Missed Opportunities & Failed Connections

Last week, the Obama Administration released its five-year offshore oil & gas leasing plan much to the dismay of those directly affected by offshore energy, namely coastal states and American energy consumers.  In the proposed final plan, the administration fails to open leasing to any new areas off the East or West Coast, preferring to delay development of a comprehensive energy plan for a distant day in the future.

For starters, the plan leaves off the entire Atlantic from leasing opportunities, notwithstanding the fact that for years the bipartisanship leadership in the Commonwealth of Virginia requested lease sales.  Originally scheduled for 2011, the lease sale off Virginia had been postponed following the Deepwater Horizon spill in the Gulf of Mexico and now appears further delayed until at least 2018.  The indefinite pause means Virginians will miss the opportunity to enjoy the jobs-and-revenue benefits that offshore development confers.  In the words of Virginia Governor Bob McDonnell, the decision “does not help our nation move towards energy independence and it certainly does not help Virginia’s workers and economy.”

Currently, the administration is moving forward with plans to allow seismic surveying of the Atlantic for hydrocarbon potential. However, the lack of leasing opportunities really brings into question if and when this surveying will even occur and what good it really is. Yes, it’d be nice to have a better sense of how much oil and natural gas exist off the East Coast – knowledge is power after all. But, who’s going to pay to obtain this information? It’s certainly not likely to be the energy companies unable to drill in the area and benefit from its investments in surveying.  Nor is it the cash-strapped federal government.  Somewhere along the line, the federal government failed to connect the need for leasing with the incentive to complete seismic surveys.

In the Arctic, the administration has decided to delay lease sales by one year from what was originally proposed and to remove millions of acres from leasing in order to form “study areas.” Yet again, it appears the federal government failed to connect the need for oil and natural gas access with increased scientific study.  Few realize that it’s the opportunity for oil & gas development that has influenced much of the significant research already conducted in the U.S. Arctic. Over the past few decades, the private sector has invested heavily to study the Arctic – to examine the environment above water and under, to understand the implications of a harsh Arctic climate and to determine how to best approach extraction of the area’s energy resources in a manner that preserves the surrounding environment.  In fact, over 70% of the money spent on scientific research in the Alaskan Arctic has been driven by the opportunity for oil and gas development.   In failing to offer adequate and timely opportunities for leasing, the federal government may soon discover that private research efforts could falter in the absence of a sound leasing plan.

In ignoring the correlation between scientific study and OCS energy development, the federal government is also missing an opportunity for significant revenue generation.  The last time leases were offered in the Chukchi and Beaufort Seas north of Alaska, the federal government pulled in $2.6 billion in bonus bids. Compare this to 2011 when the government netted only $37 million from offshore lease sales.

The decision to restrict leasing opportunities in America’s resource-abundant offshore areas will ultimately delay the realization of a sustained, robust energy policy that thoughtfully develops our own natural resources.  When combined with the protracted delays in issuance of permits for existing leases, this shows a failure to create economic opportunities through energy production, thus maintaining reliance on imports, harming U.S. competiveness and perpetuating the current economic climate that sees more than 24 million of our friends and neighbors unemployed or underemployed.  Let’s get back to work with a strong national energy policy.

 

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