Taxpayers may have to pay $280B in plugging costs for oil and gas wells | Hacker News Reader

Taxpayers may have to pay $280B in plugging costs for oil and gas wells

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154 pointsclumsysmurf81 comments

Sadly this is how mining works.

The gold mining companies literally raped the ground in Montana for decades, with the same pattern of using highly toxic cyanide leach fields to extract low volumes of gold from massive quantities of ore, take profits, pay huge bonuses to the board, and then declare bankruptcy and form a new company to repeat the process, leaving the state to pay for cleanup.

Montana passed laws to force them to buy insurance upfront for cleanup and tried to ban executives from doing this over and over again. It largely worked, but they just moved to other places that don’t understand or don’t care yet.

https://billingsgazette.com/opinion/columnists/guest-opinion...

These people should be in prison, plain and simple.

If I pour poison int the gutter, I wouldn't be acquitted just because the specific way I poured a specific poison wasn't written into the law.

If you are rich enough and have the correct corporate structure, you can poison anything you want in America. I think WV had shown this.

In prison... or dead.

In China, you can be sentenced to death for "serious pollution case". And if that isn't serious pollution, I don't know what is.

https://nypost.com/2013/06/21/serious-polluters-in-china-to-...

Negative externalities born by the public, but profits go to shareholders.

Exactly, I really hope a coalition can form (around the world) between all opposed to this kind of policy (be they capitalists, anti-capitalists etc.). These corrupt distortions will kill the planet and harm the west.

The problem is that when you create an international coalition powerful enough to control capital and to go against its logic, you've built a communism. Under that system, the common ideological space (what yuval noah harai calls "the greatest story ever told") comes under an active, deliberate intervention by a political will, and there's just no way the people in power are ever going to share in the kind of control they enjoy now.

Why? If I organise enough people to vote to end subsidies like those featured in the article, I have created communism?

What is practised in the west isn't even along a socialism-capitalism axis, it's just corruption. That is a problem in any society held together by words.

Why is corruption a problem specifically in a society held together by words? In what kind of society wouldn't it be a problem?

The remark was mostly to point out that we can and should aim for better, but we don't.

I'm a bit drunk so excuse any poor oracy

No, you build communism when you transfer the asset to the people or the state.

The supremacy of the sovereign over commerce has nothing at all to do with communism. Under US law, the Congress has nearly unlimited power to regulate interstate commerce, which by modern standards can be applied to almost all commercial activity. US policy tuned this down considerably from the 1960s onward.

You’ll find that if you actually read about what some of the illustrious founders thought about regulatory authority, the average modern conservative in particular would be clutching their pearls. Hell, George Washington mustered a small army to collect (ie seize) excise taxes from hillbillies in Western Pennsylvania!

>Under US law, the Congress has nearly unlimited power to regulate interstate commerce

As intended: Jefferson chose the term "pursuit of happiness" rather than "estate" (unlike Locke's earlier formulation) in the declaration of independence because all of the founding fathers viewed commerce and property as a function or construct of society, rather than a natural right in itself.

And because the word “happiness” at the time meant something more like felicity or properness, not pleasure or “near joy” as it does today.

Yes! There is even further context to break down about what we originally formulated our natural rights to address; it's something I think all American's interested in their rights should read into.

all of the founding fathers viewed commerce and property as a function or construct of society, rather than a natural right in itself

Your interpretation goes against the Founder's stated beliefs.

  The true foundation of republican government is the equal right of
  every citizen, in his person and property, and in their management.
  ~ Thomas Jefferson to Samuel Kercheval, July 12, 1816

  In a word, as a man is said to have a right to his property,
  he may be equally said to have a property in his rights.
  ...
  Government is instituted to protect property of every sort; as well
  that which lies in the various rights of individuals, as that which
  the term particularly expresses. This being the end of government, 
  that alone is a just government, which impartially secures to every 
  man, whatever is his own.
  ~ James Madison, Essay on Property

  Government is instituted no less for the protection of the property
  than of the persons of individuals.
  ~ James Madison, Federalist 54

  the faculties of men, from which the rights of property originate ... is
  the first object of government
  ~ James Madison, Federalist 10

