John Waggoner • Houston
Rethinking the OCS debate
If the US seeks to bolster the long term sustainability of its energy supply, it should look to hydrocarbons in the Outer Continental Shelf (OCS), the leaders of some of the world’s largest oil companies say.
Delays in bringing ongoing debate forward into policy ideas about opening new exploration and production in the OCS have led the oil and gas industry to renew the effort to win over groups opposed to offshore drilling.
Government moratoria on drilling in the OCS expired last year amid fervent debate over the future of the country’s energy policy.
At the time, oil prices were screaming near a level of $147/bbl and the surge in fuel prices that followed led to renewed support for opening the OCS as a means to raise domestic hydrocarbon supplies.
Today, however the bumper stickers once common throughout the coastal states of the Gulf of Mexico and elsewhere urging “Drill, baby, drill!” have begun to fade and peel while the issue languishes for debate.
Oil prices have since retreated, and industry leaders now say it is increasingly important to call attention to the advancements in offshore drilling technology that protect human life, the environment, and the health of the economy.
Gary Luquette, president of Chevron North America comments that renewed engagement with groups opposed to OCS drilling is essential.
“The industry has done a poor job of getting the message out about how the industry is important to the economy,” he says.
The industry should take “credit and great pride” in the advancements over the past 40 years, Luquette says, particularly those which protect the safety of the environment and ensure maximum recovery with every well.
The consensus among speakers on the topic at the Offshore Technology Conference (OTC) in Houston in May was that one of the main obstacles to opening the OCS is a perception by many in the country that renewable energies are somehow at odds with the hydrocarbons, even though the US needs oil and gas every bit as much as other sources to keep up with demand.
Worse, renewable energies are viewed by some as an easy replacement for the hydrocarbons that keep the world running, starkly in contrast to empirical fact and the economic and practical limitations of wind, solar, and nuclear power.
The polarization of renewable energy against oil and gas industry is essentially misleading because the country’s energy needs will continue to rely predominately on hydrocarbons well into the future, Luquette says.
“In 30 or 40 years, oil and gas will still play a very important role,” he says.
ExxonMobil president Tim Cejka agrees that technology will be a decisive factor for the industry to deliver on its promises in the OCS.
“New cutting edge technologies…can produce safely and with minimal environmental impact,” Cejka says.
Karen Alderman Harbert, president and CEO of the US Chamber of Commerce’s Institute for 21st Century Energy, believes that the OCS drilling agenda must be pursued as part of a comprehensive energy policy alongside renewables.
“There is no silver bullet, but there is silver buckshot,” she says.
The Department of the Interior’s strategy for meeting the growth in energy consumption includes both conventional and renewable resources. However, a five-year plan from the Minerals Management Service (MMS) to address new OCS leases has been delayed, raising concerns by the industry that the topic remains in limbo.
For some, if there is a single “line in the sand” which divides those in favor of drilling and those opposed, that line would be the environment.
Sidney Coffee of America’s Wetland Foundation says it is essential that OCS exploration and production operate from a sound environmental platform.
The group has organized the Gulf Coast states into a coalition of economic, environmental and energy interests to “educate America, shape public policy, and speak with a shared voice in Washington.”
In Louisiana, this coalition was instrumental in the effort to change the state’s constitution to direct the state government’s portion of federal OCS income to hurricane restoration and coastal protection.
For reasons such as this, experts say federal OCS revenue and the ability to create new jobs – many of them high paying and levied at a higher income tax rate – are powerful arguments in a recession.
David Dismukes, associate director and professor at the Center for Energy Studies at Louisiana State University says the Gulf of Mexico (GoM) currently produces each year some 490 MMbbl of oil and 3 tcf of gas, accounting for 23% and 14%, respectively, of all domestic US production.
This once restricted activity has translated into federal revenue of $32 billion per year over the last five years, Dismukes says. That amount is second only to the tax-gathering might of the Treasury itself, meaning no other industry can claim to have paid back more to the American people than oil and gas producers.
However, operations in the GoM cannot maintain this pace forever. The region’s producing wells are maturing, and federal proceeds will inevitably decline along with production unless new areas of the OCS are opened.
Due to the age of US Department of Energy data – much of it acquired with 2D seismic – the data about the country’s offshore reserves is hopelessly out of date, experts say.
Until new areas are opened to the private sector to begin exploration, oil and gas operators say it will be impossible to determine how much oil and gas is out there.
But for the operators to take on the long term risks involved in exploring these new areas, Dismukes says allowing access to the OCS will mean little without consistent governmental policies to support development.
