Getting the Offshore Drilling Program Right

Mark Green
Posted May 11, 2016

Some points for the Senate Energy and Natural Resources Committee to consider when it meets next week to review the Obama administration’s proposed 2017-2022 program for offshore oil and natural gas leasing.

First, offshore oil and natural gas production historically has played a major role in overall U.S. energy output. In 2010 more than 30 percent of U.S. oil and 11 percent of U.S. natural gas was produced in the Gulf of Mexico. So, while it’s great that the U.S. Energy Information Administration (EIA) estimates  that Gulf production will increase to record high levels in 2017, every American must recognize that reaching record Gulf output next year would result because of leasing decisions made a decade or more ago.

In that context, let’s be clear: The federal offshore leasing program must reflect energy leadership and vision, and it must be focused on fostering opportunity. It must not reduce America’s offshore energy potential by keeping key offshore areas off the table for development.

We bring this up because some are suggesting that the 2017-2022 leasing program the Bureau of Ocean Energy Management (BOEM) is building shouldn’t include the Arctic because of recent pauses on development in the area. An Interior Department spokesman tells POLITICO the absence of ongoing activity in the current low-price environment won’t impact the final leasing program – and it shouldn’t. Erik Milito, API group director for upstream and industry operations:

“Long-lead times are needed for offshore development, especially in frontier areas. For this reason, current oil and natural gas prices should not factor into BOEM’s lease sale planning in the next decade. In fact, BOEM agrees. Within the BOEM’s Proposed Program Decision Document, the agency states: ‘There is no reason to exclude any of the proposed program areas in the Proposed Program Options based purely on the price of oil and gas.’ The EIA data shows that the industry has the ability to plan ahead and develop innovative technologies to meet all U.S. energy needs. The U.S. needs energy policies to match.”

The right energy policy path is for BOEM to produce a robust offshore leasing program that fits with the United States’ rise to world leadership in oil and natural gas production. This is critically important to America’s energy security and to global energy stability as well.

Next week’s Senate hearing is timely, with EIA Administrator Adam Sieminski unveiling the agency’s International Energy Outlook, which forecasts that global energy demand will rise nearly 50 percent between now and 2040. Sieminski said fossil fuels will continue to supply 75 percent of the energy the world uses in 2040. EIA’s chart, showing that natural gas will become the world’s second-largest energy source while oil maintains its leading share:

An offshore drilling program that is as inclusive as possible – BOEM unfortunately dropped the lone Atlantic lease sale it had included in its program draft – would be part of an energy approach that includes sensible permitting and regulatory systems, both critical to long-term investment decision-making. According to a 2015 National Petroleum Council report on Arctic development, the technology to safely explore and develop Arctic reserves is available today:

The oil and gas industry has a long history of environmental stewardship and successful operations in the Arctic, including exploration, development, production, and transport, enabled by continuous technology advances and learnings from experience. … Most of U.S. Arctic offshore resources are in less than 100 meters of water and have some open water season. As a result, exploration is possible during summer and shoulder seasons with floating drilling rigs, and development and production are  technically possible using conventional bottom-founded drilling facilities with numerous support vessels including oil spill response vessels. Such technology has been field-proven.

Again, the offshore leasing program should facilitate safe and responsible energy development, including the Arctic because of the tremendous energy opportunity there. Milito:

“Arctic oil and natural gas represent incredible potential for American energy security, jobs and revenue for the government. Access to the region’s oil and natural gas resources will remain necessary to provide energy supplies to meet the world’s growing demand and vital to keeping America’s status as a world leader in energy.”