And, if we read Locke's own words:

  The necessity of pursuing happiness [is] the foundation of liberty.  
  As therefore the highest perfection of intellectual nature lies in a 
  careful and constant pursuit of true and solid happiness; so the care 
  of ourselves, that we mistake not imaginary for real happiness, is the 
  necessary foundation of our liberty.
  ~ https://www.pursuit-of-happiness.org/history-of-happiness/john-locke/

This is not interpretation - it is not ambiguous why the Committee of Five purposefully chose to downplay the function of government to specifically protect property rights - again, in explicit contrast to Locke's formulation of natural rights bearing "Life, Liberty, and Estate" - here's some further reading of their thoughts (including Madison's) that contradict this decontextualized misinformation:

http://press-pubs.uchicago.edu/founders/documents/v1ch16s12....

"Private Property therefore is a Creature of Society, and is subject to the Calls of that Society, whenever its Necessities shall require it..."

https://press-pubs.uchicago.edu/founders/documents/v1ch12s25...

"While it is a moot question whether the origin of any kind of property is derived from Nature at all … it is considered by those who have seriously considered the subject, that no one has, of natural right, a separate property in an acre of land … Stable ownership is the gift of social law, and is given late in the progress of society." -Jefferson

https://press-pubs.uchicago.edu/founders/print_documents/v1c...

Even originally, Locke thought of the right to property more explicitly in terms of acquiring property more along the lines of the "pursuit of happiness" as evidenced by his Second Treatise, and Madison spoke in terms of that document as well:

https://thf_media.s3.amazonaws.com/CPP/FP_PS02w.pdf

Your quote from Locke supports their explicit and his implicit viewpoint here, and your other quotes are out of context of their primary sources which end up supporting their broader view of "Property" == "Pursuit of happiness".

Your original statement was, ALL of the founding fathers viewed commerce and property as a function or construct of society, rather than a natural right in itself which is false.

You are quoting out of context to support a particular view.

For example the first you posted from Franklin continues:

"All Property, indeed, except the Savage's temporary Cabin, his Bow, his Matchcoat, and other little Acquisitions, absolutely necessary for his Subsistence, seems to me to be the Creature of public Convention. Hence the Public has the Right of Regulating Descents, and all other Conveyances of Property, and even of limiting the Quantity and the Uses of it. All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition."

It is the "Property superfluous to such purposes" that belongs to society. Your interpretation was contrary tp that, believing it to mean ALL property belongs to society. That is refuted by the very links you posted.

In Frankin's second quote, he stated his belief, rightly so, that he was hesitant to create an aristocracy based on property. He was arguing for a bicameral legislature and in the process admitted the rights of people to own property (the upper legislature composed of property owners).

Also, in Franklin's second quote, you quoted out of context. Immediately, prior to what you quoted, he spoke about property rights. We know, that, when one of them has attempted to keep a few Swine, he has not been able to maintain a Property in them, his neighbours thinking they have a Right to kill and eat them whenever they want Provision, it being one of their Maxims that hunting is free for all; the accumulation therefore of Property in such a Society, and its Security to Individuals in every Society, must be an Effect of the Protection afforded to it by the joint Strength of the Society, in the Execution of its Laws.. His argument is that the purpose of a society is to protect property rights.

I should clarify that there was universal agreement in regards to personal property rights, rather than private property rights. Jefferson, Franklin, Madison, Hamilton, and Adams were adamant supporters of the idea of private property rights as a social construct. This is in contrast to the misinformation you were parroting which implied that property as a whole was intended to be protected absolutely by society - you seem to even agree that it is not, despite your original quotes implying the opposite.

However, I'm decontextualizing their quotes to support my view despite more precise context being included in the quotes I provided? The meaning of the second quote was not decontextualized and your emphasized component is addressed more precisely by "except the Savage's temporary Cabin, his Bow, his Matchcoat, and other little Acquisitions, absolutely necessary for his Subsistence" which was included in my comment: your analysis does not really add additional nuance where I was supposedly lacking, you're just repeating your original misinformation while bringing up their (related but tangential) ideas on government.

