INSIGHT: Offshore energy becomes election issue

19 June 2008 16:08  [Source: ICIS news]

The tide may be changing for US offshore drillingBy Joe Kamalick


WASHINGTON (ICIS news)--President George Bush and presidential hopeful John McCain have raised US offshore energy access as a major election issue, a move that McCain clearly believes will help him win the White House and one that conceivably could end the longstanding congressional ban on offshore drilling.


In a speech in Houston, Texas, on Tuesday this week, McCain staked out a new energy policy intended to turn growing popular anger over record prices for crude oil and US gasoline against Democrats in general and his campaign rival, Barak Obama, in particular by showing their opposition to expanded domestic oil and gas development as contrary to consumer and voter interests.


His focus is on lifting the 27-year-old congressional ban on oil and gas exploration and development in 85% of US outer continental shelf (OCS) regions - chiefly the US East and West Coasts and off the lengthy Alaska coastline.


Those closed regions are estimated to hold some 86bn barrels of oil and more than 420,000bn cubic feet (bcf) of natural gas.  The US consumes 8bn barrels of oil annually - importing 60% of it - and about 22,000bcf of natural gas.


US petrochemical producers and their downstream customers are heavily dependent on natural gas as a feedstock and have been pleading with Congress for several years to open the closed OCS areas to development.


McCain’s high-profile pitch for offshore energy development was followed on Wednesday by Bush’s call for Congress to lift its ban on energy development in OCS regions, saying there is no excuse for the drilling ban with gasoline at $4/gal.


McCain was careful to reassert his support for energy conservation and efficiency, alternative energy resources and the hoped-for future of an economy free of hydrocarbon fuels, but he declared that the US must develop its domestic oil and gas reserves now until that distant oil-free goal can be reached.


Bush too said that in the long run the US must develop alternative energy resources, but “in the short run, the American economy will continue to rely largely on oil, and that means we need to increase supply, especially here at home”.


In what clearly was an election year bid to paint Democrats in Congress as obstacles to lower fuel prices, Bush charged that Democrats have blocked Republican-led efforts to expand domestic energy production.


“My administration has repeatedly called on Congress to expand domestic oil production,” Bush said. “Unfortunately, Democrats on Capitol Hill have rejected virtually every proposal - and now Americans are paying the price at the pump for this obstruction.”


“Unless members of Congress are willing to accept gas prices at today’s painful levels - or even higher - our nation must produce more oil, and we must start now,” Bush said.


“The stakes are high for our citizens and for our economy,” McCain said. “With gasoline running at more than four bucks a gallon, many do not have the luxury of waiting on the far-off plans of futurists and politicians.”


“We have proven oil reserves of at least 21bn barrels in the United States. But a broad federal moratorium stands in the way of energy exploration and production,” he said, referring to the offshore drilling ban.


“And I believe it is time for the federal government to lift these restrictions and to put our own reserves to use,” he said.


“I am a firm believer in the technologies that one day will free us from oil entirely,” he said, “but to get there at all, a more pragmatic approach will serve us better.”


“As a matter of fairness to the American people, and a matter of duty for our government, we must deal with the here and now and assure affordable fuel for America by increasing domestic production.”


In his call for Congress to end its offshore ban, Bush asked that the congressional moratorium on OCS drilling be lifted before legislators leave Washington for their home districts for the 4 July Independence Day holiday and recess.


Obviously, Bush and McCain want Democrats who continue to oppose offshore energy development to face constituents at home over the holiday who are paying $4/gal for gasoline - and perhaps more by 4 July.


“Now that their opposition [to offshore drilling] has helped drive gas prices to record levels,” Bush said, addressing members of Congress, “I ask them to reconsider their positions.”


“If congressional leaders leave for the 4th of July recess without taking action, they will need to explain why $4/gal gasoline is not enough incentive for them to act,” Bush said. “And Americans will rightly ask how high oil and how high gas prices have to rise before the Democrat-controlled Congress will do something about it.”


Bush, McCain and many other Republicans sense that popular sentiment about offshore drilling - which has long been opposed or indifferent - is changing as fast as the price of fuel.


A poll released on Tuesday by survey group Rasmussen Reports showed that 67% of voters believe that drilling should be allowed off the coasts of California, Florida and other states. Rasmussen Reports said that only 18% of responding voters were opposed to offshore energy development, with 15% undecided.


In addition, nearly two-thirds of the voters polled said they believed US gasoline prices at the pump would likely go down if offshore areas were opened to development.


A survey in late May by the highly respected Gallup polling company showed that 57% of Americans favoured drilling in US coastal “and wilderness areas” now off limits. Only 41% were opposed  The reference to wilderness areas is to the Arctic National Wildlife Refuge (ANWR) in Alaska, which many voters feel should be left free of energy development.


While he is now calling for an end to the congressional offshore drilling ban, McCain still maintains that ANWR should not be drilled, a position likely meant to retain some support among environmentalists who otherwise were annoyed by his change of heart on offshore drilling. (When McCain ran unsuccessfully for president in 2000, he was against offshore drilling.)


The likelihood that sentiment in Congress on offshore drilling is changing was demonstrated on Wednesday when Democrat leaders in the House abruptly postponed without comment a long-scheduled Appropriations Committee meeting that was to take a vote on an amendment to lift the offshore development ban.


Hill sources suggested that the vote was hurriedly set aside because Democrat leaders feared the authorisation for offshore drilling would pass or because the Democrats did not want to be seen voting against a measure that would increase domestic US energy supplies.


Whether this new and high-profile attention to the nearly three-decades-old offshore drilling ban will actually culminate in its reversal remains to be seen. But with the national election campaign now in full swing and McCain certain to keep the issue alive, the prospects for repealing the drilling ban are definitely increasing - especially as the cost of gasoline continues to increase.


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By: Joe Kamalick
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