An AEI big-picture commentary

Once again, a Presidential announcement about offshore oil development has sent the media and environmental advocates into a spasm of headlines and press releases that presumes the words being uttered in DC actually reflect on-the-ground (or in this case, under-the-waves) reality. In late 2016, there was effusive praise for an effectively symbolic Obama decision to not offer leases in Alaskan and Atlantic waters (AEI’s “much ado about not much” post questioned the prevailing celebratory outburst). Fourteen months later, we’ve got a mirror-image outcry over Trump’s base-pumping proclamation about “unleashing America’s offshore oil and gas potential” through a National Outer Continental Shelf (OCS) Oil and Gas Leasing Program for the years 2019-2024.

This one sure does sound bad: opening up 90 percent of our continental shelf, with 47 lease areas including regions like New England and the Pacific Northwest that haven’t even had vague proposals for decades. Despite the boom in American oil and natural gas production that occurred during the Obama years, with much of the increased production being exported, the new administration is intent on exploiting as-yet untapped deposits, ignoring the climate imperative to leave as much oil in the ground as we can. Vincent DeVito, a Counselor for Energy Policy at the Department of Interior, practically twirls his mustache with this comment from the official DOI press release:

“By proposing to open up nearly the entire OCS for potential oil and gas exploration, the United States can advance the goal of moving from aspiring for energy independence to attaining energy dominance. This decision could bring unprecedented access to America’s extensive offshore oil and gas resources and allows us to better compete with other oil-rich nations.”

Sure, that’s just the ticket; these eager beavers can’t wait to dominate a fading industry—a decade from now, since that’s how long it takes to get offshore wells on line.

And so begins a two-year planning process that will needlessly and expensively repeat the one just completed in 2016.  For we already have a National Outer Continental Shelf Oil and Gas Leasing Program, with a finalized plan set to run from 2017-2022, which the government (both federal and states), oil industry and energy consulting firms, and environmental groups spent two years and who knows how much money to complete.  As always, these plans are revisited, revised, and occasionally overhauled every five years. But this gang may not be around in 2021-2022 when it’ll actually be time to once again jump into this particular vat of no-fun-for-anyone. So let’s just tear it up and do it all again now!

UPDATE, 2/16/18: Caroline Ailanthus rightfully notes that diving back into processing hundreds of thousands of public comments and writing up a new programmatic EIS will keep BOEM staff from fulfilling their many other tasks, which include assessing new science and identifying key data gaps, smaller project-level environmental assessments, and overseeing new research. She asks, “Do you suppose interfering with research in this way could be the point of this massive do-over?”

But before we get too caught up with the swarm of freaked out bees in our bonnet, let’s step back and consider the actual energy development landscape as it exists in the real world, as distinct from the fever dreams of this administration’s oil and gas cheerleaders. Of course, we can start with the obvious global surge toward solar and wind energy and countless innovative projects aiming to radically improve batteries and foster other energy infrastructure breakthroughs, or the bipartisan opposition to opening up more of the OCS demonstrated during the same process two years ago, which included more than 150 municipalities nationwide and 1,200 local, state, and federal officials, many of whom were presumably among the over 800,000 comments that were supposedly considered by Zinke and his team as they prepped this re-do. Already the Republican Governors of Florida and Maryland are slamming the new initiative and vowing to fight it.

UPDATE, 1/10/18: Well, that was quick. In response to Florida GOP Governor Rick Scott’s outcry, DOI Secretary Ryan Zinke announced that his state will be removed from offshore lease consideration, because, in Zinke’s words, “Florida is unique and its coasts are heavily reliant on tourism as an economic driver.” Well, that is exactly the position taken by nearly every other coastal governor, Democratic and Republican alike. Stay tuned….

No, we don’t even need to take solace in all this context; all we have to do is look at the current state of our “leashed” and woefully neglected oil and gas industry:

