INSIGHT: Obama, Congress move against offshore energy

12 February 2009 17:49  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS news)--Barely a month in office, President Barack Obama has already begun to rollback oil and gas development prospects, and Congress is poised to impose an offshore drilling ban that could be vastly larger.

Earlier this week the Obama administration postponed for six months action on an offshore oil and gas development plan issued by former President George Bush just days before he left office.

The week before, the administration withdrew from exploration and development federal acreage in Utah that had been offered for lease by the Bush administration in December. The Obama administration said the Utah tracts set for drilling needed more study and public comment, despite a seven-year environmental review that had already been completed.

The Utah acreage withdrawal and the offshore leasing postponement were quickly criticised by the US oil and gas development industry as unnecessary delays in accessing needed domestic energy resources.

On the offshore issue, the Interior Department announced a six-month extension of the public comment period for the new five-year development plan for the outer continental shelf (OCS) regions issued by the Bush administration on 16 January.

The Bush OCS development plan was the first in nearly 30 years to include exploration proposals for the nation’s Atlantic and Pacific coastal regions.

Until late last year, those Atlantic and Pacific OCS areas had been closed to drilling under a 27-year-old congressional moratorium that expired on 1 October.

The US petrochemicals industry - which is heavily dependent on natgas as a feedstock and energy fuel - and a broad array of other manufacturers had pressed Congress for years to lift the offshore drilling ban.

In announcing the six-month extension for public comment, Interior Secretary Ken Salazar said that the Obama administration needs to “set aside the Bush administration’s midnight timetable for its OCS drilling plan and create our own timeline”.

In addition to extending the public comment period to late September this year, Salazar said he will hold four public hearings in coastal communities.

Congressman Doc Hastings of Washington State, the ranking Republican on the House Natural Resources Committee, said Salazar’s decision to delay the OCS leasing plan was a mistake.

“It’s disappointing that the Interior Department is choosing to delay new exploration on the outer continental shelf when we must be focused on growing the economy and putting people to work,” Hastings said.

Suggesting that Salazar’s delaying action was purely to stall development, Hastings said that the secretary’s call for more public comment was superfluous. “There is nothing the secretary announced - resource assessments, impact reviews, etc. - that is different than what is already part of the five-year plan process,” Hastings said.

The Independent Petroleum Association of America (IPAA), whose member firms account for 90% of US oil and gas drilling development, said it was “disappointed by the Obama administration’s decision to delay moving forward on domestic energy development - especially at a time when our economy is struggling”.

“This unnecessary delay will hold America back at the precise moment when we need to move forward the most,” the association said.

Jack Gerard, president of the American Petroleum Institute (API), noted that the Bush five-year OCS leasing plan “had already received a record 120,000 comments from states, environmental groups, industry, labour groups and members of the public - with 87,000 of those comments supporting expanded and expeditious development”.

Gerard suggested that the Interior Department’s move would likely mean a delay of much more than six months.  “Secretary Salazar’s announcement means that development of our offshore resources could be stalled indefinitely,” said Gerard.

That is a distinct possibility because while the Obama executive branch stalls exploration and development both onshore and off, Congress appears bent on restoring a broad ban on offshore energy development, period.

Earlier this week environmentalists, tourism and fishing industry officials urged Congress to restore a ban on oil and gas drilling in US OCS regions and called for extension of the ban to Alaskan and Arctic areas.

The House Natural Resources Committee began a series of hearings on whether and how the US should look at developing the offshore regions.

Committee Chairman Nick Rahall (Democrat-West Virginia), who favours a drilling ban, in his opening statement argued that increased offshore drilling in the previously closed OCS regions would not likely produce significant additional oil and gas supplies or reduce US energy and fuel costs.

But estimates on how much oil and gas might lie beneath the shelf regions off the nation’s Atlantic and Pacific coasts are necessarily short because Congress has banned even seismic surveys of those areas for nearly 30 years.

Rahall also argued that opening the previously closed OCS areas to drilling really wouldn’t make any difference to the country’s energy supply. 

He cited Interior Department estimates that “82% of the oil and 84% of the natural gas in the outer continental shelf are in those areas that were already available for drilling [US waters in the Gulf of Mexico] before the congressional moratorium expired last year”.

Not so, according to Hastings. He pointed out that the Interior Department estimate cited by Rahall specifically noted that it did not include potential resources in the previous moratorium areas “where leasing has been prohibited and where the last geophysical surveys and drilling exploration occurred more than 25 years ago”.

Rahall claimed too that “no reputable economist believes that increasing the amount of drilling we do in the OCS will have any real impact on energy prices”.

But in response to a query from Congressman Jack Kingston, a Republican from the Atlantic coastal state of Georgia, the Energy Department’s Energy Information Administration (EIA) said that if offshore output could add 1m bbls/day to domestic oil production (a 20% increase), global oil prices “could be expected to decline by up to $20 per barrel”.

Hastings slammed the hearing called by Rahall and the witnesses invited, charging that Rahall was simply stacking the deck against OCS development.

The hearing’s star witness was actor Ted Danson, who also serves on the board of Oceana, a global ocean conservation group. 

Danson argued that “it is critical that Congress quickly reinstate its moratoria on drilling in the OCS” in order to safeguard coastal tourism and fisheries and to avoid continuing reliance on fossil fuels.

But restoring the drilling ban on the US East and West Coasts would not be enough, Danson declared. 

Noting an expansion of oil and gas exploration and development off Alaska’s shores and in nearby Arctic regions, he called for a broader moratorium that would bar energy development in those areas as well as along the US East and West Coasts.

“Those ongoing activities must be stopped,” he said.

Odds are that Congress will oblige him.

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By: Joe Kamalick
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