Health, Sustainability and the Oilpatch. Tee L. Guidotti The George Washington University Washington DC

Transcription

1 Health, Sustainability and the Oilpatch Tee L. Guidotti The George Washington University Washington DC

2 The petroleum story is really one of a never-ending ending cycle of change. Oil is really too valuable to burn. Today, man is both master and slave of petroleum. Berger & Anderson Modern Petroleum 1992

3 Oil is an unusual commodity Highly efficient, portable fuel Readily fungible, easily traded Lots of redundancy in system, capacity Still lots of room for conservation Tends to impede diversification of economy, investment Over-reliance reliance on volatile commodity prices

4 An industry divided Upstream Exploration Leasing, Land Use Drilling Completion Production Collection Pipeline Transport Straddle plants and liquids removal (gas) Downstream Processing (Unconventional) Separation Refining Distribution Chemical products Plastics feedstocks End use Responsible care

5 Upstream

6 Drilling, completion Environmental impact assessment, land use Blowouts Flaring Pressurization Aquifer contamination Water, brine Disposal of mud, foaming agents

7 Production Surface water pollution, brine Production chemicals (emulsifiers, anticorrosion agents) Separation Desulfuration Fugitive emissions Flaring

8 Developments Upstream 3-D D seismic data reduces drilling risk Enhanced recovery Fracking Horizontal drilling Injection (water, brine, gas, CO 2 ) Increased use of CO 2 flooding in existing wells Financial instruments limits financial risk Offshore drilling

9 Unconventional Sources Suncor Syncrude Oilsands deposits Oilsands processing Highly sour oil, gas Coal-bed methane Heavy oil Shale oil Oilsands Coal liquifaction Special concerns: mining in situ technologies cracking, upgrading toxicity profile

10 The Industry and the Environment Today investment levels are rising sharply and technology is advancing to enable us to recover more oil and gas. I don t believe that access to hydrocarbons is the primary problem. The major test is the environmental one. And it is a test we have to pass for the sake of future generations. Tony Hayward, CEO, Exploration and Production, BP Pipeline Magazine,, May 2006

11 Conflict Over Eco-Policy

12 Storage Production tank batteries Pipelines Pump stations Tank farms Common issues: vessel integrity confined space safety hazards welding

13 Transport Pumping stations Flaring Fugitive emissions Pipelines leaks blowouts Barges, tank cars Spill potential Rights of way

14 Petrochemical production Celanese plant in Edmonton, Alberta: closed Chemical toxicity Benzene Feedstocks Shutdown, scheduled maintenance Uncontrolled releases Waste disposal Risk profile depends on product

15 Distribution Additives Surface water discharge Underground tanks Groundwater contamination Oxygenates Fugitive emissions

16 Downstream Health Issues

17 Refinery Health and Safety All the usual problems of a big chemical plant Safety, confined spaces, fire, etc. Question of cancer risk: brain Flaring Fugitive emissions Safety issues Explosion Fire BP plant, 2005

18 Energy Demand Transportation (gasoline) Driven by economic gains in large developing economies Heating (fuel oil, gas) Chaotic weather conditions make demand unpredictable. Electricity (fuel oil, gas) Fuel shifting (price-sensitive) Increased demand with climate change? Climate control Desalination (huge anticipated demand)

19 Transportation Favors individual vehicle Highways and roads Increased risk of injury In vehicles Pedestrian safety Children at risk Access and barriers Cuts off neighborhoods Limits access on foot

20 Transportation Policy and Land Use Low oil prices Highway and road system Lower density, Built-in in inefficiencies High oil prices Mass transit attractive Higher density, nodes Built-in in efficiencies Externalities Beverly Willis, FAIA

21 Why is Land Use Important to Influence of the built environment on health Fitness Childhood obesity Social access Health? Influence of natural environment on stress Individual well-being Social quieting Increased activity

22 Air Quality

23 Atmospheric Change and Health Ecosystem Climate change Strato ozone depletion Acid deposition POPs transport Airshed/ Ambient Ambient air quality Air toxics Allergens Built Environment Indoor air quality Occupational exposure

24 Problems of Interpretation for Policy on Fine Particulates Is this a public health emergency? Is this a public health opportunity? Is compliance a national priority? Is compliance a national preference? What is the acceptance of risk? Do guidelines offer a more flexible approach?

25 An Alternative Approach: Acceptable Risk Risk-based standards based on acceptability. Continuous improvement over time change in control technology replacement of infrastructure, turnover in fleet fuel economy Risk comparison - prioritization Determining acceptability of risk targets Works only for lower-risk risk mgmt situations. Linear exposure-response response with no threshold Makes tradeoffs, externalities explicit to constituents.

26 An Innovative Approach Risk levels as suggested by linear exposure- response Translate into community-specific outcomes Interpret in personally meaningful terms Survey for public preference Risk-based standards for low-risk tradeoffs Applicable only in low-risk management cases

27 Prototype Something like this was done by CASA in Alberta. Stakeholders working out policy options to present to government for review, adoption. Does not fit US regulatory framework, however.

28 Evaluation of the Approach Advantages Implicit comparison of risks Avoids assumptions in valuation Open social process Allows for community preferences, values Predictable business planning Externalities made explicit Disadvantages Risk perceptions change Requires mechanism to monitor continuous improvement Stability for business planning Conceptually difficult Subject to political bias Does not fit regulatory structure of US

29 Sustainable Fossil Fuels Fuel switching (e.g. biomass to gas) Efficiency gains, sulfur reduction Carbon sequestration (e.g. EnCana) Conservation: efficiency, reduced demand Combustion technologies Oxygenated and cleaner fuels (ethanol, not MTBE!) Fuel extenders Noncombustion technologies Hydrogen stripping Fuel cells Social support Continued higher prices Externalities made explicit

30 Crude oil prices - Low Led to unsustainable economic infrastructure Prone to price shocks No incentive for conservation Incentive for fuel switching (biomass, coal) Less revenue, capital for producers Hubbert s Peak Predicts scarcity Texas US Rest of World?

31 Crude oil prices - High Economic productivity, investment impaired Prone to price distortions, inflation Incentive for expanding production Strong incentive for alternative energy sources Perverse effect on fuel switching (sunk costs) Rational economic development Developing economies Developed economies: No economic contraction so far! Are externalized costs being internalized? No! Question: what is a high price?

32 Crude oil prices- Just right! Mid-range - moderate to high prices stimulus for wise use of energy stimulus for increasing efficiencies stimulates energy-efficient efficient technologies less volatility sustainable Good? for producers environmental policy Where is the sweet spot? How to stay there? Perhaps by internalizing costs

33 Inescapable Conclusion Oil and gas industry is powerful shaping factor in today s world. Mostly in ways that are not obvious Environmental objectives and oil/gas industry do have common interests. Oil and gas sector will dominate for years to come. Industry is vulnerable in many ways. Much depends on managing externalities. Sustainability depends on improved environmental performance, prices.

34 What is Going to Happen? Over the long term, increasing concern over sustainability Climate change is emerging as the limiting factor In the short term, oil & gas will continue to dominate the energy sector Infrastructure and distribution system is in place Alternative energy sources have not worked out in practice (exception: wind for electricity) Abundant reserves and low cost of production Great potential for conservation Some mitigating technologies may extend its viability In long term, probably a mixed energy economy