SURPRISE, SURPRISE, SURPRISE: How 'Gas & Oil' Industry Helps Create Coastal Dead Zones

Scientists are expecting a very large "dead zone" in the Gulf of Mexico and a smaller than average hypoxic level in the Chesapeake Bay this year.

“Surprise, surprise, surprise,” is how Gomer Pyle would’ve put it.

The report from the National Oceanic and Atmospheric Administration (NOAA) forecasts the 2013 hypoxic "dead" zone in the Gulf of Mexico will be between 7,286 and 8,561 square miles, placing it among the 10 largest ever recorded (an area the size of the entire state of New Jersey). Hypoxic (very low oxygen) and anoxic (no oxygen) zones are caused by excessive nutrient pollution, often from human activities such as agriculture, which results in insufficient oxygen to support most marine life in near-bottom waters.

“…the growing dead zones in the Chesapeake Bay are the direct result of inadequate water filtration — a job that was once carried out by menhaden,” noted author Paul Greenberg, while Jim Uphoff at the Maryland Department of Natural Resources said of menhaden, “they are filter feeders that consume phytoplankton, thus controlling the growth of algae in coastal waters. As the population of menhaden declines, algal blooms have proliferated, transforming some inshore waters into dead zones.”

Imagine, a single adult bunker filtering as much as 2 million gallons of water a year, essentially inputting bad water and outputting clean water by ridding 4 to 6 gallons of algae from the water in a single minute.

SHAZAM!

It should be of no surprise to anyone that the biggest dead zones in coastal U.S. waters are at the mouth of the Mississippi and in a small region of the Chesapeake, right where factory menhaden reduction operations by the publicly-traded resource degradation outfit known as Omega Protein (stock symbol OME) are based. Omega’s manufacturing facilities, the ports where hundreds of millions of pounds of menhaden are offloaded for processing into livestock feed and fish meal, are located in the Gulf towns of Abbeville and Cameron in Louisiana and Moss Point in Mississippi, as well as at Reedsville, Virginia on the Chesapeake Bay.

Headquartered in Houston, Texas, Omega Protein traces its origins to Zapata Oil, founded in 1953 by future-U.S. President George H. W. Bush and business partners John Overbey, Hugh Liedtke, Bill Liedtke, and Thomas J. Devine. Overbey was a ‘landman’ skilled in scouting oil fields and obtaining drilling rights cheaply, while Bush and Devine were oil-wildcatting associates who performed oil exploration drillings. Their joint activities culminated in the establishment of Zapata Oil through an initial $1 million investment provided by the Liedtke brothers, Bush's father Prescott Bush and his maternal grandfather, along with an inner-circle of wealthy oil tycoons. Hugh Liedtke was named president, with Bush was vice president.

A 1975 internal CIA memo noted how Zapata was founded through Bush's joint efforts with Devine, a CIA staffer who had resigned his agency position that same year to go into private business, but who continued to work for the CIA under commercial cover. Devine would later accompany Bush to Vietnam in late 1967 as a "cleared and witting commercial asset" of the agency. (Read more about Zapata here at Wikipedia.)

In 1997, Zapata Protein would go public in seeking additional investors, changing its official name to Omega Protein in 2002.

OCEAN ‘WILDCATTING’ & EPA VIOLATIONS

During 2013 alone, the OME stock price has ranged from a low of $6.32 a share on January 7, to a recent high of $11.03 on May 21. One investor called the near-doubling of the OME stock as coming entirely as a result of fish meal supply reductions in Peru following extreme government restrictions there on the anchovy catch. After finding that "the Peruvian anchovy is in danger of extinction," Peru’s President Ollanta Humala cut anchovy production there by 68%, opening a new international market for Omega’s ground-up fish meal product.

Using spotter planes to find the menhaden, high-powered vacuums to suck out acres upon acres of fish from the water, and large factory ships to ‘reduce’ the oily baitfish to meal, Omega Protein essentially functions to take as much menhaden from areas of the Chesapeake and Gulf of Mexico as is technological possible, leaving these waters devoid of a natural “water filtration” while lining the pockets of their investors. What’s left behind are hungry striped bass, weakfish and crabs whose primary source of protein is ultimately turned to fish meal for Peruvian aquaculture facilities (and others around the world), and vast hypoxic "dead" zones where algae and phytoplankton chokes the oxygen from the water.

In addition to its wanton destruction of a vital ecosystem stock, Omega Protein Corporation has also come under fire for other environmental issues in recent years. On June 4th of this year, OME pleaded guilty to a pair of Clean Water Act violations stemming from bilge water discharge practices at its Reedville, VA facility, requiring the company to pay a $5.5 million fine, be placed on a three year term of probation, and implement an environmental compliance program.

In addition to the $5.5 million fine, the Chesapeake operation was required to make a $2 million payment to the National Fish and Wildlife Foundation to fund projects in Virginia related to the protection of the environmental health of the Chesapeake Bay.

