I shouldn’t tell you this, but I have had a secret source over the years. His name is Mr. Big Oil and he calls me up from time to time to talk over energy policies. M.B.O. phoned last week and asked me to lunch. We met at Millie’s Diner, an upscale eatery on the downside of Church Hill in Richmond.
When I met him at Millie’s, M.B.O. looked sleek and prosperous. He ordered a triple Scotch and a Cobb salad. Since it was Big Oil, I asked for a “There Will Be Bloody Mary” followed by a “Devil’s Mess” omelette. M.B.O. was dying for a cigarette but wasn’t allowed. The following is an actual transcript of our conversation:
Gooz Views: “Well, how’s it going?”
Mr. Big Oil: “Very, very, very well.”
G.V.: “You must be raking in the dough. Ready for some big policy changes?”
M.B.O.: “We’re working on it and it looks good. Bush is finally getting off the dime on the Mid-Atlantic ban on offshore drilling. As you probably know, The Minerals Management Service of Interior says there could be 86 billion barrels of oil and 420 trillion cubic feet of gas offshore the whole country.”
G.V.: “Sounds great but how much is off Virginia?”
M.B.O. “Don’t know exactly, but there’s supposed to be 3.82 billion barrel’s worth off the entire East Coast.”
G.V. “If all of that were tapped, what would it mean? It would supply all our needs for maybe six months?”
M.B.O. “Probably, but you are missing the point, as usual. First, there’s probably a lot more natural gas out there than oil. A few years ago, the Woods Hole Oceanographic Institution found cracks in the Atlantic seabed suggesting lots and lots of gas.
“As far as oil, the point isn’t that the Mid-Atlantic has lots of oil. The idea is to get something moving out there so we can get more leases in the Gulf of Mexico and off California and Alaska. That’s where the big game is. That’s where the Big Oil is.”
G.V. “Yeah, I was kind of wondering why nothing’s happened off Virginia if it’s such a hot prospect that people like Jim Gilmore and Congressman Eric Cantor are jumping up and down trying to pass laws breaking the moratorium and start drilling.”
M.B.O. “Well, Gilmore’s not so good with numbers, you know. Look at the car tax thing. As for Cantor, he’s a muffin, but he’s our muffin.”
G.V. “Michael Ward, exec director of the Virginia Petroleum Council, wrote in the local rag the other day that Louisiana received more than $400 million in royalties and more than $440 million in severance taxes through its offshore development program. He says Virginia should be getting some of this gravy.”
M.B.O. “Goozer, you can be such a dolt sometimes. Point One, nobody has an offshore program as big as Louisiana’s and they never will. Point Two, state royalty rights extend to maybe three to six miles offshore. If the current leasing and drilling plans go forward in Virginia, the rigs will be more than 50 miles out there. What that means for Virginia’s royalties, I don’t know. Point Three, this Mike Ward character is a paid lobbyist so of course he’s going to paint the sky blue.”
G.V. “But what happened to Virginia’s big oil projects over the years? You’d think that if the promise of oil was so wonderful, it’d have been exploited already.”
M.B.O. “The reality is that there’s hasn’t been a major oil project in this state since the old Amoco oil refinery was built in Yorktown in the 1950s. There was a tract that is now the new Maersk shipping container unloading facility on the Elizabeth River in Portsmouth. It was once intended for an Exxon refinery but it never got built. One guy, a slick wildcatter type named John K. Evans, had wanted to build a refinery in Suffolk in the late 1960s but shifted to this site. He tried for years to get his new project, the Hampton Roads Energy Company refinery, off the ground, but it never happened. It would have refined imported crude.
“Then, after the Iranian crisis in 1979 and oil shortages, big oil service companies such as Brown & Root took options around Cape Charles at the mouth of the Bay to fabricate giant offshore oil rigs. There was some excitement then about leasing off Virginia. But that never happened either. By the 1980s, the moratorium on offshore leasing took effect. The B&R site is now a pair of elite golf courses and a community built by a rich real estate dude from Virginia Beach.”
G.V: “I read somewhere that despite the Cantors of the world jumping up and down, Virginians will actually get screwed if current leasing boundaries go forward.”
M.B.O. “Right you are. The way the Interior Department has it set up, Virginia’s share of offshore rights is very tiny compared to other states such as North Carolina or Massachusetts. They’d lap up most of the gravy. Somebody needs to revisit that in Congress. But, hey, not my problem. We in Big Oil don’t give a damn where the royalties go. We just want a showcase rig out there off the East Coast so we can bury this moratorium thing once and for all. Then we can grab offshore California or Alaska and more of the Gulf of Mexico. Whatever is done off the Old Dominion won’t get finished until about 2020 anyway and if we have any sense, there will be a big shift in consumption patterns by then.”
G.V. “You going to pick up the check?”
M.B.O. “Of course.”