Even in this reply you seem not to delineate the nuance they were intending with their comments on social constructs vs natural rights - just additional context about how they intended to structure government around these ideas.

And next time should you want to spread misinformation without the decontextualizing the meaning of primary sources, include some links to the full text of the parroted quotes. There was certainly much more context provided in my instance that yours - which reeks of someone trying to misconstrue something for their viewpoint. Was Madison """impure""" because he didn't support your opinion exactly as you expected?

> Government is instituted no less for the protection of the property than of the persons of individuals.

Obviously there is nuance there as Madison and his constituents depended on the power of the state to deprive their laborers of their natural rights.

Madison in particular struggled with the notion of human chattel and the paradox of standing for liberty and slavery. He banished import of slaves and advocated for profound government intervention on the market — a federal buyout of slaves.

Madison may have been impure, but that is distinct from his thoughts on property being a right instead of a "function or construct of society, rather than a natural right in itself".

I wouldn’t call him impure, merely a human who was a product his times with the intellect and courage to question.

The whole point of this thread is that regulation doesn’t equate to any meaningful definition of “communism”. Property has scope attached to it, and whatever right exists isn’t supreme over other natural rights, and just like say, speech, can be regulated.

Property's nature is shaped by society and law. My clothes and real property belong to me. But I do not own my children, and cannot buy the sky. I cannot own title to contraband. Also, The commons exist and must be protected against encroachment.

Also don’t forget that natural rights are not worth anything if I can acquire you as property. And the conditions that allow one human to own another are set by society.

> Madison may have been impure, but that is distinct from his thoughts on property being a right instead of a "function or construct of society, rather than a natural right in itself".

To be clear for anyone else reading, Madison viewed personal property as a right, but private property as a social construct - there is no vagueness in his views.

Additional context provided here: https://thf_media.s3.amazonaws.com/CPP/FP_PS02w.pdf

https://www.americanbar.org/groups/taxation/publications/aba...

To anyone reading DetroitThrow's comment. Madison's own words delineate what he thought of property.:

" That is not a just government, nor is property secure under it, where the property which a man has in his personal safety and personal liberty, is violated by arbitrary seizures of one class of citizens for the service of the rest."

and Madison's closing words:

If the United States mean to obtain or deserve the full praise due to wise and just governments, they will equally respect the rights of property, and the property in rights: they will rival the government that most sacredly guards the former; and by repelling its example in violating the latter, will make themselves a pattern to that and all other governments.

~ https://thf_media.s3.amazonaws.com/CPP/FP_PS02w.pdf

~ Madison on Property

Madison viewed a just government as protector of private property.

That was long before capitalism had corroded and hollowed out all of our public institutions. I'm referring to what some people mean when they say that we changed from being a society that has markets to being a market society. If you think that it's just a matter of Congress wielding unlimited power because it says so in a document, my question is how are you going to build the kind of political coalition to make that into a reality? In a society as hollowed out as ours, our entire conception of what the role of politics is will have to change.

Look at early 20th century American politics. We went from total domination by the trusts to the progressive era, to the disturbing Wilson (pre and postwar) to the new deal period.

IMO, we are witnesses to a historical tipping point that will usher in the next era.

Each of those moves to the left were made possible only by a very angry and mobilized coalition of communists, socialists, trade unionists, and other desperate working-class people. Nothing like that exists currently, and also we never had to contend with a hostile digital media empire. Just look at what happened with Trump's impeachment, compared to what would've happened at any other point in history.

Corrupt oligarchs are also capable of learning from the past.

I watched 3000 people march past my house in a city of 100,000 this summer. And remember those “deplorable” people who fell for the Trump speil are still disaffected and still have no prospects.

Society is a powder keg. A spark can come from anywhere.

The problem, I think, with this is that while both capitalists and anti-capitalists oppose this policy, they view it differently. For capitalists, this is a corruption of the ideal market system. Consequently, it makes sense to try and advocate for a correct to those policies. For anti-capitalists, this is the nature of the market system. Consequently, it makes no sense to advocate for correcting these policies, the whole system needs to be uprooted.

What does "the west" have to do with this?

