The Impact of the Administration's Offshore Leasing Ban

Jane Van Ryan
Posted December 2, 2010

In a major policy reversal, the Obama administration yesterday announced that it would not include potentially energy-rich areas of the eastern Gulf of Mexico, the Atlantic, and the Pacific in the government's next five-year offshore leasing plan. Further, the administration also officially delayed the next two lease sales for the central and western Gulf.

In March, President Obama said the administration would examine and consider leasing offshore areas along the Atlantic coast from Delaware to Florida, as well as areas in the eastern Gulf and in Alaska's Beaufort and Chukchi seas.

API's President and CEO Jack Gerard said the policy shift "shuts the door on new development off our nation's coasts and effectively ensures that new American jobs will not be realized."

Had the lease sales gone forward, positive impacts already would have been felt in the U.S. economy. An API analysis of a study by ICF International indicates that:

• U.S. jobs could have been created immediately and would have grown to more than 57,000 by 2020;
• Government revenues could have exceeded $3.8 billion by 2020; and
• U.S. energy production could have climbed by an estimated 900,000 barrels of oil per day and 2.9 billion cubic feet of natural gas per day by 2030.

Closing the eastern Gulf and the Atlantic and Pacific coastal areas to exploration and production denies all Americans the benefits of this valuable economic activity and reduces U.S. energy security.

Virginia Governor Bob McDonnell, a Republican, called the administration's decision "irresponsible and short-sighted." It's been estimated that energy drilling and production in Virginia could have generated 2,578 new jobs and resulted in $271 million in revenues in state and local taxes.

"The cost of [the] decision will be seen in major lost job opportunities, surrendered economic growth, and increased dependence on foreign sources of energy, from nation's often hostile to American interests," McDonnell said.

Democrat Senator Mark Warner (D-Va.) said through a spokesperson that he saw "no reason to delay this process for what realistically could be another seven years or more," and added that he will work with others in the Virginia delegation to "explore ways to re-examine this decision."

National Association of Manufacturers (NAM) Executive Vice President Jay Timmons said his members were "angered" by the administration's decision and warned it "will only discourage investment in new projects." He also said that "failing to open additional areas to drilling stifles job growth."

Environmental groups hailed the administration's decision, and a representative of Environment America called it a win for "anyone who loves our beaches." But that begs the question: With these areas being placed off-limits for at least another seven years, how many Americans will be able to drive to the beaches to enjoy them?

H/t to J.R. Hoeft at Bearing Drift and Carter Wood at Shopfloor.