OME has always claimed to be a champion of the environment, and when you search for Omega Protein at Google or Bing you’ll find the company boasting of its “sustainability,” claiming to be “committed to protecting the environment and menhaden fishery that provide us with our livelihood.” The livelihood of Omega’s workforce has always been used by their corporate leaders in defending the company’s ability to degrade our local waters of menhaden. In December for example, the Atlantic States Marine Fisheries Commission (ASMFC) opted to reduce the total allowable catch of menhaden by 20% beginning in 2013, a move that Omega’s Ben Landry called "big blow for the blue-collar workers in the Northern Neck of Virginia, as well as up and down the East Coast."

According to the Daily Press of Hampton Roads, VA, “Omega employs 300 workers in its reduction facility in Reedville, where menhaden are ground and boiled down into fertilizer, food for pets and livestock and dietary supplements. Thousands of other jobs depend on the industry, including fishermen in Omega's eight-vessel fleet.”

"Well have to run some numbers," Landry told the Daily Press last winter, adding "I can assure you it's probably going to cost the fleet at least one vessel, and that results in (lost) jobs directly there."

Well, surprise, surprise, on May 20th of this year, one day before OME’s stock surged to its highest point of 2013, the company announced the launch of new two state-of-the-art fishing vessels at the Reedville facility. At 196 feet and 184 feet long, these are the first new vessels christened by Omega in more than 20 years.

CHEAP FOREIGN LABOR

In terms of the Omega employees, while they claim to have a staff of 300 in Reedville alone, the company has historically be able to utilize foreign (largely Mexican) H2B Visa workers for temporary employment during the fishing season, although according to its 10-K the company's initial application for 2013 was denied by the U.S. Department of Labor. As of the filing of Omega's 10-Q on May 7 Omega's re-application had not yet been approved, and the company had already "embarked on a program to complement its workforce with non H2B Visa domestic workers."

While Omega hadn’t disclosed the dollar amount of its utilization of the program in 2012, according to a Freedom of Information Act request Omega Protein received 695 H2B visas for foreign workers in 2006 and 2007 at $12,000 per worker for the season. Landry said of the visa program, "the average laborer, a young man, blue collar worker, can make an extraordinary rate in the oil and gas industry [in the Gulf] and it was something we weren't able to keep up with."

Of course, it’s funny that Landry would differentiate himself and his corporation from the “oil and gas industry” in the Gulf of Mexico, given the fact the company’s history is built upon oil and gas revenues going back to Bush, Liedtke, and Devine. There is very little difference between the owner/investor of a Gulf oil rig and that of a 196-foot factory reduction ship, they both function the same.

The good news is that the large-scale commercial menhaden fishery - the ‘reduction’ industry - has been gradually phased out of all Atlantic States except Virginia. And while the overall 20% reduction in overall allowable harvest of menhaden voted by ASMFC sounds like a good deal for the fish and the ecosystem, it’s really a hollow victory for the resource given that Virginia has represented on average about 34% of Omega’s overall catch over the past five years. Coastwide, the total allowable catch now is 20% less than the average catch from 2009 to 2011, but the decision has also granted Omega 85% of the entire coastwide harvest.

Given that all state waters except Virginia are now closed down for the menhaden reduction industry, it’s expected that the Chesapeake will continue to be hit hard in the future by factory ships. In turn, the expected 8% loss in Omega Protein’s overall sales volume thanks to the Virginia restrictions will now have to offset somewhere if investors are going to continue to flock towards OME stock. That means an increase in overall harvest can be expected in the Gulf of Mexico, where there are no similar cap restrictions on the amount of menhaden which the reduction industry may harvest. Omega and its spinsters will say that increased harvest leads to increased employment.

However, where the Louisiana unemployment rate was 3.7% in 2006-2007, topping 6.5% in Mississippi during the same period, Omega’s manufacturing facilities in that region had utilized close to 600 of those low-paid foreign workers through the company’s H2B visa program.

While Jim Nabors’ boyhood home of Sylacauga, Alabama is a good 250 miles from the mouth of Mobile Bay on the Gulf of Mexico, I’m sure that his beloved Gomer Pyle could’ve surmised this hypocrisy quite well in just three, simple words:

“Shame, shame, shame…”

One final point which many find interesting - where groups like the Recreational Fishing Alliance (RFA) were pushing ASMFC and federal officials to go after Omega’s Chesapeake Bay operations, while calling for an outright ban on the reduction industry there, environmental activists working under the Pew Charitable Trusts umbrella pushed for the coastwide bunker cap which was approved back in December.

With Pew’s billion-dollar coffers, one might think that a crushing blow to Omega’s heart was within reach in 2012. However, with Pew’s activist support, Omega Protein’s 85% share of the Atlantic Coastal menhaden harvest was memorialized, with local bait harvesters taking the lion’s share of the overall harvest limit on a state-by-state basis.

Pew Charitable Trusts of course was founded by J. Howard Pew, Mary Ethel Pew, Joseph N. Pew, Jr., and Mabel Pew Myrin—the adult sons and daughters of Sun Oil Company (SUNOCO) founder Joseph N. Pew and his wife, Mary Anderson Pew. If you’d like to get in touch with SUNOCO INC, feel free to write them at 1308 N US Highway 83 in ZAPATA, TX 78076.