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Offshore Drilling Revisited

Congress and the Obama Administration weigh the benefits and risks of expanded oil and gas production

by Glenn Hess
March 23, 2009 | A version of this story appeared in Volume 87, Issue 12

Credit: Shutterstock
The Obama Administration wants further study of the energy potential of the U.S.'s offshore oil and gas deposits before permitting any new leases.
Credit: Shutterstock
The Obama Administration wants further study of the energy potential of the U.S.'s offshore oil and gas deposits before permitting any new leases.

ENERGY INDUSTRY OFFICIALS, coastal states, and environmental activists are clashing over whether Congress and the Obama Administration should allow offshore drilling for oil and natural gas in federal waters that until last year were off limits to development.

Democratic lawmakers, who now hold power in both houses of Congress, have been reluctant to move quickly on offshore drilling. They say they want to further assess what resources are available, including alternative energy such as wind, wave, and tidal power. The Department of the Interior is also delaying action on allowing exploration lease sales until it collects more public comment.

Rep. Nick J. Rahall II (D-W.Va.), chairman of the House Natural Resources Committee, has indicated that a decades-old legislative ban on drilling off the Atlantic and Pacific coasts that for political reasons was allowed to expire on Oct.1, 2008, is probably not going to be reinstated, although some new limits are virtually ensured.

Rahall recently convened a series of hearings to determine "where and under what terms future oil and gas development off the nation's coastlines should occur." He said his committee, along with others that share jurisdiction, will craft a comprehensive energy bill that addresses offshore drilling.

"I am not opposed to new drilling," Rahall noted at one of those hearings last month. "There are clear benefits, including jobs, tax and royalty income, and money that we keep here at home instead of sending it overseas. But the amount of additional oil that we could drill offshore is a drop in the bucket of what we need to sustain our economy and meet our energy needs," he remarked.

Former President George W. Bush lifted an executive ban on offshore drilling last summer, and Democratic lawmakers allowed a congressional moratorium to lapse in the final stretch of the 2008 election campaign as gas prices topped $4.00 per gallon and public opinion polls showed broad support for expanded domestic energy production.

Since 1981, Congress had prohibited the Interior Department from spending money to process new drilling leases, in effect banning energy companies from even exploring most outer continental shelf (OCS) waters, a 1.76 billion-acre area that begins 3 miles off the U.S. shoreline and extends 200 miles outward. Currently, the government has only leased tracts for drilling off the coastlines of Alaska, Texas, Louisiana, Mississippi, and Alabama.

Just four days before leaving office, the Bush Administration floated a draft plan to allow drilling off the entire Atlantic coast and some parts of the Pacific coast. It would have authorized 31 energy exploration lease sales between 2010 and 2015 for tracts along the eastern seaboard and off the coasts of Alaska and California. But at a press conference on Feb. 10, Interior Secretary Kenneth L. Salazar said he would extend a public comment period on the proposed offshore leasing program until September to avoid a "headlong rush" to drill.

"Growing global demand dictates that all sources of energy, and efficiency, will be needed to fuel economic growth."

"It was a process rigged to force hurried decisions based on bad information," Salazar said. "It was a process tilted toward the usual energy players, while renewable energy companies and the interests of American consumers and taxpayers were overlooked."

He also ordered department scientists to compile a report on OCS's energy potential—not just for oil and gas, but also for renewable sources such as wave power and wind farms. "This rule-making will allow us to move from the 'oil and gas only' approach of the previous Administration to the comprehensive energy plan that we need," Salazar said.

President Barack Obama has said that he could accept an expansion of offshore oil and gas drilling as long as it is part of a broad package that helps move the U.S. toward energy independence.

Calvin M. Dooley, president and chief executive officer of the American Chemistry Council (ACC), a trade group representing major chemical manufacturers, says he welcomes the government's commitment to a national energy plan that includes both conventional and renewable resources.

"As Congress and the Administration take a fresh look at needed energy sources and technologies, we believe efficiency and conservation, energy diversity, and expanded domestic oil and natural gas production should be the foundation of a new policy," Dooley says.

CHEMICAL MANUFACTURERS, which consume huge amounts of natural gas both as a feedstock and as a fuel source, have been hit hard by high and volatile energy prices for most of the past decade. Although prices have tumbled since peaking last July, the industry is concerned that climate-change legislation or new environmental regulations could spark new demand for natural gas across the economy, which would shrink supplies and send prices soaring again.

Dooley notes that ACC was encouraged by the bipartisan support in Congress last year for lifting the moratorium on offshore domestic energy development. "Clearly, consensus has developed around the need for OCS energy to be part of America's energy equation," he remarks. "We cannot begin soon enough to reshape U.S. energy policy in a way that drives demand for American goods and services, maintains and expands America's job base, adds leasing revenues to the Treasury, helps reduce greenhouse gas emissions, and advances our security."

Republicans, however, have criticized the Interior Department's decision to delay OCS leasing, asserting that it is really a continuation of the moratorium. "The true effect of Secretary Salazar's six-month delay is a reinstatement of a ban on drilling," Rep. Doc Hastings of Washington, the top Republican on the Natural Resources Committee, stated at a Feb. 25 hearing. "So let us call it what it truly is, a moratorium, not a delay."

Hastings said U.S. oil and gas companies are "ready, willing, and able to invest private dollars to develop these resources, along with the technology to do so in an environmentally responsible manner, and we should let them." Expanded offshore drilling, he said, is "about creating good American jobs" and reducing the U.S.'s dependence on foreign oil and the OPEC (Organization of the Petroleum Exporting Countries) cartel.