I think we have a moral duty to have a strong and confident western world (with or without the US) to act united against countries like russia and china.

It's a good counterpoint to people that invoke nationalism as a reason to allow shitty business/environmental practice

But hey! It's trickle down economics, you know!

I donut remember Reagan ever specifying what would trickle down...just that something would

IDK why libertarians complain about anything. We’re living in a Reagan-Friedman Paradise.

The classic reference, for those who want to explore on Wikipedia: https://en.wikipedia.org/wiki/Socialism_for_the_rich_and_cap...

Also "Privatise the profits, socailise the losses"

That’s not how commodity markets, like for oil and gas work. If the entire industry saves $280 billion, they don’t declare a giant dividend. The industry is extremely competitive, and the price of gas is very sensitive to changes in the cost of extracting the gas. If you forced operators to say pay the costs of capping wells up front, those costs would almost entirely be passed onto the consumer.

Since almost everyone uses gas, people are just going to be paying money they saved earlier through cheaper gas. More generally, the “but profits!” view of the world isn’t very useful when applied to highly competitive industries. Yeah, Purdue makes a lot of money in absolute terms, but it makes cents on each chicken. Consumers are the ones that mainly benefit from factory farming in the form of lower prices. Focusing on “profits” overlooks the real economic issue: people like cheap gas, chicken, and other commodities.

Down voters: There is nothing here to “disagree” with. The fact that gas prices closely track costs of extracting oil is not only Econ 101, its well established empirically.

I'd rather pay for my gas when I'm paying for my gas, as opposed to regardless of my consumption of gas. That way there's incentives to reduce consumption

So let it be more expensive by internalizing the costs. Society will adjust. After all, Americans use an astounding amount of energy. I get your point on the competitiveness of the industry, but let's be real, a lot of people are, indeed, making money and socializing the costs.

I’m not making a normative point about what we should do. I’m describing what’s happening. Econ 101 also tells us that failing to internalize an externality will result in more than an efficient amount of that thing being used, because it’s artificially cheap. So if I were to comment on it, I would support internalizing that cost up front.

Rhetoric about “but profits!” is good for creating narratives and selling newspapers. But it’s not good at actually helping fix the problem. The oil & gas industry has a 5.6% profit margin. Profit is not a relevant discussion when it comes to the oil and gas industry.

Also, insofar as there aren’t good alternatives to oil, oil companies might make even more money if you force them to pay the cost of capping wells ip front. That increases their up-front investment which means they’ll demand a higher return on the backend. The problem is that presidential approval ratings closely track gas prices at the pump, and politicians won’t do anything that will cause gas prices to go up.

This is entirely a decision for consumers to make. Do we want to pay more at the pump know, or pay more in the cost of capping wells 20 years from now?

The failure to account for externalities and to couple them to their causes was probably the fundamental failure of communism.

While what you say is mathematically correct, it fails to align the cost with those who received maximal benefit, instead blindly socializing the cost.

Frankly I’d prefer tha the west avoided the mistakes of the Soviet Union and instead assigned liability appropriately.

Passing the cost onto the consumer is preferable to passing the cost on to future generations, right?

1. Then why are energy company CEOs so wealthy?

2. Why does OPEC exist?

3. Why is this at all relevant to the topic at hand?

If we had a working government, we'd raise their taxes and add registration fees to cover the costs.

In our actual government, though, their lobbiests would kill that immediately.

I don't get this one. There is enough money at stake here for the lawmakers to go after the companies and they have a huge economic/political incentive not to dump tax increases on their constituents.

So basically, how is this not a huge federal suit?

If there is one thing I do expect its for this stuff to work itself out when the politicians have a clear interest in doing so? On the other hand maybe I'm missing something ?

There are almost no politicians in office who have not been vetted, negotiated with, and financed by the very companies that are getting away with this.

Lobbyists + political donations means the politicians have lots of incentive NOT to do anything about it.

The environment may matter to Democrats, but as a party they could also drop it without losing many if any votes; after all, it's not like Democratic voters who care about that issue can go to the GOP, and they likely also won't stay home since there are other issues they care about.

