Offshore and All-of-the-Above Energy

Mark Green
Posted January 29, 2015

Offshore energy is getting lots of attention this week, which is good. Offshore energy is vital to America’s economy and energy security.

This week the Interior Department proposed the first draft of its next five-year program for offshore oil and natural gas leasing, in the 2017-2020 timeframe. While the draft plan doesn’t go far enough, it could include the first Atlantic lease sale in decades, and that would be a positive step. Meanwhile, on Thursday the federal government is scheduled to hold a lease sale for offshore wind in the Atlantic.

All of the above …

That’s more than a rhetorical flourish. America will need energy from all available sources in the future – thus the case for a genuine all-of-the-above strategy. We hope this week’s wind sale is successful.

Energy isn’t a zero-sum game, and neither is energy job creation. Offshore energy development of any kind can generate jobs and raise significant revenue for government. The country benefits and so do individual Americans – you know, folks holding the middle-class jobs everyone wants to support. The oil and natural gas industry is doing it, contributing more than $980 million in total bonus bids in exchange for new offshore leases just last year. Industry brings in about $12 billion in rents, royalties and bonus payments to the federal treasury each year. 

When you add income taxes and other payments, our industry contributes an average of $85 million a day to the federal government. At the same time, industry supports 9.8 million jobs across the country, with an average upstream segment salary that’s seven times higher than the federal minimum wage. Doing all of this with an income tax rate of 40.2 percent makes it hard to argue that the industry doesn't pay its fair share.

Another thing: Industry does all of this without subsidies.

And industry could do more. It starts with the administration allowing oil and natural gas development in new offshore areas. As the map below shows, 87 percent of the acreage under federal control remains off limits to development.  

Increasing offshore energy access would allow industry to deliver more energy, more jobs and more revenues to government. Studies by Quest Offshore Resources show that offshore oil and natural gas leasing could create nearly 840,000 U.S. jobs and raise $200 billion in revenue for the government by 2035 – including $51 billion and 280,000 jobs along the Atlantic coast, strongly supported in Florida, Georgia, North Carolina, South Carolina and Virginia.  

We hope this will happen – though the administration's proposal for the Atlantic represents the bare minimum, with plans for just one potential lease sale six years from now that Interior Secretary Sally Jewell acknowledged could be “narrowed or taken out entirely in the future.”

That would be unfortunate for the country, for jobs, for U.S. energy security. Instead of talking about the possibility of a single lease sale for the entire mid-Atlantic outer continental shelf – the government should be planning a number of them for the Atlantic, the Pacific and elsewhere.

Unfortunately, the administration is taking a backward-looking, minimalist approach to American energy that restricts access, draws out permitting processes and seeks regulation for the sake of regulation – all of which sap the energy potential from areas under Washington’s control.

Beyond the draft offshore leasing plan, President Obama's budget proposal, scheduled to come out next week, also may indicate the administration’s seriousness on supporting America's status as an energy superpower.

The president’s past budgets have proposed harmful tax increases on the oil and natural gas industry, singling out one of our country's biggest economic drivers. Fortunately, hiking industry taxes has gone nowhere legislatively. Yet, bringing them up again next week would signal to industry, to the country and the world that the president is unserious about pursuing positive energy policies to sustain and grow the energy renaissance occurring on his watch. API President and CEO Jack Gerard:

“There is a growing awareness that this is a unique American moment and that we should be proud of how far our nation has come in a very short time. But we should also be mindful that this progress could easily be stalled or even reversed without the right energy policies. … What we want and what the American people deserve are elected leaders at all levels of government who act with a sense of urgency and spirit of collaboration to convert this unique American energy moment into an enduring legacy of American energy abundance so that future generations will only know the United States as a global energy leader.”