Bollingers and the other oil service millionaires whose wealth were built on servicing the industry that is killing Louisiana's coast and fisheries.

Jindal took part in another anti-moratorium rally on June 24, this one in the Port of Terrebonne in Houma, next door to the Chouest LaShip project into which he's poured so many state dollars.

The potential job losses are real and not to be lightly dismissed. But, Jindal and his administration have destroyed as many public sector and healthcare jobs over the past two years than will be lost to the moratorium in the coming months and he exercised those cuts with a certain detachment that failed to indicate that he connected in any way with those workers or the impact of those job losses on their families or their communities.

On the moratorium, though, Jindal is fully engaged because he's got a skin in the game, namely his own. Despite the fact that he's got a fat campaign war chest, he's bored with governing and faces another big budget shortfall next year. His adamant refusal to consider tax increases has locked the state into a pattern of continuing cuts of service that are building a backlash against those policies among some of his base, particularly those in healthcare and those who value higher education.

Even with no Democrat making noises about opposing him, Jindal will have a rough year next year if he decides to stick around. He will need every campaign dollar he can get his hands on in order to convince state voters that his sow's ear policies are actually silk purses.

If the oil service oligarchs are wounded, so too will Jindal's campaign coffers. That explains why he's passionate about fighting the moratorium. His job could well be at stake.

So, too, will be the coffers of Republican candidates down the ballot next year, particularly in legislative races. Although the LCRM is coming to play again, its method in 2007 was to supply nearly over-power media resources to Republican candidates and against Democrats in selected races. They use a lot of direct mail and a lot of radio. If Bollinger, Chouest and other oligarchs are wounded, they might take a more restrained approach to their participation in state elections next year.

That could work to the benefit of Democrats, particularly if Jindal tries to ram through another year of draconian budget cuts.

The BP Gulf Gusher was unexpected and has had a lot of unexpected consequences. That it could have a dramatic impact on the state's political landscape would be another one of those unanticipated consequences. If the moratorium stands either officially or because companies are hesitate to resume drilling because of the regulatory uncertainty, big changes could roll through Louisiana politics in the coming year, courtesy of the gang that could not drill straight and the people who enabled them.

How Much Oil Must Be Spilt on Louisiana's Coast Before that Coast is Worth Saving?

The BP Gulf Gusher hit day 57 today. Somewhere between 40 million and 55 million gallons of oil have blown from the floor of the Gulf of Mexico since the well blew out on April 20 and relief is at least six weeks away.

Tens of millions more gallons of oil will have gushed by the time relief wells are completed in August. If the relief wells work, the end of the beginning of this nightmare might be over. BP's record of predicting when they will get this well under control is almost as shoddy as its safety record for North American operations in recent years.

There are doubts within the industry that the relief wells themselves will work in putting an end to the flow of oil into the Gulf of Mexico.

Louisiana political and business leaders are working more frantically to bring an end to the six-month moratorium on deep water drilling ordered by President Obama than they are to protect Louisiana's coast.

Governor Jindal led a pep rally in Houma and called the White House to urge an end to the moratorium.

Senator David Vitter (John DC/LA) wrote a letter to Department of the Interior Secretary Ken Salazar calling for an end to the moratorium — ooops! No, this letter to the White House is the one I meant to link to (sorry!).

Senator Mary Landrieu questioned Salazar about why the moratorium was ordered when his panel of experts convened in the wake of the blowout did not recommend it.

Newly minted interim Lieutenant Governor Scott Angelle blasted the President claiming the moratorium was based on his dislike of the industry when Angelle launched a PR effort to gin up state support for an end to the ban (or is this another Jindal fund-raising effort by Angelle while on public duty?).

Attorney General Buddy Caldwell criticized the moratorium during a presentation to a joint session of the Legislature on Tuesday (but it did not help him get approval to direct legal work to his contributors the best legal minds he could find to sue BP). And, of course, the Louisiana House of Representatives took a position, as well.

At the core of the issue for those politicians is the fact that the moratorium will cost offshore service jobs. Just how many is subject to debate and the industry is playing it cute, saying they'll wait a month before deciding what to do. Interestingly, other governments are taking a tougher line on environmental and safety requirements as the disaster in the Gulf continues to unfold.

The fact that the affected companies include some of the state's largest political contributors in what has become the state's zone of the deepest political pockets (think the Bollingers and Chouests for starters) and it is easy to see why Louisiana politicians are clamoring for an end to this moratorium.

Money affecting politics? In Louisiana? Nah!

