A view from Washington – The winds of change

The view from my office in Washington, D.C., provides me the opportunity to see various US flags hanging from different buildings. That is always a welcome sight, but on March 31, 2010, the varying wind directions (some might say hot air) caused the flags to wave vigorously to the north, east, south, west, then north again. I mused that is certainly appropriate for D.C., where consistent, reasonable energy policies seem to get the same traction as a cow on wet cement.

Unfortunately, such abrupt, disjointed shifts produce very little real change, as we continue our cry for energy security or the mythical "energy independence" and continue to import energy from abroad. So, while on the last day of March I welcomed the President's announcement of a new energy strategy for America, I sincerely hope it is not just more hot air, but actual winds of change.

Without real change, the Energy Information Administration (EIA) predicts that we will still import roughly half of our oil in 2035. While that is better than the current import rate of nearly two-thirds, it means that a quarter century from now we, like flags in the wind, will remain subject to the whims and political uncertainty in many of the oil producing countries.

Some may say that I am ignoring the fact that if oil becomes more expensive and scarce, we will finally set course from a fossil fuel based economy to one based on energy from renewable sources. I say that while that should be our general direction, the road to get there will be built on traditional energy sources -- energy sources that are home grown, home produced and supply jobs and economic growth.

The EIA predicts that even with the increased use of renewable energy, fossil fuels will still provide 78% of our energy portfolio in 2035. Couple that with our projected continued dependence on imported oil, and the end result is no significant change 25 years from now.

What can we do to improve our energy security? A big part of the answer lies at home and off our shores and beneath our oceans. One of our greatest potential sources for domestic oil and natural gas, the outer continental shelf (OCS), remains largely unexplored and still "off limits," despite removal of moratoria in 2008.

Yes, I've heard the claims that development of oil and natural gas off our, and let me emphasis OUR, shores will not make a significant difference in the energy supply. But frankly, we can't know that based on current data. Estimates of resources that lie beneath US waters are three decades old and have not been verified by actual exploration and drilling.

If the history of the Gulf of Mexico is any indicator of what could be, once we look, we may find much more oil and natural gas than we predicted using the technology at hand 30 years ago. In the 1980s, the Gulf of Mexico was considered a "dead sea" of energy. It was thought that most of the oil and natural gas known to be there at that time had already been produced. However, due in large part to advances in technology, the Gulf has yielded about six times the oil and natural gas once thought to be there.

On March 31, the Obama Administration announced a new offshore energy plan that includes, for consideration, "new" areas offshore the Atlantic Coast, from Delaware to the central Florida Coast, and in the Eastern Gulf of Mexico. While the Administration and media touted these areas as being "newly opened," in fact nothing "new" has been "opened."

Until 2008, 85% of the OCS was effectively "closed" to oil and natural gas exploration due to an Executive withdrawal and Congressional moratoria. In 2008, President Bush lifted the withdrawal and Congress ended its long-standing moratoria, apart from the Eastern Gulf of Mexico. Nearly the entire OCS has thereby effectively been "open" since October 2008. In January 2009, the Bush Administration introduced the 2010-2015 offshore leasing plan, which included for consideration all planning areas on the OCS – some of which (the Atlantic and Pacific coasts) had not been included in planning for decades.

So there is nothing really "new" here. The 2012-2017 offshore roadmap proposed in March 2010 by the Obama Administration is in fact, a boiled down version of the 2010-2015 plan proposed in January 2009 by the Bush Administration. It doesn't "open" anything "new."

The plan in fact, closes more offshore acreage than it opens and rejects areas where oil and natural gas could be developed most rapidly. Due to existing infrastructure and current oil and gas production, there are areas of the OCS that can be developed relatively quickly. It is therefore somewhat perplexing that this plan, which purports to increase our Nation's energy security, removes so early in the multi-step planning process southern California, including the known Santa Barbara-Ventura basin, the Oceanside-Capistrano basin, and the Santa Maria basin and much of the eastern Gulf of Mexico, including the known Destin Dome formation. Essentially, the plan gives a "maybe we'll proceed" to an area in the Gulf of Mexico that would be extremely expensive to develop, requiring very deep drilling and extensive infrastructure. It removes from discussion areas of known oil and natural gas and doesn't even allow further discussion of areas where temporary structures could be used much closer to shore than the 125-mi (201-km) proposal and still not be visible from the coastline.

Also disappointing was the Administration's announcement that contested sales in the Beaufort and Chukchi Seas in Alaska have been removed from the remainder of the current 2007-2012 plan. Although these areas may be included in the 2012-2017 plan, the sales are at the least being delayed, and delayed sales equal delayed energy, jobs, and revenue urgently needed to fuel our struggling economy.

On a positive note, the plan does show that the Obama Administration is listening. In the recent years since the price of gasoline reached an average $4 per gallon at the pump in 2008, poll after poll has shown a majority of Americans support domestic offshore oil and natural gas drilling. According to a Rasmussen poll released just last month, 72% of voters support offshore oil drilling.

The inclusion of the areas off the Atlantic Coast, in particular areas offshore Virginia, also show that the Administration is listening to Congress and state governors and legislators. After several letters from Virginia state leaders, the Administration kept Lease Sale 220 in the current 2007-2012 plan. Virginia is so supportive of exploration for oil and natural gas in federal waters off its shores that the state assembly passed and the governor signed into law two bills supporting offshore development and allocating their share of any future revenues from energy production. That's true support and true foresight.

Revenue sharing among coastal states near future offshore energy development, similar to that occurring today in parts of the Gulf of Mexico, has been a topic of keen interest and vigorous debate among state and congressional leaders. From NOIA's perspective, congressional action in support of revenue sharing is part of the package. It just makes sense.

Congressional action may also be required to fund the environmental impact study needed before any seismic work can begin off the Atlantic Coast. The Administration's FY2011 budget released in February did not request this funding. These seismic studies are vitally important, because a modern estimate of oil and natural gas resources will be a key incentive for companies to lease, explore, and develop oil and natural gas in federal waters off the Atlantic Coast.

I am hopeful that the 2012-2017 offshore energy plan is more than just a virtual reality process. I am anxious to see the Department of the Interior complete the multiple steps leading to implementation of the final plan in July 2012. True access requires deeds, in addition to written words. True access to the areas included in the plan will require a number of interim actions, scientific analyses, and permitting processes that are the foundation of these larger plans and often take several years of work to accomplish. I am hopeful that the release of this plan, which is largely a scoping document, truly represents a commitment to actual sales.

In an Administration committed to "science-based decision making" as well as providing "predictability and consistency" to the offshore energy industry, there should be no delay in the collection of vital environmental data. To the offshore industry, predictability and consistency are contingent on the timely completion of necessary environmental and scientific analyses. Predictability and consistency also hinge on energy lease sales moving ahead as originally scheduled, without alteration or cancellation after the fact.

While the 2012-2017 offshore plan is a step in the right direction to recognizing the need for greater domestic energy production, it is not the finish line. Additional rounds of review and permitting are required before any new leasing can be authorized.

NOIA supports the Administration's efforts to proceed with the implementation of this energy plan as rapidly as possible and is hopeful the new plan will keep America on course for sensible, reasonable, and reliable energy, resulting in less dependence on foreign oil and natural gas and more jobs and economic benefits at home. The 250 member companies of NOIA are ready, willing, and able to safely provide vital energy and well-paying jobs for America. We welcome the winds of change.

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