What do Russia and California have in common?
Russia is currently the world’s second largest oil producer, and will play a key role in determining the extent to which global oil production is able to increase over the next 5 years. Particularly promising are two megaprojects based on Sakhalin Island, just north of Japan. Sakhalin-1, in which the Russian state oil company Rosneft holds a 20% interest, along with ExxonMobil (30%) and a consortium of Japanese and Indian firms, is expected to be producing 250,000 barrels a day by the end of the year. Sakhalin-2 is an integrated oil and natural gas project on a similar scale that is operated by Shell Oil Company (55%), Mitsui and Co. Ltd (25%) and Mitsubishi Corporation (20%).
The Russian Natural Resources Ministry on Monday annulled the environmental permit it had previously issued for the Sakhalin-2 project. Environmental concerns about the project are real, and legitimate environmental groups such as Sakhalin Environment Watch, Pacific Environment and CEE Bankwatch Network welcomed the news. But it is hard not to be cynical about the role that environmental concerns actually played in the decision. Ruminations on Russia regards Sakhalinmorneftegas, a Rosneft subsidiary in Sakhalin, as a significantly worse polluter than Shell, and many analysts believe that the main goal of the move is to help Gazprom acquire a stake in the venture. Indeed, within days Mitsui and Mitsubishi announced intentions to sell part of their stakes to Gazprom. Time will tell whether the ultimate outcome of this week’s negotiations is a cleaner environment or an even greater degree of power exercised by Vladimir Putin.
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The temptation for any totalitarian government to change the rules of the game after a company has already made a huge financial commitment, and thereby divert the assets to the personal objectives of the rulers, is almost irresistible. Of course, if the firm knows that’s the way the game is going to be played ahead of time, the initial investment would have been more cautious, or nonexistent. An irresistible temptation, perhaps, but one that continues to impoverish millions of people throughout the world today. Geoffrey Styles laments:
If Russia were trying to build up its oil and gas technology into world-class competitors, it had a great opportunity with aggressive private firms such as Yukos to take the lead, instead of semi- or re-nationalized firms such as Rosneft and Gazprom. Post-Yukos, we see a clear strategy built around firm control of the resources and their logistics, and the steady application of state power to reduce the influence that international firms gained during the Yeltsin years. That approach will keep world oil prices higher than they would otherwise be.
Meanwhile, on the other side of the Pacific Ocean, California State Attorney General Bill Lockyer this week issued the following press release:
Attorney General Bill Lockyer today filed a lawsuit against leading U.S. and Japanese auto manufacturers, alleging their vehicles’ emissions have contributed significantly to global warming, harmed the resources, infrastructure and environmental health of California, and cost the state millions of dollars to address current and future effects.
“Global warming is causing significant harm to California’s environment, economy, agriculture and public health. The impacts are already costing millions of dollars and the price tag is increasing,” said Lockyer. “Vehicle emissions are the single most rapidly growing source of the carbon emissions contributing to global warming, yet the federal government and automakers have refused to act. It is time to hold these companies responsible for their contribution to this crisis.”
Filed in U.S. District Court for the Northern District of California, the complaint names as defendants: Chrysler Motors Corporation, General Motors Corporation, Ford Motor Company, Toyota Motor North America, Inc., Honda North America, and Nissan North America. The lawsuit is the first of its kind to seek to hold manufacturers liable for the damages caused by greenhouse gases that their products emit. Lockyer filed the lawsuit on behalf of the People of the State of California.
The complaint alleges that under federal and state common law the automakers have created a public nuisance by producing “millions of vehicles that collectively emit massive quantities of carbon dioxide,” a greenhouse gas that traps atmospheric heat and causes global warming. Under the law, a “public nuisance” is an unreasonable interference with a public right, or an action that interferes with or causes harm to life, health or property. The complaint asks the court to hold the defendants liable for damages, including future harm, caused by their ongoing, substantial contribution to the public nuisance of global warming.
I’m concluding that Lockyer must not share my current concerns about the grave financial challenges and likely further big job losses already facing American car manufacturers. In any case, there certainly appear to be legitimate environmental groups that welcomed Lockyer’s announcement, such as
this statement from Carl Zichella, Sierra Club Regional Staff Director. But the key question in my mind is not the extent to which reducing greenhouse emissions from vehicles may be a good idea, but rather whether, under previously existing U.S. law, it has been lawful to manufacture cars that emit carbon dioxide. I submit that it has, and if a judge somewhere now creatively determines that a company can be punished for such perfectly lawful behavior, then I fear that America is no longer a nation ruled by law, but rather ruled at the whim of whatever those currently wielding power happen to think might be a good idea. And if we are unsure about such a fundamental question as this one until a robed priest of the court can deliver the latest answer, then America has become a profoundly more difficult place in which to do business.
Fortunately, I see I am not alone in my reaction to Lockyer’s announcement:
We cannot help reacting to something so inane and specious that it leaves one wondering if it is a joke.
Even if the California’s lawsuit against auto manufacturers for the damages caused by global warming is, as Steve Verdon says, “a cheap political stunt,” it is still shocking. The idea that this could win votes tells you something.
[Lockyer's] notion that internal combustion engines might not be unlawful in themselves, but constitute nuisance in this case because manufacturers could be doing more to minimize their impact, makes as much sense (which is to say, no sense whatever) as if he sued California’s own drivers on the grounds that they contribute to the problem by taking unnecessary trips.
Because, after all, the California attorney general is the one who should be deciding national policy on the global warming controversy.