Let's be clear here; when only one of the two parties in power even accepts that something is even a problem, the other can do whatever is most expedient about it without consequence.

Their "constituents"? Who do you think they are? Are we not talking about America? The constituents are the companies, not the voters.

Seriously it is frustrating watching the US from outside. Watching how American just let themselves getting screwed over again and again and again. Only to ask for more. The paranoia about government and the praise of capitalism is so strong in America that people will rather embrace crony capitalism with a warm hug than do anything that means you risk getting called anti-business, job-destroyer, socialist, communist or whatever.

There is not democracy in America anymore. It is the same "system" as Iran. Sure you get to vote, to retain the illusion of choice. The mullah's deciding on who gets to run has been replaced by the 1 percent, the donor class. You are allowed to vote on whomever they approve of.

> The constituents are the companies, not the voters.

That is neoliberalism in a nutshell. A 50 year long project to make capital the only source of political power.

And here we are.

The wells will have been traded between multiple companies (and not necessarily with the intent to abandon them so they don't need to pay costs.).

A lot of the 'current owners' will be defunct or bankrupt. Because wells can become productive again (due to new technologies or techniques becoming cheaper or price for oil increasing) it would be hard to show any company was playing shell games even if they were, so it will be hard to show who should be stuck with the cost if the current owner can't pay(and of course shareholders are shielded). It would be a costly forensic exercise and while no doubt it would pay off on average there would be a lot of cases where nothing could be done meaning the tax payer has still lost out.

Otherwise the only real way to claw back cash would be to retroactively add liability to the company that contracted drilling the well (this of course has the usual draw backs of retroactive laws).

Realistically the only thing that could be done to cover this cost efficiently is some form of tax on the industry as a whole going forward.

There also absolutely needs to be a law sooner rather than later that no new wells can be drilled without an appropriate bond (Now days this is the case in a lot of places or is a standard part of permitting).

After 2006 operators in Texas generally pay these costs up front when getting permits to drill the wells. There is also aftermarket for taking over abandoned wells (though I'm not super familiar with the economics.)

It's very straightforward: you buy the land, you get the mineral rights.

So cost of acquisition is: how much land, the working condition of the well equipment, and nearby production as a proxy for reserve capacities (or, in lieu of that, a finger in the wind.)

One popular site for selling/re-selling both unleased and leased acreage is https://themineralmarket.com/

If only we had patched creditor law to make these costs first in the charging order when an O&G company is distressed, or instituted responsible reserve/escrow amounts (1%!?) for remediation. Privatize the gains, socialize the losses.

Oh well, will make quite the book of work for a civil conservation corps.

> Privatize the gains, socialize the losses.

It’s the American way, at this point; another gift from the generation before us.

※ grift

It’s in the constitution alongside capitalism

Can you paste the relevant portion from the constitution? Just trying to understand it a bit better, thank you.

that was a joke.

That's our lobby / legalized bribery system working hard.

This is ON-shore wells. Just imagine the cost of closing offshore ones.

This reminds me of the BP oil spill that leaked for months... they had to pay a reasonable fine, but they purchased so many gas stations in the region afterwards... I think to prevent people from boycotting them.

XOM, EOG, COP and APC can pick up the tab I'm sure.

Huh, what happened to personal responsibility?

In America that only applies to poor people, and especially black people. To the rich, it does not apply. Rather you are responsible for THEIR problems.

Hahaha, you really bought this?

It's only personal responsibility when it applies to individual, poor or minority issues. A big oil company causing societal level damage and seeking bailouts? Printer goes brrrr.

Oh the amount of self hate people must have to keep voting for this crap over and over again.

Btw, I was being sarcastic...

meanwhile, morons keep claiming Tesla lives off government subsidies.

They can both be true, no? Tesla's P/E is roughly 1100, they aren't exactly printing money.

That really doesn’t say much. Amazon’s P/E looked insane for years, while still being a good investment.

The real question is what do future profits look like, and past performance is often a poor indicator of future performance.

Perhaps, but for Tesla to go to being what Amazon is now would take so much luck/decision-making I just can't see it happening. They make nice cars, but they would have to dominate the market in a way they can't even dream of today.

