NOIA: Sitting Atop the Crest of the Wave

May 1, 2001
Opportunity for Change

As the curtains are drawn on a tumultuous election year and the nation welcomes a new President and the many fresh faces in Congress, the ocean industries sit atop the crest of a wave - a wave whose force could sweep in a revitalized energy policy, or conversely, a wave whose momentum could dissipate on the craggy reefs of regulatory barriers and short-sighted political expediency.

As an industry, and as a nation, we must ensure that this wave carries us closer to our goal of a sound national energy policy. At a time when the interplay between business and politics is more pronounced than ever before, we need to make certain that the vital work of this industry does not go ignored, unappreciated, or misunderstood.

At the present time, opportunities for progressive change abound, but they could vanish quickly, churned away to nothing by well-intentioned, but poorly designed regulations. Our nation is facing major surges in energy demand, and our policymakers must not risk jeopardizing our future by placing obstacles in the way of a reliable domestic energy supply - obstacles that endanger our economic stability, our national competitiveness, and our standard of living.

The Five-Year Plan

The Minerals Management Service (MMS) is currently in the midst of preparing the next five-year plan for oil and natural gas leasing on the Outer Continental Shelf. The plan determines where and when companies can lease parcels of ocean lands on which to explore and produce oil and natural gas for the years 2002-2007. Areas included in the plan are considered for leasing, but need not be leased. Areas not included in the plan, however, are not available for leasing at all.

NOIA has asked the MMS to carefully examine the option of including areas in the five-year plan that have been subject to moratoria in the past - areas likely to contain hydrocarbons that can be found and harvested in a manner consistent with our nation's highest environmental standards.

The tightness of the current energy market and the distinct possibility of grave shortages in the near future dictate that the MMS leave open the possibility that the moratoria may be reconsidered in the next five years, and include these areas in the five-year plan. To do otherwise would rob the MMS of the flexibility necessary to properly address our rapidly changing energy needs.

With the public's attention once again riveted on energy supply issues, first in the Northeast and then in California, the need for energy policy flexibility could not be clearer. These two crises were the result of a complex convergence of factors, but each could have been offset by a forward-thinking national energy policy encouraging infrastructure investment and greater access to our natural resources. Reliable access to our abundant supplies of oil and natural gas must be the cornerstone of any national energy policy that hopes to adequately address the energy needs of our growing nation.

This fundamental message must not be obscured. Even by conservative estimates, America's demand for natural gas is going to rocket at least 30% higher over the next decade. Despite the fact that we have plentiful amounts of natural gas in this country, we will not be able to come close to meeting this demand increase unless we enhance industry access to the submerged lands of the OCS.

Wave Rising Out of Success

The central and western areas of the Gulf of Mexico acted as the backbone of our nation's oil and natural gas supply for more than 50 years, accounting for nearly a third of all US production. While technology has been able to increase oil production in the Gulf of Mexico, the future of natural gas production from the central and western regions is less certain.

The deepwater discoveries that account for much of the increase in oil production have not shown as much promise for natural gas. Indeed, many experts suspect that the sub-deepwater geology may be a less hospitable place for natural gas. If this is true, the need for increased access to the natural gas-prone eastern Gulf of Mexico and Atlantic regions becomes even more critical.

It is important that policy makers realize that leasing moratoria are not the only obstacle to a reliable source of domestic energy in the future. Although federal regulatory actions are often a force for good, encouraging safety, investment, and sustainable business practices, it is at least as true that government regulations can create obstructive barriers to development and burdensome requirements that constrict healthy enterprise.

In the past year, NOIA has met with success on several regulatory and legislative fronts. Prominent among them were successes with the Oceans Act of 2000, the continuance of Deep Water Royalty Relief, and the Environmental Protection Agency's rule on the use and discharge of Synthetic-Based Drilling Fluids. A sustained constructive dialogue between experts in both industry and government enabled policymakers to strike a balance between the needs of industry and the long-term interests of coastal communities and energy consumers.

Thanks to industry input, the Oceans Act of 2000 was changed from a bill fraught with thorny concerns for the industry, to an act that fosters a science-based examination of oceans issues and policies. Success with the Deep Water Royalty Relief Act can be attributed to NOIA's continued tradition of cooperative engagement with the Minerals Management Service, while the rule on the use and discharge of synthetic-based drilling fluids marked a new era of cooperation with the Environmental Protection Agency spearheaded by outreach and education efforts facilitated by NOIA between industry and the EPA headquarters and the Region IV office.

NOIA was also able to work with the transition team of newly elected President George W. Bush to prevent the implementation of the EPA's Ocean Discharge Criteria that had been proposed in a spirit contrary to the aforementioned rules. Developed under the last administration against the strident objections of the ocean industries, the rule would have complicated and lengthened the ocean discharge permit approval process to an unacceptable level. In what we hope is a sign of things to come, the administration took industry's concerns under consideration and decided to withdraw the proposed rule.

A Wave of Progress?

Despite having these successes as a backdrop, there remain some pending actions that are cause for great concern. A notable example is the Coastal Zone Enhancement Act, which would reauthorize the Coastal Zone Management Act of 1972 (CZMA) - thereby strengthening and expanding a statute whose provisions have a long history of impeding energy exploration, development, and production, at essentially every step of the process.

The act was passed with the laudable intention of creating a national program that would encourage states to manage and balance competing uses of, and impacts to, coastal resources. However, anti-development interests within states have used the law to stall or halt offshore development and to enmesh offshore lessees in a never-ending loop of permit approvals.

Recently, Florida officials signaled their intention to use the CZMA's federal consistency provisions to oppose the use of floating storage, production, and offloading (FPSO) systems in the central and western planning areas of the Gulf of Mexico - regions that are far removed from Florida's coastal waters. NOIA believes that it is vital that FPSOs are approved for use in the Gulf, as they hold great potential to improve the economics and efficiency of the deepwater operations that are behind the continued dynamism of the region. NOIA is asking legislators to review the CZMA and to remove the aspects of the law that clearly overreach and obfuscate its original intent.

The Wave of the Future

At this writing, the future looks bright. It is my fervent hope that Lease Sale 181 materializes as planned. Estimated to hold vast deposits of natural gas, the Sale 181 area's resource potential will be a vital component of meeting America's mid-term energy needs and a crucial first step toward meeting the massive demand increases forecasted by the Department of Energy and the National Petroleum Council.

The current administration and Congress appear to be serious about making a difference in our energy security. Already this year, bills have and will be introduced that, if passed, will go far toward ensuring our energy future. Meanwhile, the administration has signaled its willingness to work with industry to shore up our domestic supply capacity and has clearly articulated an accurate understanding of the energy problems our nation faces.

Yet, these energy initiatives face strong opposition. The industry must better communicate to the public that oil and natural gas exploration and development can occur in accordance with our highest environmental and safety standards.

So, the question remains an open one: will the wave of America's energy future bring about the implementation of a national energy policy? Or will the future be dashed on the rocks of political inaction and indifference? Only time will tell.

Tom Fry President National Ocean Industries Association
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