Gulf of Mexico production is a big contributor to US oil and gas output. Photo via Shutterfly/Lukasz Z
The Trump administration’s early January announcement that it planned to open up 90 percent of federal waters to offshore oil and gas development was met by much fanfare, but what ultimately winds up on the final leasing block is likely to be far less than what is on the ambitious draft plan.
“By proposing to open up nearly the entire OCS for potential oil and gas exploration, the United States can advance the goal of moving from aspiring for energy independence to attaining energy dominance,” Vincent DeVito, Counselor for Energy Policy at the US Department of the Interior said in a press release announcing the new draft plan.
But barely a week after the announcement, the plan hit the first in a series of snags when Interior Secretary Ryan Zinke announced the removal of Florida from proposed list of planned lease sales following a conversation with Republican Governor Rick Scott. Since then, legislators from more states along the eastern and western seaboards have lined up to request exemptions citing concerns about the environment and tourism.
Among the states asking to be left off the draft five-year offshore leasing plan are California, Oregon, Washington, New York, New Jersey and South Carolina. (source) So far, only Alaska and Maine have applauded the plan.
Henry McMaster, the Republican governor of South Carolina, told the press “we cannot afford to take a chance with the beauty, the majesty and the economic value and vitality of our wonderful coastline,” the Post and Courier newspaper reported.
The draft National Outer Continental Shelf (OCS) Oil and Gas Leasing Program for 2019-2024 proposed the largest number of lease sales in US history. It called for including 47 potential lease sales – 19 sales off the coast of Alaska, 7 in the Pacific Region, 12 in the Gulf of Mexico, and 9 in the Atlantic Region.
If implemented in its draft form, it would bring unprecedented access to US offshore oil and gas resources at a time when the OCS is already a substantial contributor to US production. The US Energy Information Administration reported that the Gulf of Mexico alone was expected to produce a record 1.7 million barrels per day in 2017.
The blowback to this plan highlights a broader public anxiety about the extraction of oil and gas resources that are essential to powering modern life. It creates a complex conundrum for the oil and gas industry; The public wants affordable energy and the economic stimulus generated by oil and gas production, but it balks at the prospect of drilling for these resources in their own back yards.
This atmosphere of concern highlights the need for the oil and gas industry to emphasize the use of ecologically conscious practices wherever possible. Several majors and independent producers are already heeding this call with the adoption of sustainability practices. Among the companies leading the way are BHP, Chevron, Shell, Statoil and Hess which each release their own annual sustainability reports.
Adopting safe and environmentally conscious practices are an important part of maintaining the industry’s social license to operate. The ongoing kerfuffle over the draft OCS lease plan shows that even the most industry-friendly White House in recent memory cannot ease public anxieties about the potential for accidents and spills in ecologically sensitive areas. Only the industry can do this by demonstrating a good faith effort to promote sustainable practices.
History Can’t Repeat Itself
Memories of the 2010 Deepwater Horizon oil spill still linger on the minds of many coastal residents. The spill was kicked off by a cascading chain of missteps and equipment malfunctions that led to a blowout at the BP-operated Macondo field in the deepwater Gulf of Mexico. The ensuing explosion caused 11 fatalities and set into motion the largest oil spill in US history.
In response to the spill, the Obama administration overhauled the federal agency responsible for overseeing offshore production and implemented a host of new rules aimed at reducing the potential for another accident.
Today, the Trump administration is quietly working to roll back some of those regulations to bring new investment into the US offshore.
In December, the Bureau of Safety and Environmental Enforcement begin moving forward with a proposal to adjust some of these rules as part of a wider Trump administration effort to reduce undue burden on industry. This signal from regulators indicates that the US government is willing to make compromises in exchange for promises of investment and eventual production royalties.
Regardless, the resistance to new offshore exploration by many coastal states highlights the fact that the public mood has not changed and demonstrating concern for the environment remains a prudent business practice. Doing so will help to ensure that areas that are already open to development stay open and states that favor like more exploration, like Alaska, will be able to see more leasing within their borders.