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Jigar Shah

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The U.S. Practices Oil Tolerance

Posted: 05/23/2012 2:45 pm

I just read, "How Brazil is Making an Example of Chevron" in Bloomberg Businessweek.

Compared to the BP Oil spill in the Gulf, which spewed 50 million barrels of oil wreaking havoc on the environment, Chevron reacted quickly to an oil spill mitigating environmental damage. The spill was contained at just 2,400 barrels. That is .0048 percent of the BP spill. An expert in deep sea drilling leads Chevron Brazil, and did everything "right."

But, Chevron ran into an unexpected foe in this "minor" spill. The foe is the Brazilian government, which is practicing a "zero-tolerance" policy regarding oil spills. So, the government sued Chevron for billions of dollars.

The real backbone of Brazil's "zero tolerance" policy is that the country has produced enough ethanol to achieve "oil independence." It can tell Chevron, BP, Total or any other oil company that even one drop of oil spilled is not tolerated. It is like zero tolerance for drinking and driving in the U.S. because it puts lives in danger. Or zero tolerance for littering because "every litter bit hurts." Oil is a natural substance, but drilling it from over a mile below the surface can impact our environment, our oceans, beaches and our health. And Brazil does not have to tolerate it.

Also, behind that suit and "zero tolerance" policy is a Brazilian government willing to auction rights to other deep-water oil fields off the Brazilian coast. Plus, as an aside, there will be in fighting between the Brazilian states for an equal share of the revenues generated.

So, the reaction to Chevron's small spill has caught the company by complete surprise. They thought that small incidences were so commonplace that everyone was OK with these small environmental mishaps. A U.S. view of this is that the Brazilian government is overreacting. But are they?

I worked for BP, in their renewable energy division, for almost 4 years from 1999-2003. When I was there, no one at BP wanted to talk to me about oil. Everyone wanted to talk about the future, alternative fuels, solar and wind power. Never mind that solar and wind don't offset oil or that at the time both technologies were not yet cost effective without incentives like they are now. Back then, oil was at about $20/barrel and the oil industry was not accused of being as powerful as they are now.

What I realized when I was there is that very few people in the world actually like oil. They view oil and coal as a necessary evil. It's like the pest exterminator loving their chemicals -- they just see these chemicals as a means to an end. For the oil industry leaders, they believe that they have a solemn obligation to the world to supply the energy we need to live our lives.

When oil spills occur they believe that these small environmental mishaps are the price we all collectively pay for our access to the precious stuff. This same point of view pervades BHP Billiton and Rio Tinto on their quest for mining minerals. The water they use, the runoff, the trailings they can't clean up completely, and the unfortunate deaths that occur every year are the sacrifices we all pay for "progress."

The U.S. "tolerance" of oil comes at a price. Brazil can be intolerant because they are not beholden to oil or the oil companies. The U.S. is tolerant. In 2006, President George W. Bush said, "America is addicted to oil." We still are addicted, and are clearly tolerant of all its ramifications.

In the next few weeks, Brazil will host the global conference RIO+20. At it, global leaders will be addressing the challenges of poverty and environmental destruction of the globe. I hope Brazil can be an example of how we can start to stiffen our backbone and create a global "zero tolerance" for oil, coal, and mining contamination? Who should pay the price for small environmental mishaps? Perhaps, Brazil is not overreacting and letting Chevron off easy.

 
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