Ocean Conservation
Credit: Oceana
Danson (left) and Cousteau urged lawmakers to reimpose the lapsed moratorium on offshore drilling at a House hearing.
Credit: Oceana
Danson (left) and Cousteau urged lawmakers to reimpose the lapsed moratorium on offshore drilling at a House hearing.

The six-month extension of the comment period for the five-year draft plan was also criticized by the American Petroleum Institute (API), an industry trade group. "Secretary Salazar's announcement means that development of our offshore resources could be stalled indefinitely," API President Jack N. Gerard says. "That would delay Americans' access to nearly 160,000 new well-paying jobs; $1.7 trillion in revenues to federal, state, and local governments; and greater energy security," he remarks, referring to projections made by consulting firm ICF International in a recent study commissioned by API.

"In these tough economic times, Salazar's delay does a disservice to all Americans," Gerard says. "We should be moving as quickly as possible to develop more of our own oil and natural gas."

Environmental activists and coastal states that depend on tourism oppose new drilling, citing the potential for spills and urging an emphasis on renewable energy instead. "By committing to a thorough review, Salazar is demonstrating bold leadership that will offer America a new energy future that provides clean domestic energy and cuts our dependence on foreign oil," says Wesley Warren, director of programs for the Natural Resources Defense Council, an environmental group.

"Energy independence and jobs will be won by investing in clean energy, not by handing over our coasts to the oil industry," adds Athan Manuel, public lands director of the Sierra Club.

At one of last month's House Natural Resources Committee hearings, Philippe Cousteau Jr., grandson of legendary oceanographer and filmmaker Jacques Cousteau, warned that expanded offshore drilling would be detrimental to sea life and could cause spills, such as Union Oil's infamous 1969 oil spill in the Santa Barbara Channel that fouled miles of the California coastline. Restoring the drilling ban "is absolutely critical for the health of the oceans," said Cousteau, president of the conservation group EarthEcho International.

Actor and longtime environmental activist Ted Danson said approximately 120 million gal of oil is discharged into the world's oceans each year from platforms, marine transportation, vessel discharges, and accidents. "Offshore drilling only looks good from an oil executive's office," he told the committee. "While not intentional, oil spills do happen, and they harm everything from the smallest ocean organisms to the largest predators in the sea," added Danson, a founder and board member of Oceana, a global ocean conservation organization.

Danson also stressed the importance of a speedy transition from fossil fuels to renewable, carbon-free energy, such as offshore wind and solar power. "Our energy policies should fit within a consistent blueprint in which expanded conservation and improved energy efficiency are paired with facilitating renewable energy production to reduce our reliance on fossil fuels," he told the committee.

Coastal state representatives offered divergent views. California Secretary for Natural Resources Mike Chrisman testified that his state continues to strongly oppose oil and gas leasing off its coast, arguing that the adverse environmental and economic impacts would "far outweigh the benefits."

Chrisman said California Gov. Arnold Schwarzenegger and other state officials were prepared to use their permitting authority over coastal development to thwart any new drilling plans. He also noted that the governors of Oregon and Washington have made clear their opposition to opening federal waters off their coasts to drilling, too.

But Garret N. Graves, director of the Louisiana Governor's Office of Coastal Activities, told the committee that his state has benefited economically from offshore drilling and energy revenue sharing. Louisiana, which has had drilling rigs off its coast since 1947, receives about $1.5 billion annually in revenue from oil and gas.

"Congress should accompany any new expansion or increase in domestic oil and gas production with a program to allow for sharing of energy revenues that is fair to all coastal states," Graves said.

Oil company executives testified that expanded offshore production will produce jobs, help the U.S. economy, and reduce the nation's dependence on imported petroleum. "The need for making more oil and natural gas available to Americans is clear. The U.S.'s continued economic growth and prosperity depend on access to reliable and affordable supplies of energy," said A. T. (Tim) Cejka, president of ExxonMobil Exploration.

Lamar McKay, president of BP America, noted that U.S. policymakers have "deliberately constrained our own supply by limiting access to promising areas for leasing, exploration, and development." He pointed to Interior Department estimates that predict the offshore areas that have been off limits to exploration hold at least 18 billion barrels of oil and 76 trillion cu ft of natural gas. Access to this reserve is important because the U.S. currently imports about 65% of its petroleum supplies.

"THE PRESIDENT has said he wants to free us from foreign oil," said J. Larry Nichols, CEO of Devon Energy and chairman of API. "Well, we have domestic oil. We have domestic gas. And a lot of it's offshore. If we are serious about reducing our dependence on foreign oil, that surely must mean we want to develop our own energy resources."

Marvin Odum, president of Shell Oil, said additional oil and gas will be needed as the U.S. cultivates renewable and alternative energy sources. "Growing global demand dictates that all sources of energy, and efficiency, will be needed to fuel economic growth," Odum said in his testimony. "Yes, policies are needed that will lead to the commercialization of green energy sources. But we must be realistic. The transition to this future will take time, even under the most optimistic of circumstances.

"We can continue to import increasing volumes of oil and gas, or we can develop more of our own domestic resources," Odum said, pointing out that now "we can drill safely and efficiently with an ever-decreasing environmental footprint." Because of improvements in technology that prevent the types of oil spills that have taken place during exploration and production work in the past few decades, he said, "producing more oil and gas in our own country is a no-lose proposition."

House and Senate Democratic leaders have signaled that they might tackle energy and climate change in one legislative package, with floor action perhaps as early as this summer.


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