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U.S. Offshore Leasing Program Under Attack

drilling rig

By MarEx 2016-05-19 23:43:59

The U.S. Bureau of Ocean Energy Management’s 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program has met with criticism during a May 19 Senate Energy and Natural Resources Committee hearing.

Chairman Alaska’s Senator Lisa Murkowski said: “It pains me to say this, but we now effectively have a Gulf of Mexico leasing program, and the shadow of a program for three major planning areas in Alaska.

“The Department [of the Interior] has concluded after years of study that just 13 percent of our nation’s Outer Continental Shelf (OCS) acreage should be available for leasing. It has canceled sales in my home state, where development has overwhelming support, and produced only a “bare minimum” plan for 2017 through 2022.

“I find that unacceptable.

“The Energy Information Administration tells us that OCS oil production will rise from 17 percent of the U.S. total this year to 21 percent in 2017. We could pat ourselves on the back about that. Or we could recognize that it is the result of decisions made years ago – likely in 2007, or even earlier. And that, in turn, should make us consider what kind of production the program before us today will yield for our nation in 2027 and beyond.”

The Bureau of Ocean Energy Management removed the single Atlantic lease sale in its proposed program earlier this year, despite a 2014 study that estimated that a robust Atlantic leasing program could result in new oil production of 1.3 million barrels per day and 280,000 new jobs by 2035.

Murkowski’s full speech is available here.

API Disappointed

U.S. industry body the American Petroleum Institute (API) has also voiced its disappointment. “The United States needs forward-looking energy policy,” said API Executive Vice President Louis Finkel. “Leaving out offshore Alaska would put the U.S. at a serious global competitive disadvantage, considering that Russia, Iran, Norway and other countries are moving rapidly to develop oil and gas resources.”

Arctic offshore energy development could add 27 billion barrels of oil and 132 trillion cubic feet of natural gas to America’s proven energy portfolio and create more than 54,000 jobs across the country, says Finkel. It’s estimated that the Beaufort and Chukchi seas have more technically recoverable oil and natural gas than the Atlantic and Pacific coasts combined.

Finkel’s full speech is available here.

A Call for Caution

Dr. Donald F. Boesch, President of the University of Maryland Center for Environmental Sciences, voiced the need for caution. “Climate change is becoming ever more evident and science has now prescribed the lanewidth on the pathways to limit global warming below 2° C. That is the basis for the Paris Agreement and the initial commitments of the United States and 176 other countries to reduce greenhouse gas emissions. Put simply, the United States will have to reduce its emissions by at least 80 percent over the next 30 to 40 years. If that is the case, then the question must be asked if we should seek to develop hydrocarbon resources in new, risky places when it will take 20 years or more to produce significant new resources from them,” said Boesch.

“Is oil and gas drilling safer than it was in early 2010, prior to the Deepwater Horizon blowout?” he asks. “Yes, but I and my fellow Commissioners believe there is still significant room for improvement. There continue to be explosions, loss of well control events, and oil spills from offshore oil operations. Just last week, for instance, a Shell Oil Company production facility in 2,300 feet of water 90 miles south of Timbalier Island, discharged almost 90,000 gallons from a seabed flow line. Many of the new safety requirements are just now coming into force.

“Furthermore, I have concerns about how the fall in the price of oil has resulted in industry cutbacks in personnel and other expenditures. Offshore operations in the United Kingdom, for instance, have increasingly deferred the maintenance of critical safety equipment.7 The lower prices are particularly creating problems for the smaller companies that operate most of the wells on the Gulf continental shelf and many of those in deep water. Unlike the major companies familiar to most Americans, these smaller companies have generally less technical and financial capacity to deal with safety and oil spill response.”

Boesch’s full speech is available here.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.