The Obama administration is set to reverse course on opening Atlantic waters to a new generation of oil and gas drilling, after a revolt by environmentalists and coastal communities.
(Bloomberg) - The Obama administration is set to reverse course on opening Atlantic waters to a new generation of oil and gas drilling, after a revolt by environmentalists and coastal communities that said the activity threatened marine life, fishing and tourism along the U.S. East Coast.
The proposed offshore leasing program expected to be released Tuesday walks back the administration’s initial plan to auction off drilling rights in as many as 104 million acres of the mid- and south-Atlantic in 2021, according to an Interior Department official who requested anonymity because the plan wasn’t yet public.
The decision to close the door to expansive Atlantic drilling responds to an outcry from coastal residents and opposition from the Pentagon, which concluded the activity could impede military training and naval exercises. The move also reflects current market dynamics, conflicts with other uses of the ocean and limited infrastructure in the region, according to the Interior official.
The Obama administration’s about-face is a defeat for the governors of Georgia, South Carolina, North Carolina and Virginia, who had lobbied for nearby offshore drilling they say would create jobs and new economic activity. It also is a major blow to energy companies that had eyed the U.S. Atlantic as a promising frontier, with the potential for oil discoveries and new development that could churn out crude for decades, supplementing eventual production declines on shore.
Offshore drilling in the Atlantic is "an exploration activity that hopefully leads to the discoveries that give us our energy security and put us on a road to energy independence," said Erik Milito, the American Petroleum Institute’s director of upstream and industry operations. "Canada, Cuba, Venezuela, South America, Europe, West Africa -- they all do it, and we’re sitting back kind of witnessing it without exploring ourselves."
Right now, oil companies with major offshore operations in the U.S., including BP Plc, Chevron Corp. and Royal Dutch Shell Plc, are largely confined to the Gulf of Mexico. And while it’s unclear how much oil and gas could be lurking along the U.S. East Coast -- government projections using decades-old geological surveys estimate 3.3 billion barrels of oil and 31.3 trillion cubic feet of natural gas -- geologists say discoveries in other Atlantic waters around the world suggest even bigger potential.
The plan being released Tuesday is only the latest step in a long, multiyear process of developing the U.S. government’s five-year offshore leasing program, with both the available acreage and the number of auctions generally whittled over time. Both the proposal and an environmental analysis of the program now will be subject to public comment, with the Obama administration likely to finalize its leasing plan in November.
The proposal may still set the stage for selling oil and gas leases in the Arctic waters of the Chukchi and Beaufort seas, as well as Alaska’s Cook Inlet and the Gulf of Mexico, where 10 auctions were tentatively scheduled from 2017 to 2022. It was unclear early Tuesday whether the administration had retained those auctions and all of that acreage.
Environmentalists have been lobbying the administration to spike lease sales in the Chukchi and Beaufort seas north of Alaska, saying drilling is too risky in those Arctic waters. Conservationists argue the Interior Department must preclude Arctic drilling to fulfill a pledge President Barack Obama made with Canadian Prime Minister Justin Trudeau to weigh "the life-cycle impacts of commercial activities in the Arctic" and satisfy an international climate accord commitment to cut carbon dioxide emissions released when fossil fuels are burned.
‘Stain on Legacy’
“Any new offshore drilling will be a stain on President Obama’s climate legacy,” May Boeve, executive director of the group 350.org, said in a statement Monday. "If the president is going to meet the targets he agreed to at the climate talks in Paris, he needs to keep fossil fuels in the ground or in this case, under the sea. We can’t afford any more oil spilling into the oceans and carbon pouring into the atmosphere."
The proposed offshore plan will not affect oil and gas companies’ existing drilling rights in U.S. waters.
The drilling debate has stoked passions from the coastline to the campaign stump as former Secretary of State Hillary Clinton and Vermont Senator Bernie Sanders vie for the Democratic presidential nomination. Sanders has promised to block all offshore oil and gas development. Clinton told environmental activists she was “against drilling off the Atlantic” during an event last month in Norfolk, Virginia. The issue has not gotten significant attention in the Republican primary contest, where candidates generally support more domestic oil and gas development.
In weighing which waters to lease, the government is required to consider an array of factors, including the interests of oil and gas producers, the goals of affected states, and the proximity of energy markets.
Interior officials have signaled they were paying attention to the protests of coastal communities, dozens of which used letters and resolutions to formalize their opposition to offshore oil development. Interior Secretary Sally Jewell noted the "very powerful" input in comments to reporters last month.
While some governors support offshore oil and gas development, "we’ve heard from a lot of communities, a lot of local leaders -- Republicans and Democrats -- taking the opposite view," Interior Department Chief of Staff Tommy Beaudreau said last month at Columbia University’s Center on Global Energy Policy.
Oil companies and trade groups have countered that the coastal opposition is an outlier, bucking polls that show consistent support for offshore drilling. An analysis by the industry-backed Consumer Energy Alliance said that communities that formally oppose offshore oil development account for no more than 7.2 percent of the total population.
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