By Tom Fry, President
National Ocean Industries Association
Steadily increasing hydrocarbon production from the Gulf of Mexico illustrates a tremendous story. It is a story of American innovation, technological prowess, and private-sector leadership. Gulf production is robust, and I anticipate that it will remain a competitive region on a global scale for the foreseeable future.
That is part of the story, but not the whole story. The Central and Western Gulf of Mexico remains a premier producing region. And the turnaround success story of this region, one of the world's most mature offshore basins, is a testament to industrial ingenuity. However, a frank examination of the current geopolitical terrain, a troubled US economy, and energy security concerns suggests that adhering to the status quo in terms of energy is not acceptable.
The US' future security and economic growth depend upon an abundant and reliable supply of domestic energy. Now is the time for elected leaders to look beyond short-term provincial concerns and pull together to make the tough policy choices that will make energy security a reality. NOIA believes sound decision-making will be contingent on the recognition of a simple fact: The only way to ensure energy security is to expand access to domestic energy resources, particularly oil and natural gas from the outer continental shelf (OCS).
NOIA's mission is to advocate for reliable access to OCS hydrocarbons and to promote the economic interests of the members of the offshore and ocean-oriented industries. With this in mind, NOIA is concentrating its advocacy before congress and the executive branch around several key goals. What follows is a brief description of some of the key areas of NOIA's advocacy.
Coastal Zone Management Act Reform
Primary among NOIA goals is to seek reform of certain objectionable provisions of the Coastal Zone Management Act (CZMA) of 1972. For the most part, NOIA strongly supports the CZMA. Its stated purpose of balancing the often competing and conflicting demands of coastal resource use, economic development, and conservation, through cooperative partnerships among federal, state, and local governments is important and laudable.
In addition to acting as the vehicle for the distribution of nearly $100 million per year for state coastal programs, the CZMA is intended to facilitate the coordination and cooperation of state and federal agencies in order to ensure expedited governmental decision-making for the management of coastal resources. As a part of this process, the CZMA includes "consistency" provisions, intended to accomplish this federal/state coordination. As implemented, however, NOIA takes issue with these consistency provisions and advocates reform.
The consistency process relies on a system of checks and balances that keeps the federal-state relationship on an even keel. The process has generally worked well in the Central and Western Gulf of Mexico, where industry has compiled a strong record for good stewardship of public lands and for operating offshore in a safe and environmentally sensitive manner.
Unfortunately, some states use their consistency authority to stifle resource development instead of striking a balance that would benefit marine life and enhance economic growth. This result is often contrary to law and to achieving national ocean resource goals. It is also adverse to the national energy security interests that require industry to make major, long-term capital investments to develop domestic energy supplies.
Reliable access to OCS energy requires that permitting and consistency reviews of development projects be predictable, consistent, and timely. NOIA urges policymakers to re-establish the principles and practices of the CZMA as originally envisioned by congress.
Infrastructure security, coastal assistance
Another issue of importance to NOIA is that of infrastructure security. As we all know, the attacks of Sept. 11 pointed out serious weaknesses and frailties of our national security. As an industry, we must work to ensure that we have response plans in place and that we have open and reliable lines of communication with local, state, and federal government and law enforcement.
However, energy security is an area in which the interplay between the private and public sectors is extremely important. Industry and government must work as a team to ensure safe and reliable energy production. Both the public and privates sectors must adopt an approach that is proactive, flexible, and coordinated. For an issue of such importance to the nation, we feel strongly that the key government agencies must be equipped with the tools necessary to secure our nation's energy infrastructure. For this reason, NOIA believes it imperative to highlight the importance of adequate funding for the US Coast Guard and Minerals Management Service (MMS).
In a similar vein, NOIA advocates serious and far-reaching investment into our nation's aging energy infrastructure. While enhancing the nation's energy security entails bolstering domestic defenses against foreign attack, it also means investing in the roads, pipelines, and other areas of infrastructure necessary to move our energy supplies to the consumers and businesses that rely on them. For too many years, Washington has spent the dollars reaped from offshore production without channeling enough of these important revenues back to the people, communities, and states that host the offshore industry, work on the platforms, drive the trucks, and support America's energy production. The coastal communities that many offshore workers call home often receive significantly less than their fair share of OCS revenues. These revenues could be used to repair roadways, ports, and other infrastructure. NOIA asks policymakers and elected officials to examine ways some of the revenues that currently flow into the federal treasury might be used to enhance the local counties, parishes, and municipalities that support America's energy development.
We believe that coastal enhancement, infrastructure security, and energy security all are complementary goals that are perilous to ignore.
Enhancing economic competitiveness in the Gulf
The success of the Deep Water Royalty Relief Act of 1995 has been demonstrated clearly by substantially increased deepwater development activity and the subsequent revenues to the national treasury. Stimulating deepwater production alone, however, is not sufficient. NOIA continues to advocate for various incentives that will ensure the maximum and most efficient development of resources in the Gulf.
While royalty relief in the deepwater continues to be an important part of energy development, NOIA works with the MMS to examine other arenas that might benefit from similar financial risk alleviation measures. For instance, recently instituted deep-gas royalty relief has proven to be an important factor behind the success of the recent Gulf lease sales. These provisions target shallow-water provinces on the shelf, many of which have already been the site of considerable production. However, the MMS has found that in many cases, considerable pockets of natural gas remain deep in the earth's crust, beyond the reach of previously available technology. Therefore, the MMS has recently instituted relief measures for lessees who drill wells extending more than 15,000 ft below the mudline. Royalty relief on the initial production from these wells helps operators to lessen the financial risk involved in these technologically challenging projects while assuring that much-needed natural gas is reliably brought to market.
NOIA will continue to support royalty relief and similar measures that contribute to economic conditions conducive to increased OCS energy production.
Telling the story
These are but a few key areas of NOIA's advocacy focus. Successful advocacy on these issues will do much to ensure a brighter energy future for this country. However, the truly daunting challenge before NOIA and before the industry is telling the story of environmentally sound energy production. As the debate on energy rages in congress and in the media, the disconcertingly low level of energy literacy in this country is astonishing.
Abundant and reliable supplies of energy drive American leadership and support the high quality of life that the citizens enjoy. The offshore oil and natural gas industry is a key component of this energy supply. Furthermore, this industry is one that has demonstrated an unparalleled level of industrial safety and environmental performance. It is this story that needs to be told before congress and before the public. And that is the greatest challenge.