• First off, when announcing the existing 2017-2022 OCS program, Bureau of Ocean Energy Management (BOEM) Director Abigail Hopper stressed that “The proposal makes available more than 70% of the economically recoverable resources, which is ample opportunity for oil and gas development to meet the nation’s energy needs.” Indeed: the 6% of the OCS currently being leased is more than enough.
• Even this week’s opposite-world announcement from the current administration is proud to note that BOEM currently manages about 2,900 active OCS leases, covering almost 15.3 million acres, while noting that this accounts for 18% of domestic oil production.
• Indeed, in July the US Energy Information Administration (EIA) bragged that Gulf of Mexico crude oil production is at an all-time high, and will  keep rising through 2018 (the extent of their short-term forecast). Eight new wells came online in 2016, with 7 more on tap to start flowing by the end of this year. It’s worth noting that this partly reflects a surge after a five-year lull in production growth after the Deepwater Horizon blowout triggered a temporary moratorium on new drilling permits; and taking a wider view, exploratory drilling and new production wells have been in steep decline since 2014, largely reflecting the tapping out of the easier-to-access shelf areas; nearly all new development is in deep water. (Huh; any chance that all the the idle shelf-drilling equipment is behind some of the push for new shelf leases?)
• Likewise, The Center for Energy Studies at LSU released a report last spring that saw nationwide crude oil production increasing 33% by by 2023, and maintaining that high level through the end of its projection period in 2029, largely driven by a 45% increase in Gulf of Mexico production.
• But new oil development is not just taking place in the Gulf: oil field spending nationwide is set to rise 15% in 2018, to more than $100 billion, after a 47% increase in 2017, outpacing the international trends. (Wait, what? Not only is America already great, we’re also already dominant!) Notably, the stated limiting factor is not a lack of reserves, but rather cash constraints as companies finance this surge. If so, how many companies are going to be eager to plow significantly more money into harder to develop offshore leases? (Especially considering the 7-10 year timeline for getting a new offshore well online, even in the Gulf of Mexico where the leasing and permit process is far less of a public hot-button issue.)
• One more straw for this wobbling camel’s back: less than half of existing, already purchased oil and gas leases are currently being explored or developed. As of the end of 2015—the last annual report available at the time the Trump team began banging the drum for lifting the “burden” on oil and gas companies—a record 7950 purchased leases were idle on federal land, while at the same time a record number of leases were in production and federal onshore oil production had increased 70% in the previous decade. If we really want to continue spewing carbon into the atmosphere, we can do it without heading out to sea.

We surely can, considering the recent discoveries on shore, all of which are much easier to permit and develop. As one of those fantastically in-depth New Yorker pieces recently reported:

In September, 2016, the Apache Corporation, a Houston-based oil-and-gas-exploration company, announced the discovery of a new field in the Permian Basin, called Alpine High, which is estimated to contain seventy-five trillion cubic feet of gas and three billion barrels of oil. Two months after the Alpine High discovery was announced, the U.S. Geological Survey revealed that another area within the Permian, the Wolfcamp shale, likely contains twenty billion barrels of oil. The agency called the deposit “the largest estimated continuous oil accumulation . . . assessed in the United States to date.” Wolfcamp is also thought to have sixteen trillion cubic feet of natural gas. Between 2007 and 2012, assessments of how much recoverable oil remained in the Permian Basin increased by more than eight hundred per cent.

And speaking of US energy dominance, not even considering the long-shunned offshore territory Trump is so eager to “unleash”:

Rystad Energy, an oil-and-gas consultancy, estimates that, for the first time in history, the U.S. holds more oil reserves than either Saudi Arabia or Russia. More than half of the U.S. total is embedded in shale. Technological advances have decreased the cost of fracking to the point that it is becoming competitive with traditional means of extraction. Production in the Permian Basin has doubled in the past five years, to two million barrels a day, and the break-even cost of a fracked well in the region has plummeted to as low as twenty-five dollars a barrel. This has had dramatic consequences for more expensive means of production, such as coal-tar extraction and ocean drilling. (Emphasis added; i.e., the easier-to-recover onshore deposits are even more likely to attract investment, before companies go fishing for offshore reserves.)

Taking all these little-known facts into account, perhaps the specter of vast new oil fields along nearly the entire US coast is not nearly as scary as we might at first presume.

UPDATE, 1/10/18: WaPo notes one reason that oil companies may prefer to develop new offshore leases rather than existing onshore ones: it can be cheaper to export oil and gas from offshore wells, since they don’t have to build controversial pipelines to get their raw material to refineries along the coast.

UPDATE, 2/9/18: Here’s another good look at the many hurdles standing in the way of implementing Trump’s rush to develop offshore waters, focusing especially on the many avenues of state leverage to slow or stop the process.

But that’s not the only rollback of Obama-era decisions that the Trumpistas announced this week: they also announced a proposed rule that would abolish safety regulations added after the Deepwater Horizon blowout. This one may have more potential to come to fruition, depending on how strict the rule-making process is about hewing to best available science and technology. The 2016 regulations tightened controls on blowout preventers (the key equipment that failed in 2010’s disaster), as well as the design and lining of wells, and included a provision requiring real-time monitoring of subsea drilling and spill containment equipment. These sorts of safety measures should be considered all the more crucial as Gulf of Mexico development moves off the continental shelf and increasingly into extremely deep waters; 3000-7000 feet is routine, with some pushing 10,000 feet, and that’s before continuing through the seabed for another 10-20,000 feet to the oil and gas reservoirs.

