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BP Gains Millions from US Stimulus Funds

Leon Kaye | Wednesday August 11th, 2010 | 0 Comments

A month has passed since BP plugged up that well in the Gulf of Mexico, but it may take years to tally the economic costs of the three-month ordeal.  BP in the meantime has racked up huge expenses and its shareholders have watched the company’s value sink.  Even before the Deepwater Horizon disaster, BP had already been in hot water for other projects that caused a bevy of environmental and safety problems, including the Texas City explosion in 2005.

But while BP faces litigation and steep fines, it is also gaining money from one of the US government’s stimulus programs.  Over the next several years, as much as $308 million in federal funds, $175 million of which is directly from the American Recovery and Reinvestment Act (ARRA), will flow to a power plant outside of Bakersfield, California.

A few miles outside rapidly-growing Bakersfield lies Tupman, a small outpost where about 200 people live.  The town is surrounded by alfalfa and cotton farms; and like much of California’s San Joaquin Valley, work is seasonal and often hard to come by.  That could change soon, however.  An innovative power plant will turn coal and petroleum coke into hydrogen, which could then be burned into electricity.  Furthermore, the plant would trap 90% of its carbon dioxide emissions, which on one hand could push out oil for Occidental Petroleum.  Using carbon capture and storage technology, that CO2 would stay underground . . . forever.

Naturally the fact that BP is involved with the project is causing howls of dismay.  To many, demanding reparations from BP on one hand, while funneling funds to it through a different program, appears absurd.  Some of BP’s critics believe the company should be forever ineligible from gaining federal government financial incentives or grants because of what occurred in the Gulf of Mexico.

The argument gets more complicated; technically BP did not receive the funds.  Instead, Hydrogen Energy California, a partnership between BP and Rio Tinto, is the recipient.  Advocacy groups like the Environmental Defense Fund, which supports this deal, believes projects like this are a way to get industry on board to help wean the US away from imported fossil fuels and move towards more clean energy sources.  On the other side are organizations, including Greenpeace, which insist that energy companies receive no government money.

Perhaps the truth lies somewhere in between.  It may be bad PR that a venture related to BP is receiving stimulus funds, but the project in Tupman arguably has nothing to do with the Gulf of Mexico oil spill.  The real question is whether risky and untested technologies like carbon capture and storage should be funded at all.  Residents in Kern County, where this plant will operate, dispute whether it will or will not contribute to the area’s already high air pollution.  Meanwhile, those in Washington DC who have slammed the Hydrogen Energy California plant as wasteful, including John McCain, push carbon capture and storage as a way to harness US coal.  And folks in Tupman want jobs, even if a $300 million-plus price tag seems steep for 100 or so jobs.

Is this a much-needed project or overpriced experiment?  Share your thoughts.


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