Why Your Tax Dollars Are Underwriting Chevron


It leaked for 10 weeks, spilling an unknown amount of oil into the ocean. Three attempts at fixing it failed, and by the time a fourth attempt was made, the West Atlas oil rig had caught on fire.

Luckily, no one was injured. But some wildlife was reported killed and the oil slick eventually stretched within 50 nautical miles of Indonesia. Throughout the crisis, details from the company responsible, PTTEP, and the Federal Government, were sketchy, as this comprehensive round-up from the ABC’s David Weber outlines.

All in all, the West Atlas oil spill has been a graphic example of the risks inherent in oil and gas exploration. Some estimates put the total amount of oil spilled at around half spilled during the Exxon Valdez disaster in Alaska. But no one really knows, and PTTEP have been highly reluctant to come forward with the details.

Resources Minister Martin Ferguson has promised an inquiry into the incident, with the cooperation of PTTEP. "It is vital that we understand what caused this incident, that we learn from it, and that we put in place any measures that would help prevent such an incident occurring in the future," he said earlier this week. Meanwhile, West Australian Premier Colin Barnett worried that the spill was damaging West Australia’s reputation, telling reporters that "I think there are some doubts arising about the overall supervision and regulatory framework around this operation". PTTEP itself says it could take seven years to deal with the environmental impact of the spill, but this may be under-estimating the severity of the damage; the environmental effects of the Exxon Valdez spill are still being felt.

But the same governments who regulated and approved the exploration and drilling at West Atlas Montara have just given approval for vast new oil and gas projects off the West Australian coast. In fact, both the West Australian and Federal governments have agreed to indemnify the giant multinational oil and gas company, Chevron, from a portion of any liabilities arising from one of the most controversial aspects of its massive Gorgon gas project.

The Gorgon Project is expected to be Australia’s biggest ever resources project, pumping and liquefying perhaps $200 billion worth of natural gas over the next 30 years. The Federal and West Australian governments are behind it 100 per cent – which is not surprising when you realise the tax revenues the project will likely bring in. This article by The Australian‘s Michael Sainsbury claimed that Gorgon will end up "pumping $40 billion into the Federal Government’s tax coffers over the next 20 to 30 years". It will also spur tens of billions of dollars of investment and create thousands of high-paying jobs.

Perhaps that’s why Minister Ferguson travelled throughout Asia trumpeting the gas supply contracts signed by Chevron for the Gorgon project.

But will it be safe? The project will include drilling rigs and processing facilities on the currently pristine Barrow Island, a Class A nature reserve that will now be the site of the largest natural resources project in the country.

A big part of the Gorgon project will be its world-leading carbon capture and sequestration. Gorgon is planning to capture and inject millions of tonnes of carbon dioxide into natural aquifers deep below Barrow Island, in the world’s largest demonstration of this so-far unproven technology.

It’s true that Gorgon has gone through an extensive environmental impact assessment process — according to Chevron, one of the most complicated ever carried out in Australia. The project has met all the environmental stipulations placed on it and has received final sign-off from Environment Minister Peter Garrett in August.

But the Government has also made some big concessions of its own. The most important of these is hinted at in one sentence of a press release from Martin Ferguson on 14 September. "Importantly, the Gorgon project will also be the world’s biggest CO2 geological storage project. The Australian Government last month announced its decision to jointly accept — with the Western Australian Government — long-term liability arising from the storage, clearing the way for today’s Final Investment Decision."

What does this mean? It means that Australian taxpayers are now going to be on the hook for a portion of the liability of the carbon capture and sequestration under Barrow Island. If any carbon dioxide bubbles to the surface and results in death to wildlife and people — Chevron will not be responsible. We will be. As this Bloomberg article by Jason Scott explains, "The national and Western Australia state governments removed a key obstacle last month when they accepted ‘any long term liability’ should carbon dioxide captured from the project escape sequestration, or storage, two kilometres underground." Chevron and its partners will be liable during drilling and operation and for 15 years afterwards, after which liability will revert to the governments — this will happen in around 2069 on current timetabling. The CO2, of course, will be there for millions of years.

Scott quotes environmental lawyer Craig Wallace, who calls the decision the governments of Australia and Western Australia "a calculated risk". In electoral terms, he’s right. By the short term standards of the 24-hour news cycle, 2069 might as well be another planet, as any current ministers and governments will be long forgotten. And, if the predictions of the IPCC are anything to go by, by 2069 Australia will face far more pressing issues, namely, sand-bagging our coastal cities and defending Melbourne from mega-fires caused by devastating climate change.

Could the CO2 leak out? No one really knows. The geologists argue that the aquifer under Barrow Island should be favourable, but other experts point to fault lines underneath Barrow that could allow leaks to occur. Given the scale and complexity of the project, it’s a brave scientist or politician who can guarantee that all that CO2 will still be there in 50 or 1000 years time.

What the Gorgon liability swap really shows is the power big resource projects exert on elected governments. Perhaps it is simply that no government, when offered the carrot of billions in extra tax revenue and thousands of new jobs, can resist the siren call of the mega-resource project. It certainly seems that way in the current political environment in Australia. After all, the Gorgon decision is only a potential catastrophe — a mere hypothetical compared to the certain damage to the atmosphere that every day of Australian coal mining brings.

When it comes to trifling matters like the future responsibility for a possible environmental disaster, our governments will take the money every time.

newmatilda.com contacted Chevron’s spokeswoman, Nicole Hodgson, seeking comment for this story, but she did not return our calls.

Ben Eltham is New Matilda's National Affairs Correspondent.