Fuelling our own demise: Why The Bahamas must divest from oil now

Climate change is an existential threat to our land mass…We are here to talk about survival.” – Prime Minister Perry Christie, in his position as CARICOM Chairman, in a May meeting with French President Francois Hollande.

 “Our children have the biggest stake in the future. They will bear the consequences of economic, social and environmental decisions and actions that are not harmonious with nature.” – Kenred Dorsett, Minister of the Environment, Earth Day 2015.

 .Digital.Disclosure. / ALISON LOWE

The Bahamian government is attempting to walk a line – a line which is in fact a gulf – between climate advocate and gung-ho oil investor.

Keeping his climate campaigner hat on, Environment Minister Ken Dorsett told Earth Day attendees in Nassau last month it is “no secret that an environmental priority and concern of the Government is the effect of climate change”.

Quite rightly, he noted how 88 percent of the Bahamian population lives within 10 miles of the sea and climate change-associated sea level rise could flood 80 percent of the country.

However, assuming the position of oil enthusiast, the Minister also recently described a possible oil discovery as a silver bullet to end The Bahamas’ by now well-publicised fiscal woes forever.

An oil strike would be, he said without a hint of irony in October 2014, an event which would, “have a massively transformative effect on our fortunes as a people”.

Fiscal deficit? Eliminated. Electricity costs? Reduced. Industry? Flourishing. Generally speaking, oil would “enrich (The Bahamas) beyond its’ imagination,” he said. Not bad, when you put it like that.

In the meantime Dorsett has sought to make real this support for the oil sector by advancing, albeit too slow for the Bahamas Petroleum Company’s liking, oil regulations to govern this sector which he so clearly wishes to emerge.

But viewed from above, the gulf that exists between these two positions our environment minister is trying to straddle is too wide. He must jump to one side if he, and the rest of us, are to avoid drowning.

In answer to a rallying cry Dorsett himself made to students at the Earth Day event – that they should state their solutions to climate change – the response is painfully simple:  keep the oil in the ground, or in our case, under the ocean floor.

It is beyond time to admit that for the Bahamian government to facilitate the establishment of oil wells in its territory is to shoot itself in the foot quite tragically – and not primarily for the reasons most opponents have argued.

For it is true that, as opponents of oil drilling in The Bahamas have long argued, that preserving the sector that currently accounts for the majority of our GDP, tourism, and our marine environment, are both highly relevant to the case against oil exploration.

Oil slicks shimmering in the sunset, inundated beaches, roadways and airports and stronger and more frequent hurricanes are not the stuff of Joe Blow’s vacation dreams.

But even more important to the debate over the way forward on oil drilling in The Bahamas is the larger issue of climate change. Larger in the sense that oil extraction not only has the potential to threaten tourism and the environment via unmanaged oil spills, but it also threatens everything else too – our entire physical land mass. Economically, to accept oil drilling as a form of wealth generation would be to rob Peter to pay Paul.

To appreciate why, the government would do well to examine the impetus behind a major international campaign launched in March by a leading international media outlet, The Guardian.

The Guardian newspaper’s Editor-in-Chief, Alan Rusbridger, explained how accumulated scientific knowledge today tells us the world’s future depends on the remainder of our global fossil fuel resources staying just where they are. If we to extract and burn the fossil fuel that is known to exist, available evidence shows that globe will become a truly inhospitable place.

In fact, 80 percent of all known extractable oil, coal and gas reserves still under the ground must stay put in order to prevent catastrophic climate change of more than two degrees celsius above pre-industrial levels.

With international negotiations among sovereign states having been notoriously protracted, painful and ineffectual in finding an agreed path to limit global carbon emissions, The Guardian has joined those taking a more practical approach. Forget long-sought agreements among politically-hamstrung politicians, the way forward is to de-finance oil. The newspaper is calling for divestment from global companies that lead the pack when it comes to finding and burning more oil, gas and coal. Rusbridger says that not doing so sooner is one of his only regrets of a 20 year career heading the newspaper.

Here in The Bahamas our government could choose to sit back and hope that this high profile, international campaign by The Guardian, and those similarly minded, work; that the world sees the error of its ways fast enough to save Bahamian skins from the inevitable flooding, increased and stronger hurricanes, coral bleaching and loss of livelihoods that will result if the world doesn’t change course.

Or we could recognise that this climate science demonstrates clearly why The Bahamas should undertake its own divestment initiative. More than the overwhelming consensus among leading climate scientists and the launch of The Guardian’s campaign point to why us now is the time to do so.

Last month, April 2015, was the date by which the Bahamas Petroleum Company (BPC), the frontrunner in the Bahamian oil exploration sector, was required to drill an exploratory well in Bahamian waters under the terms of their licensing agreement. The company quietly missed that deadline.

This inaction was the case notwithstanding the fact that Chief Executive Officer (CEO) Simon Potter described the royalty agreement obtained by BPC from the Bahamian government as “second to none” and likely “music to the ears” of the joint venture partner the company was seeking to finance the drilling of the well.