For example, Tesla sold 300k cars last year - ford alone sold something like 6 million. Tesla have to compete with the entire world's car industry including companies that have much more experience selling cars at that scale. Is it impossible, no, is it unlikely yes - Tesla will grow from now but I just can't see that P/E turning into cold hard cash.

Also, Amazon's P/E peaked at 3.6k but only for 2012. It's been around a tenth of Tesla's current P/E for almost all of their time on the exchange.

https://www.macrotrends.net/stocks/charts/AMZN/amazon/pe-rat...

I haven’t dug deeply into their financials, but directly comparing them to other car companies is misleading as they are far more vertically integrated.

An EV charging network, direct sales, and building significantly more parts in house means they can extract more money even if they sold an identical product to the rest of the market. I doubt the solar business or grid batteries are particularly profitable, but it’s the same Apple vs Samsung song and dance. Outsourcing everything means you’re sharing profits with your suppliers and have little leverage over your competitors.

That’s not to say they can or will do all of that profitability. Tesla’s self driving tech could fall behind rendering a massive investment worthless. But, the numbers aren’t so high it’s impossible for them to be a great investment just IMO unlikely.

Tesla is much more than a car company. It’s an energy company that also sells cars.

What does that have to do with subsidies?

> For example, Tesla sold 300k cars last year - ford alone sold something like 6 million. Tesla have to compete with the entire world's car industry including companies that have much more experience selling cars at that scale. Is it impossible, no, is it unlikely yes - Tesla will grow from now but I just can't see that P/E turning into cold hard cash.

Tesla sold 367,500 vehicles last year, Ford sold about 5,387,000. In other words, Ford sold almost 15 times as many cars as Tesla in 2019, which is a significant difference in scale.

Fast forward to Q3 this year. Ford sold 551,796 vehicles (sales down significantly due to the pandemic). Tesla sold 139,300 (sales up significantly despite the pandemic). They are now just a factor of four apart.

And that's just vehicles; Tesla is really an energy company, don't forget. The battery and solar parts of their business are just getting started.

The P/E is extreme, but given how well Tesla is executing, and how steep their growth trajectory is, perhaps it's not so crazy after all...

They 'can' both be true, but they are not. Their P/E has nothing to do with government subsidies. The made more profit in the last 3 quarters then most other automakers, as most lost billions.

Generally everything here can be true at once.

(1) Tesla can be living off government subsidies.

(2) Taxpayers can be on the hook for billions in clean-up costs.

(3) A P/E of 1100 represents a combination of the market's enthusiasm for TSLA shares, their subsidies driving earnings on the one side, and their desire to re-invest proceeds on the other. They are making good money [in part thanks to subsidies], but they're pouring it back into R&D rather than returning it to the shareholders. This is the mark of a growth company.

As I said, yes it 'can' be true, but it isn't. But Tesla isn't living of subsidies, that is just a nonsense claim that gets repeated by uninformed people. In fact, of US automakers they have had the least amount of help in the last 10 years.

Tesla has been operating without the EV tax intensive for a while now, while all their competition (outside of GM) still have it. So if anything the US government is helping VW, BMW, Daimler, Nissan and so on MORE then they are helping Tesla (or GM) at the moment. A pretty insane policy if you ask me but I guess the US government didn't really think it threw.

Ford hasn't even payed back the credit from the 2008 crash to the government. And GM clearly got the most help this century.

I wasn't saying they are both true just that the subsidies can go to both.

Also [Citation needed]? Some manufacturers did make losses but "most others" would seem to be a miss-classification at least by net income.

https://www.investopedia.com/articles/company-insights/09151... (Updated 2020)

They are, and intentionally so. The point of government subsidies is often to bootstrap business models that aren't economical now, but will become economical in time. Electric cars are a great example of this, IMO. I argue that's the system working very well.

I think he meant "in context." The implication is that Tesla lives of subsidies while the oil industry doesn't. This story shows yet again that the oil industry is getting major subsidies, and the complain about subsidies for Tesla rings hollow.

exactly! And you're right, I should have used the word "complaining" rather than "claiming"

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