A view from Washington

All incoming administrations face the same challenge. What can they accomplish in four or eight years that will fundamentally change the daily lives of Americans and will be known as their legacy? Administration spokespersons may deny that legacy is a topic of ongoing conversation and concern, but it is, and from day one.

Weaning off of oil and gas and “greening” the energy source used by American is clearly a top agenda item of the Obama Administration. This desire was far more than just the often repeated mantra that we must decrease our reliance on imported oil. However, the latest call is to reduce our oil imports by 30%. Today we import approximately 60% of our oil.

Our economy and our livelihoods depend on a reasonably priced, reliable, and secure source of energy. At this time, green energy is none of the above, so on March 31, 2010, the Administration proposed expanded offshore oil and gas exploration and development in the Gulf of Mexico (which currently provides approximately 30% of our oil and 11% of our natural gas). In addition, for the first time in more than two decades, the possibility of exploration off the coasts of Virginia, North Carolina, South Carolina, and Georgia was laid on the table for discussion. It appeared that expanded oil and gas development would be part of the Administration’s energy agenda, and thus, part of its legacy. The environmental groups were outraged. The oil and gas industry was encouraged, but skeptical, and proved to be rightly so.

Three weeks later, the Macondo well blew out, killing 11 men, and triggered the largest oil spill in the history of U.S. waters. Two deepwater exploration moratoriums were imposed, shallow water exploration was unofficially stopped as both industry and government took stock in the ability to prevent and respond to potential deepwater blowouts.

The environmental effects of the spill apparently are not of the epic proportion predicted by many of the fringe environmental groups, but the economic effects of the spill and exploration freeze were immediate and still occur today. The tragic accident snuffed out the Administration’s will to expand exploration, and they announced that its offshore development plan through 2017 will not venture beyond what we are doing now and have been exploring for the last quarter century.

I, by no means, trivialize the significance of the Macondo well blowout. It is a stark reminder of the risks of deepwater exploration. Its aftermath should be a top down review of technology, practices, and an overarching philosophy that personnel and environmental safety must be first and foremost in our industry. The tragedy changes how we view the history and technology of offshore development, but it should not be a Waterloo to a vital part of our nation’s energy portfolio. This is not the time to tread water in offshore energy development.

While the Administration’s view has changed, the Nation’s energy needs have not. Increased emphasis on renewables and green energy will not meet our energy needs for at least the next generation. The Energy Information Agency (IEA) estimates that renewable energy as part of our energy portfolio will double in the next 25 years. Even at that optimistic and astounding growth rate, however, traditional energy will still supply 75% of our energy needs.

IEA further estimates that due to just the Administration’s exploration moratorium and subsequent slowdown of issuance of exploration permits in the Gulf of Mexico, our estimated domestic oil production will be reduced by 250,000 b/d. Decreased domestic production is offset by increased energy imports.

The Administration’s U-turn on offshore development imposes a moratorium for seven years in offshore development that had been rejected by the previous Administration and Congress. This seven year ban keeps us on the same track of high prices, fewer jobs, and 60% of our oil being imported, often from countries that have no interest in our well-being or our way of life. The Administration’s seven-year prohibition does nothing to increase energy reliability or energy security, and will not encourage new investment or job growth in a time of near recession. However, it will be a legacy, a legacy of no job growth, higher prices for energy, and more reliance on Middle East oil. The Administration’s goal of reducing our oil imports could be met simply by increasing our domestic production.

While much of the offshore industry’s attention of late has been appropriately focused on the present day pace of permitting and its impact upon jobs, we are just as concerned with the lack of national policy direction for the future regarding access to the oil and gas resources of the OCS. Recent polls indicate a strong majority of Americans do not think we are doing enough to develop our own oil and gas resources here at home.

The Administration justifies its future moratorium on the mistaken interpretation that oil companies are sitting on idle leases. This argument shows the lack of knowledge and understanding the Administration has in how and where oil is found, or not found, and produced. At this juncture of high prices and market volatility, oil companies are not sitting on leases. Most of the projects take years to develop and companies pay rentals for the leases they have purchased through bonus bids. If production hasn’t occurred by the end of the lease term, the lease is returned to the United States. It is much like buying a fishing license – it only allows you to fish, it doesn’t guarantee success. You still have to buy the fishing tackle and you still need to find a suitable fishing spot, but you may still not be successful.

Our only hope for veering from this course at this time is Congress. Congress could legislate that new areas be considered for offshore development, so that, at a minimum, Americans would have a modern and more accurate estimate of the energy resources off our shores. (At least six times the resources estimated as the result of a 1980s survey have been produced from the Gulf of Mexico.) Congress could allow the consideration of the now canceled lease sale off the coast of Virginia, which the State itself still supports. Congress could assist in seeing that more of the Gulf of Mexico remains on the table for discussion for the benefit of the American consumer and public. Congress could adopt “an all of the above” energy policy which includes oil, gas, nuclear, and nontraditional sources of energy. Congress could assure that the potential promise of the Chukchi and Beaufort seas in Alaska are evaluated fully and that the trans-Alaska pipeline continues to deliver U.S. crude oil to U.S. consumers.

On March 29, Republican leadership in the House of Representatives introduced legislation aimed at tackling each of these important issues. As part of House Republicans’ American Energy Initiative, Natural Resources Committee Chairman Doc Hastings (R-WA) introduced three separate bills to expand offshore energy production in order to create jobs, lower energy costs, generate revenue to help pay down the national debt, and improve national security by lessening our dependence on foreign energy. They include:

• The Putting the Gulf Back to Work Act would end the Obama Administration’s de facto moratorium in the Gulf of Mexico in a safe, responsible, transparent manner by setting firm time-lines for considering permits to drill, which provide certainty and allow employers and workers to get back on the job.
• The Restarting American Offshore Leasing Now Act would require the Obama Administration to move forward promptly to conduct offshore lease sales in the Gulf of Mexico and offshore Virginia that the Obama Administration has delayed or canceled. Due to the Obama Administration’s actions, in 2011 there will be no offshore lease sales – for the first time since 1958.
• The Reversing President Obama’s Offshore Moratorium Act would lift the President’s ban on new offshore drilling by requiring the Administration to move forward in the 2012-2017 lease plan with energy production in areas containing the most oil and natural gas resources.

The legislation provides a road map that industry, Congress, and the Administration can follow to increase jobs, decrease oil imports, and increase energy reliability and sustainability. We look forward to working with Congress to see the legislation passed.