Beyond Politics

To hear his Louisiana critics, President Obama decided to impose the deep water drilling moratorium without considering the economic impact of the decision on Louisiana. That was not the case and, in fact, he made that clear in appearances in Louisiana last week. He also made it clear through a proposal to have BP pick up the tab for those oil workers laid off as a result of the moratorium.

One undeniable fact in the Gulf of Mexico is that the well on the floor of the Gulf that was once drilled by the Deepwater horizon continues spewing very large amounts of oil into the water, just as it has done for the past 56 days.

It has done this despite the best efforts of BP and all of the major players oil and gas industry to get this well capped and the flow of oil staunched.

As we see every day, nothing has worked.

Since the scope of the problem has been recognized, BP's peers have been providing the company engineering and technical assistance because they recognize that this blowout is a problem for the entire deep water drilling industry. Royal Dutch Shell is lending expertise. Chevron is helping BP. Exxon-Mobil is helping.

They are all helping BP because they see this disaster for what it is: a threat to the future of the deep water drilling industry.

And while there are those in state government and the industry parroting figures about how many thousands of wells have been drilled offshore over the years without any accidents, the Deepwater Horizon incident, the resulting gusher, and the so-far-futile attempts to stop that gusher prove conclusively that deep water drilling presents a much higher degree of difficulty than drilling in shallow waters.

Think about how many times someone from BP has used the phrase "never been tried before at this depth" in describing attempts to cap this gusher. Whether it was the Top Hat, Junk Shot, whatever. The depth has been an issue.

The Deepwater Horizon was drilling a mile above the Gulf floor. Other deep water rigs in the Gulf were operating at greater depths.

The industry has demonstrated on a daily basis that it is not prepared to deal with a blowout in deep water where pressures on oil and gas in the ground are greater, where the pressure from the water column of the Gulf is greater, and where the temperature of the water is more extreme. These deep water operations are far more complex than those in shallow coastal waters.

How can any serious person (that is, not in the pocket of the energy industry) argue to end this moratorium when the causes of the Deepwater Horizon incident are not known; when the measures that might better prepare companies to deal with future incidents have been neither identified nor implemented; and when the gusher resulting from the April 20 explosion and fire still has not been brought under control?

What Cost Louisiana's Coast?

Louisiana's environment, in general, and our wetlands, in particular, have long been considered expendable by the energy industry and by our state's political and business leaders. They were willing to sacrifice a football field of wetlands every 38 minutes in exchange for tax revenue and campaign contributions. When the tax revenue shrank, the political leaders were willing to settle for the campaign contributions.

Since the end of World War II, Jame Carville writes, Louisiana has lost more land than all of Delaware, a significant portion of that attributable to oil and gas activity in the marshes and offshore.

So, let the record show that only Dave Treen and Foster Campbell had the temerity to publicly say that this was a bad deal. Treen said it in the early 1980s while he was governor. Foster Campbell said it during his 2007 campaign for governor (he's still saying it today). Senator Rob Marionneaux of Grosse Tete tried to get a processing tax similar to that proposed by Campbell passed in the wake of the Deepwater Horizon incident but got only six votes in the Senate.

The bottom line is that for the vast majority of Louisiana's political elite —in both parties — sacrificing Louisiana's coastal wetlands and the protections those wetlands provided against storms and tidal surge was an agreeable price in exchange for the largess of the oil industry in the form of taxes and/or campaign contributions.

In the wake of the Deepwater Horizon incident, the cost to Louisiana's fisheries and coastal communities appeared to briefly bring around even those who had never shown any interest in environmental matters, such as the Barn Stormin' Bermer Bobby Jindal.

Ah, but when a few thousand oilfield jobs were imperiled by the President's moratorium, Jindal reverted to form, as did the rest of the political elite.

It is apparent that there is a price point where Jindal and others in the Louisiana political elite feel that Louisiana's coast is worth defending. What we are doing now is haggling over establishing that precise price point.

Early on day 57 of the Gulf Gusher, we know that our political elites consider the possible loss of  6,000 deep water jobs outweighs 40 million gallons of oil threatening the coast. If the moratorium sticks and the gusher continues for, say another month, would 10,000 jobs outweigh 50 million gallons of oil?

What if the moratorium sticks and the relief wells don't work (maybe there's a storm in the Gulf) until November? Would 20,000 jobs outweigh 80 million gallons of oil in the Gulf, probably a good bit of it in our wetlands and on our shores?

Our political elites say they value Louisiana's coast. We're just trying to establish the price at which point they will stop selling it out.