There has been much discussion — and spin — recently on the state of responsible American energy production, the most contentious of which has developed around producing oil offshore in the Gulf of Mexico. Despite a clear slowdown in permitting since last year’s moratorium, and the very real economic hardship this has imposed on businesses and consumers across the nation, many have chosen either to deny there is a problem or simply blamed those impacted by the federal government’s decision to significantly slowdown development of our offshore energy resources. Given the state of our economy and the economic benefits that await us if we resume normal operations in the Gulf, it’s important that Americans are armed with the facts about the stark reality of declining Gulf energy production.
Below are five common myths being pushed about domestic oil production, especially in the Gulf of Mexico, accompanied by a description of what’s happening in reality.
Myth: The Gulf of Mexico has returned to normal production levels and there is no “permitting freeze” in place. Reality: It would be nice if this was reality, but this simply isn’t the case. The permitting freeze is real and Americans are suffering every day as a result, a fact that can be seen simply by reviewing historical data. Between 2005 and 2010, the annual average number of offshore permits approved sat comfortably at 545. Since May 2010, only 113 permits have been approved. But upon even closer inspection, you find that these 113 permits are actually for only 34 wells since each well requires multiple permits resulting in multiple regulatory hurdles. Only by denying this reality could one conclude there is no dramatic slowdown in permitting. While it is true that the Gulf of Mexico is still producing oil, it is doing so at a much lower rate. According to the U.S. government’s Energy Information Administration, Gulf production is expected to decline to 1.39 million barrels per day in 2012, or 400,000 barrels per day below the average production rate in 2009 (1.7 million barrels per day). Some have suggested that total U.S. production has increased, so the impact on the Gulf must be overstated. But that’s clearly not the case, as the EIA data clearly shows.
Myth: Rigs aren’t leaving the Gulf of Mexico, so our production base there will be fine. Reality: To date, nearly a dozen rigs have left the Gulf since the White House imposed its moratorium last spring, each taking with them hundreds of jobs and millions of dollars in economic potential. In a capital intensive industry like energy production, companies need a predictable permitting process with a commensurately predictable level of permitting. Each day a rig sits idle, that’s millions of dollars in lost revenue. Absent a predictable investment climate, energy companies will move elsewhere, which ultimately means we will import more energy. The fact that more rigs haven’t left doesn’t mean they won’t; it just means they haven’t left yet. Imagine owning a business and paying rent for the space you have in the building, but the local government tells you that you can’t open your doors. You may wait awhile to see what happens, but eventually you’ll find a different location that will allow you to operate and generate revenue so you can pay your bills. And you won’t likely consider the prospect of ever going back, even if the original location changes its rules. Why take the risk of getting shut down again?
Myth: We should be focusing on creating new jobs in alternative energy and stop producing oil. Reality: Indeed, as we have long advocated here, America does need a sensible long-term all of the above energy policy that seeks to expand production from all sources, from renewable to traditional sources like oil and gas. But America also desperately needs jobs, and we need them now. Renewables should be encouraged starting today, with the recognition that they are years away from being able to supply our country with the affordable energy it needs. A recent IHS-CERA report entitled “Restarting the Engine” shows that just by resuming production in the Gulf to its pre-moratorium levels could create 230,000 jobs in 2012 and an additional 199,000 jobs in 2013. Look no further than North Dakota and Oklahoma to see how responsible oil and gas production can create jobs: North Dakota’s unemployment rate is a resoundingly low 3.3% and Oklahoma’s is 5.5%, both well below the national unemployment rate that has been stuck above 9% for more than two years.
Myth: We need to wait until the federal government “gets it right” on safety in the Gulf before we resume drilling. Reality: No one is calling for abolishing safety standards, but those standards need to be feasible and applied in a consistent and timely manner. Companies in the Gulf – not just production companies but also the countless workers in countless jobs who support the offshore industry or need reliable oil and gas to conduct business or manufacture products – have been forced to burn through what little cash reserves they have, lay off employees, reduce benefits, and even tap into retirement savings, all because the current permitting approval process is broken. How is the government protecting the Gulf by imposing such avoidable economic pain? Moreover, if the government needs to “get it right” on a regulatory structure, it’s interesting to note that 5 of the 7 scientists hired by the federal government to make safety recommendations after the Macondo accident last year never recommended or supported a moratorium, and a federal judge declared the moratorium “arbitrary and capricious.” The idea that the current slowdown is a means of “getting it right” not only defies common sense, but also scientific and legal expertise. To get an idea of just how much pain the permitting slowdown is inflicting on hardworking Americans – along the Gulf Coast and indeed throughout the country – just visit OpenTheGulf.org.
Myth: We should expand renewables to reduce our reliance on unstable regimes for our energy. Reality: We absolutely need to expand our renewable energy capacity, as well as energy efficiency technologies and conservation. But the inescapable fact is we’re also going to be using oil for decades to come, and its better that we produce that oil here at home instead of sending our money elsewhere. Already in 2011, the US has sent almost $250 billion overseas to meet our national oil needs as we report in our Imported Oil Counter on www.moreenergynow.org. IHS-CERA estimates that resuming full permitting would allow the United States to produce 150 million more barrels of oil in 2012, each barrel of which is one more barrel we don’t have to buy from overseas. This comes out to America reducing the amount of money that it sends foreign governments for energy by $15 billion. And this considerable strengthening of energy security could be realized if the Administration simply resumed permitting to what it was before the costly moratorium was imposed.
Resuming responsible energy production in the Gulf of Mexico is needed now more than ever. We need to create more jobs, increase available energy supplies, and help end the needless pain being felt along the Gulf Coast. By discarding the spin and getting back to reality, it’s clear that we can achieve these goals and finally move forward. Again, for more information on the real impacts of this slowdown, we suggest readers check out the compelling stories posted at OpenTheGulf.org.
