INSIGHT: Bush offshore drilling plan likely to survive

22 January 2009 14:56  [Source: ICIS news]

By Joe Kamalick

Bush plan for offshore drilling may survive new administrationWASHINGTON (ICIS news)--Just before he left office, President George Bush opened the door to oil and gas development in previously banned US offshore areas - and fixed it so that his successor and the Democrat-dominated Congress will find it hard to shut that door again.

At Bush’s direction, the Interior Department’s Minerals Management Service (MMS) announced on 16 January a new five-year offshore leasing plan for the 2010-2015 period that includes the first proposed drilling in the Atlantic and Pacific outer continental shelf (OCS) regions since the 1970s.

The proposed leasing plan also includes areas in the eastern portion of US territorial waters in the Gulf of Mexico.

The US Atlantic and Pacific coastal areas were closed to drilling under a congressional ban from 1981 until - under public pressure for more energy resources - Congress allowed the moratorium to expire at the end of September last year.

Some of the proposed leasing parcels in the eastern Gulf are in an area that was to remain closed to drilling for 20 years under a 2006 energy bill.

The US petrochemicals industry, which is heavily dependent on natural gas as a feedstock, and a broad coalition of other gas-dependent manufacturing interests had pressed Congress for years to lift the broader offshore drilling bans.

Backed by wide public displeasure with retail gasoline costs in mid-2008 that exceeded $4 (€3) per gallon and increasing US dependence on foreign oil imports, industry successfully argued that Congress could not reasonably keep major offshore oil and gas reserves closed to development.

The MMS estimates that outer continental shelf regions contain some 86bn bbl of oil and 420,000bn cubic feet (bcf) of natural gas.

However, those reserves figures are based on old technology seismic surveys done in the 1970s, and many expect that the offshore areas may hold ten times as much oil and gas as estimated three decades ago.

The US annually consumes some 7,665bn bbls of oil and 22,000bcf of natgas.

MMS Director Randall Luthi said the new five-year leasing proposal for the US Atlantic and Pacific coasts “marks an extremely important milestone in energy development”.

“A new era has arrived,” Luthi said, referring to the OCS development plans.

“Although much of the talk about the future is centered around renewable energy, the reality is that we will have to depend on oil and gas for at least the next generation,” Luthi said.

The new five-year plan was immediately welcomed by the American Petroleum Institute (API), with institute president Jack Gerard saying the new MMS leasing proposal “is a good step in the right direction”.

“American consumers have been demanding access to the oil and natural gas located off our coasts,” Gerard said, adding: “Developing our domestic resources is crucial to getting our nation’s economy back on its feet.”

Luthi - now the former MMS director - correctly noted that the incoming administration of President Barack Obama has authority to completely reject the five-year plan proposed on the Friday before Obama became president.

Indeed, within hours of Obama being sworn in on Tuesday as the nation’s 44th chief executive, new White House chief of staff Rahm Emanuel ordered all federal departments to hold back any Bush administration regulations that had not been published officially in the Federal Register.

The Interior Department’s new five-year offshore development proposal was to have been published in the Federal Register on Wednesday this week.

That does not mean that the offshore leasing proposal is or will be killed, just that the Obama administration wants 60 days in which to review that and other eleventh-hour regulations issued by the Bush White House and federal departments.

In fact, by pushing the new five-year leasing proposal out the door just before he left office, Bush may have boxed in Obama and the Democrat-controlled Congress.

For if President Obama should want to reverse that Bush decision on offshore development, he will have to make and announce his decision to do so - an action that could prove very unpopular at a time when the country is struggling to overcome an economic recession and, in the long term, needs as much domestic energy as it can produce.

To countermand the Bush offshore development plan, Obama also would have to contravene one of his own stated goals to “promote the responsible domestic production of oil and natural gas”, as related on the new White House Web site’s policies page.

Obama could scrap the Bush offshore leasing proposal and direct MMS to develop a new offshore plan, but that would represent a two-year setback - also not a prudent move given the nation’s vulnerable and costly dependence on foreign oil.

Bush also has put Congress on the spot by including in the new MMS five-year plan several parcels in the eastern Gulf that Congress specifically closed to drilling in the 2006 energy bill.

If the MMS five-year plan is allowed to go forward by the Obama White House, at some point a US energy company likely will offer a bid on one or another of the parcels that lie within the newly banned eastern Gulf region.

For such a bid to proceed, a pro-drilling member of Congress would have to introduce legislation to lift the 2006 development ban as it applies to the proposed lease areas in the eastern Gulf. 

Congress and its Democrat leadership would then have to allow the eastern Gulf drilling ban to be revised and lifted at least in part - or vote to maintain the ban on energy development in that resource-rich area.

A decision by congressional leaders to maintain the eastern Gulf drilling ban could produce headlines such as “Congress moves to quash US oil and gas energy”.

There is broad US popular support for offshore drilling - and development of all US energy resources. 

That support might not be as fervent now as it was in May last year when gasoline was at $4/gal, but any headline saying that Congress or the White House seeks to halt domestic energy production would not be popular or politically prudent.

And, while near-panic public concerns over high-dollar gasoline have ebbed since May last year, the cost of oil, gasoline and other fuels is certain to rise again as the US and global economies gradually emerge from recession. 

It would not look good for any politician to have voted against domestic energy development as consumers and voters once again see the cost of fuels begin to rise.

So while many in Congress might not like it, the Bush offshore drilling plan is likely to go forward.

($1 = €0.78)

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By: Joe Kamalick
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