Will US policy be pro-industry?

The year 2014 will bring rewards and challenges for the offshore oil industry, as the US adjusts to the potential of becoming more of a supplier and less of an importer.

Randall Luthi
National Ocean Industries Association (NOIA)

The year 2014 will bring rewards and challenges for the offshore oil industry, as the US adjusts to the potential of becoming more of a supplier and less of an importer. The past year even ended up with discussions of a crude oil glut in theGulf of Mexico. My, how things have changed. But what has not changed is the role the federal government has in relationship to the offshore industry. Put simply, the administration largely controls the destiny and direction of all offshore energy development with its decisions, or lack thereof. In 2014, will the federal government lead, follow, get out of the way, or simply do nothing on issues of critical importance?

The US has been under a self-imposed oil and natural gas embargo on 85% of its outer continental shelf for over 30 years. The Bureau of Ocean Energy Management (BOEM) will begin the planning for the 2017-2022 Five Year Plan in 2014. A recent study commissioned by NOIA and the American Petroleum Institute (API) indicated that opening up the Atlantic OCS to oil and natural gas development could allow the industry to create nearly 280,000 jobs, spur $195 billion in new private investment, contribute up to $24 billion to the US economy, generate $51 billion in new revenue for federal and state governments, and add 1.3 MMboe/d to domestic energy production by 2035. These numbers are in addition to any wind and wave energy development. It is time to lift the oil and natural gas embargo from the US OCS. The US House of Representatives has passed legislation to open up those areas. This is an opportunity for the federal government to lead.

The BOEM and the Bureau of Safety and Environmental Enforcement (BSEE) brought up concerns about the current bonding requirements in 2013. Establishing appropriate bonding amounts is not a simple one-size-fits-all process. It has been refined over decades of actual experience. The federal government should be cautious about throwing out the baby with the bathwater by rushing into wide scale changes with unintended consequences for operators of various sizes. This may be a solution in search of a problem, since it does not appear that the federal government (often referred to in this situation as the American taxpayer) was held responsible for any decommissioning costs. This might be an opportunity for the government to follow industry recommendations and stay out of the way, or to proceed only with full participation and discussion with industry bonding and decommissioning experts.

Last year we saw an unprecedented attack on seismic operations. Both litigation and a public relations push by some extreme environmental groups urged the federal government to limit seismic work in the Gulf of Mexico and to not permit any seismic operations at all off the Atlantic Coast. This provides an opportunity for the government to lead.Seismic operations are not new, and there is a lot of data and experience on how to conduct them without any harm to fish, marine mammals, or the environment.

Yes, 2014 will be an important year for the offshore industry and the federal government.

The author

Randall Luthi is the president of the National Ocean Industries Association (NOIA). He served as director of the former Minerals Management Service from 2007 to 2009.

More in Regional Reports