There are likely a multitude of reasons, some of which are out of the company’s hands and can be easily speculated over – falling oil prices and the impact of delayed government regulations for the sector – for why BPC has been unable to secure a partner to fund the drilling and therefore why it has missed this licensing condition.

Whatever the case, the passing of this deadline for action by BPC should have represented an opportunity for the government to disengage from a relationship that is not in the long term best interests of the country.

Instead, with no public discussion over the matter at all, having already done away with initial plans for a referendum on oil drilling, the government chose to renew the company’s licenses, in the process extending BPC’s drilling deadline to April 2017.

Potter said on May 21st that the licence renewals, and extended time given to BPC to drill its first $60-$100 million exploratory well, would help it attract, and finalise a deal with, potential joint venture partners.

Here’s why April 2015 should have been viewed as a turning point and why the public should press the government to reconsider its decision.

  1. Do no harm: Selling oil to the world to be burnt and turned into emissions, whose effect The Bahamas will then have to pay to mitigate, is counterproductive and short-sighted.
  2. Credibility. Our position as a country that will be among the first to drown as a result of climate change gives us the unfortunate advantage of being able to make a persuasive argument for action, if we choose to try. We owe it to ourselves and other countries like ours to use our voice on the global stage to raise consciousness about the human consequences of the world failing to act. Simultaneously announcing ourselves as an emergent petrostate reliant on fossil fuels for jobs and our government’s fiscal well being undermines that position.
  3. Motivation: If citizens conclude today, as many have good reason to, that our government is sluggish on the issue of climate change, we can hardly expect those in power to look after our long term interests by advocating reduced global carbon emissions while they stands to benefit financially from any boost in oil consumption locally and globally.
  4. Role model: What would be both ideal and feasible is if The Bahamas were to become a model for others to follow by implementing green technologies. We are an archipelago of islands for which it makes little economic sense to continually replicate power stations, as the high cost of electricity in the family islands, subsidised by Nassau consumers, demonstrates. Moving towards installing renewable solutions to energy will allow us to address this long-standing structural problem while presenting ourselves as a world leader in renewables; an example to those others who we are trying to convince to take an alternate path.

While some, such as BPC CEO Simon Potter have argued that oil revenues could be used to finance such a shift in The Bahamas, common sense and past precedent dictates this would be an appealing but unlikely outcome of oil extraction. History and human nature suggest that readily accessible oil resources would delay, not catalyse, a shift towards renewables in The Bahamas.

All of the above points still leave out the non-climate related causes for concern that arise from an oil-funded future. These include how oil wealth would be managed so as to avoid damaging the already-impaired quality of our democracy and how such a flow of wealth from one sector may inhibit the economic diversification in The Bahamas that it alone does not negate the already-existing need for. An acknowledgment of how these issues factor into the question of whether we want an oil-based economy is needed.

We must also have a debate about whether it is fiscally prudent to hang our economic hat on an industry which has in the last year proven to be more unpredictable than many had ever imagined. No longer is it as straight forward as oil being considered the “black gold” that it once was. As of February 2015, oil prices had slumped to 50 percent of their level the previous summer, and this following the longest price decline in 20 years. If we assume action will eventually be taken globally to further limit oil consumption – whether or not it comes soon enough to save The Bahamas – this also calls into question the industry’s long term value.

From the perspective of our country’s economic health and stability, relying on such an industry – as with offshore finance – could prove bittersweet over the long term.

This is the case even before we get into the subpar financial terms set out between the government and BPC. Dorsett claimed in 2013 that Potter told him he was “misquoted” when he described those terms as “second to none”. Despite the existence of audio confirming his comments, Dorsett brushed it off at the time too, even as others, such as former Minister of the Environment Earl Deveaux, suggested a renegotiation of these fiscal terms should take place.

Now the government has been warned by the Commonwealth Secretariat’s Economic and Legal Section that the financial details of its deal with BPC do indeed provide the government with “a relatively low level of earnings” from an oil strike.

In response, Dorsett has just now brought forward regulations that cap the government’s profit at 75 percent rather than 25 percent, as set out in the BPC deal. The Minister said the new terms provide “a great balance” that gives The Bahamas a “greater benefit” from any possible oil strike.

All very good, except that BPC was quick to point out these terms do not apply to them. Their fiscal terms were set out long ago, said Potter, who frequently argues the company has the country’s best interests at heart.

This again forces the question of whether The Bahamas can, or should, bear the cost of becoming a petrostate, given all of the compromises this would involve and the fact that it is most likely on the back of drilling done by BPC – not any other company governed by these belated and more “balanced” fiscal terms – that this would take place.

But back to Rusbridger. Among the many reasons why climate change has continued unabated, he has argued in The Guardian, is that arousing awareness of the seriousness of the threat it poses to humanity has been uniquely challenging.

For one, those countries set to be most immediately impacted may seem “far flung” to readers in London or New York.

But for The Bahamas, this low-lying, “far flung” state, with its acute vulnerability to the sea level rise and the more frequent and strong hurricanes associated with climate change, is our home.

Which begs the question: with so much at stake, if we do not act in our own best interest, who will?