Is opening 75 percent of offshore oil and gas really progress? | Business Roundtable


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Is opening 75 percent of offshore oil and gas really progress?

Feb 3, 2012

Secretary of Interior Ken Salazar is holding a video Q&A today at 12:30 p.m. on "America's energy future." One topic we'd like explored is whether President Obama's vow "to open more than 75 percent of our potential offshore oil and gas resources" really amounts to progress for America's energy security.

In his State of the Union address, President Obama touted U.S. energy production, putting most of the emphasis -- and praise -- on the boom in natural gas thanks to hydrofracturing of energy-bearing shale deposits. He declared:

[Nowhere] is the promise of innovation greater than in American-made energy.  Over the last three years, we’ve opened millions of new acres for oil and gas exploration, and tonight, I’m directing my administration to open more than 75 percent of our potential offshore oil and gas resources.  (Applause.)  Right now -- right now -- American oil production is the highest that it’s been in eight years.  That’s right -- eight years.  Not only that -- last year, we relied less on foreign oil than in any of the past 16 years.  (Applause.)

Sounds good. But what does it really mean?

At American Petroleum Institute's Energy Tomorrow blog, API's Erik Milito explains "Why 75 percent is an 'F'." Using charts to make his point, Milito reports that only 13 percent of Outer Continental Shelf (OCS) oil and gas resources is available for exploration and development.

What they represent are the undiscovered, technically recoverable oil and natural gas resources of America’s OCS.  Undiscovered means just that: resources that haven’t been found yet but are believed to exist because of past exploration upon which data extrapolations are made. Because these resources haven’t been found, the numbers in the table above are only estimates. But some estimates are better than others.  Why?  Well, mostly because some estimates have more data behind them.  Why?  Because, it turns out, the best way of finding resources is by … looking for them.  Or as the Minerals Management Service (MMS) put it in 1996: “Actual drilling operations are necessary to confirm the presence of oil or natural gas.”

That’s why the more important number ... is that in the president’s proposed five-year plan only 13 percent of the OCS is open to actual drilling operations.

Indeed, adding OCS territory -- including Virginia and California, areas 12 to 15 years away from development -- to the five-year plan was one recommendation API made in response to the President's State of the Union. In a call with bloggers Thursday, API's chief economist, John Felmy, listed the others:

  • Allow the Keystone XL pipeline to proceed
  • Reverse the decline of oil and gas development on federal lands in the West
  • Restrain the hand of government, including the threat of agencies overregulating hydrofracturing of natural gas, a "regulatory blizzard that would chill investment"
  • End the call for increased taxes on oil and gas companies

Agreed, but we also posed the question: Hasn't today's abundant supply -- even glut -- of natural gas from private lands undercut the argument for additional energy development on federal lands? Felmy responded:

The opponents of oil and gas development regularly cite the argument, that oh, you’ve got all these land holdings already that you’re not developing, why do you need more? Well, the answer is, if we have them, so what? If you open up those areas for leasing, it means revenues for the federal government, it means potential economic activity, it means the firms can start working on their development plans and actually move forward. If we choose to hold back on leasing, wherever it is, it just burdens and delays the process....This takes a lot of time.

We should continue to move forward and do that. Some opponents also say, well, why do you want to drill oil and gas if you can’t do anything for 10 years? Well, by the same measure, we wouldn’t have planted a tree 10 years ago. Confucius said the best time to plant a tree was 10 years ago, and the same is true of developing leasing and so on. Let's start the process. Let's move forward. It will generate revenues, it will start to get the job process flowing, and it will start us moving toward energy security.

Who can argue with Confucius? Perhaps Ken Salazar?

UPDATE (2:30 p.m.): Cabinet members who engage in webchats are usually hypercautious, offering boilerplate and bland reassurances. Guess the real news today comes from the BLM. Sen. Orrin Hatch (R-UT) issued a news release in response, "Hatch Says Today's BLM Ruling Shuts Down Job Creation and American Energy Production." The Administration's "all-in" strategy toward domestic energy development really isn't, is it, if it excludes oil shale and tar sands?




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