UPDATE, 2/3/18:  Not surprisingly, the  administrations rush to reject Obama-era policies is often neglecting established legal frameworks for making and changing regulations. This NYT article suggests that some of the environmental rollbacks could fare poorly during court challenges. Even the oil industry is  concerned:
“Privately, oil executives who are pleased with Mr. Trump’s desire to strip away regulations have expressed frustration at the Interior Department’s methods, worrying that they could bog down the efforts in a legal morass. ‘What’s important is, let’s step back and go back to regular order, and let the process run its course,’ said Jack Gerard, head of the American Petroleum Institute, which lobbies on behalf of oil companies.”

In response to the new regulatory provisions, the oil industry cried that the cost of complying with these safety measures would cripple offshore development, tossing around scary numbers that resurfaced in news reports this week as economic justification for the rollbacks: the “flawed and costly” “unnecessary burdens” would result in a reduction of $45 billion in industry capital spending on new wells over ten years, and the loss of 50,000 jobs. But look closer at the American Petroleum Institute’s talking points from 2015, which began the spread of these numbers (and added the prospect of US GDP taking a $27 billion hit over ten years). These figures, if they came to pass, would amount to a 10% reduction in capital investments in the Gulf of Mexico, an 11% reduction in total employment in the industry there, and a possible 15% reduction in regional oil and gas production—though the 2017 projections of Gulf of Mexico production cited above, both of which came out after the rules took effect, clearly call the API claims into question. And that GDP hit? Again, IF it this ghost of economic impact becomes real, the annual $2.7 billion touted is a drop in the GDP bucket; the most recent reported GDP is $19.5 trillion.

I don’t know about you, but I’d stomach a one-hundredth of one percent drop in GDP—as well our globally dominant US oil boom being 10% smaller—in order to make another Deepwater Horizon SNAFU a bit less likely. (See Ocean Conservation Research’s scathing commentary on the nickels and dimes that the oil industry is clawing back from consumers and the earth, via their minions in the Trump adminstration.)

Of course, all these “reassuring” factoids about our thriving oil and gas industry does nothing to ease my angst about the elephant in the atmosphere. I present them here not to champion the heedless rush to burn all we can before it’s too late, but to shed some light on what those inside the industry are working with as they consider the risks and rewards of moving into new offshore regions. As they look ahead a decade or more, it’s hard to imagine there’ll be all that many oilmen ready to throw their gold dollars into the oceanic wishing well.

However, there is at least some chance that these 47 offshore lease areas may loosen some purse strings enough to take advantage one of Trump’s earlier moves, which opened the door to new seismic surveys on some of the Atlantic continental shelf. Those plans led to much gnashing of teeth among enviros, though industry insiders doubted there’d be many, or perhaps any, takers unless leasing was on the horizon.

{In case you’re wondering, those surveys are the initial noise-producing activity that turns my acoustic ecology ear to the issue of offshore oil and gas development, which also triggers increased ship noise from service vessels as well as sprawling subsea oil processing facilities that roar day and night for the decades of production. For another take on how all the Trumpian offshore shenanigans relate to acoustic issues, see this summary from Ocean Conservation Research, which addresses several other odious proposals that I haven’t touched on, and this November 2018 OCR update.}

Still, if the seismic survey shoe drops, there may be at least some tentative oil industry toes dipped into the water, which could involve bidding on a few leases, whether or not they are ever likely to be developed—bidding on lease blocks is a cheap way to stake out a bit of ground, just in case. (A case in point is the over 400 leased blocks that the oil and gas industry abandoned in the Beaufort and Chukchi Seas between 2008 and 2016, as it became clear they would be too costly to pursue.)

Some of you may want to discourage such shoe-dropping and toe-dipping by adding your voices to the next batch of hundreds of thousands comments being submitted about this new boondoggle, which will include at least four comment opportunities. In addition to the Draft Proposed Program, which opens for comments on January 8, BOEM will soon initiate a Draft Programmatic Environmental Impact Statement, and after these, there will be a Proposed Final Program and a final PEIS to weigh in on. If you want to chime in, here’s the link to the National Program page. And once again, look to Ocean Conservation Research for an impassioned call to submit comments and join public protest events in coastal cities.

And that, I think it’s safe to say, is “the rest of the story”—in all its metaphor-mixing extravagance!