sharing in governance of extractive industries

EITI in the US: the invisible empire of oil (Part 3)

Growing up in Louisiana, the fourth-biggest oil producing state in America, I pretty much took the oil industry for granted.

It was everywhere, of course. I saw the sprawling refineries, heard about the jobs created and the oil occasionally spilled, but it was so omnipresent that I almost didn’t notice it. Like someone from Paris who doesn’t do a double-take at the Eiffel Tower, or a California kid who assumes every place in the world has a golden coast.

Louisiana’s coastal marshes aren’t golden; they are steeped in oil, and the state’s political and economic fortunes have risen and  fallen with this black ‘gold’. Decades of back-room wheeling and dealing between oil men and state politicians – who, as it happens, are often one and the same – have made that perfectly clear. But despite its ubiquity and its pervasive economic impact, the oil industry in Louisiana seems to slip by the state’s citizens almost unnoticed. It remains an ‘invisible empire’, in the words of former governor Huey Long.

So somehow it makes sense that it took me moving thousands of miles away to Germany, after living in Louisiana for eighteen years, to remove this oily blindfold and begin to understand the paradox at the heart of the petro-culture in my home state.

Here at OpenOil, I got into transparency and learned about the impact of extractive industries in far flung lands like LibyaColombia and Iraq. Then, recently, a thought occurred to me and struck me as rather odd: Essentially, I’m a son of oil. I spent the formative years of my life in a petro-state. So why do I know more about the oil industry in Libya than I do about the one in my own back yard? And why does a state in the US, the richest country in the world, still seem to be suffering from the dreaded ‘resource curse’?

Even if the answers are cloudy, the symptoms are clear. Decades of oil and gas activity have permanently damaged Louisiana’s precious wetlands; but for the billions of dollars in revenue they have generated over the years, Louisiana ranks close to the bottom among all US states on many health, education, economic and quality-of-life indicators. The state’s infrastructure is well below average by national standards.  And it is number one in the most troubling areas:corruption and violent crime.

To get Louisiana’s oil dollars to start producing better outcomes for its people, many elements are missing; but perhaps the most vital ingredient is transparency, especially for oil and gas production at the state level. Unfortunately, since the very beginning, Louisiana has found creative ways to spoil the promise of oil dollars with corruption and collusion, aided by an acute lack of corporate and governmental transparency.

Huey Long was America’s original petro-dictator, representing Louisiana as governor and US senator until his assassination in 1935. A natural populist with rhetorical flair, ‘The Kingfish’ first won his electorate’s collective heart and mind by waging war on big oil. For these and other exploits, he remains something of a pop legend in the bayous of south Louisiana today. A prominent bridge across the Mississippi river is named after him. He is one of two Louisianians to gracestatuary hall in the Capitol building in Washington, DC.

But Long and the political machine he created – whose influence still echoes through local politics today – also set a dangerous precedent for how Louisiana’s oil and gas industry would be run. In 1934, shortly before his death, Longfounded a secret venture called Win or Lose Oil Company which bought up nearly all oil and gas leases on private and state-owned land in Louisiana, then sold them off to big companies like Texaco at a healthy margin.

Long was a US senator when these dubious deals went down and his business partner, James A. Noe, was a member of the Louisiana senate.

Incidentally, I’ve argued in two previous blog posts that the EITI transparency initiative, which is currently being implemented in the United States but only on federal lands, should be expanded to exactly the kind of private and state-owned lands where the leases were sold by Win or Lose Co. in the 1930s. To paraphrase UCLA political scientist Michael Ross, transparency cannot magically solve the problems of resource-rich states, but it’s probably the safest and simplest way to bring about improvements. This certainly seems to be the case in Louisiana.

Oil is a slippery issue in Louisiana in many more ways than one: environmental concerns are highly visible, rightfully, as are arm-wrestling spectacles between competing state and vested federal interests. Oil industry transparency appears to be a slightly less sexy topic – but it shouldn’t be. In implementing EITI, the US federal government has an opportunity to improve transparency at every level, not just federal, of its extractive industries. Federal lands are responsible for just 30 percent of oil and gas production; private, state, and tribally-owned lands are responsible for the rest.

Subnational implementation of EITI has improved the transparency of nearly all levels of revenue streams in other countries with large extractive industries, like Ghana and Mongolia. The initiative offers the same opportunity for the US, and the federal government should seize it.

Because, for a change, it would be great for the people of Louisiana and other producing states to know exactly what’s happening in their own back yard.

Amrit Naresh is a research associate at OpenOil, a transparency company based in Berlin.

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