Strengthen the Draft Offshore Leasing Plan

Mark Green
Posted March 31, 2015

Major points in official comments submitted by API and seven other energy industry groups to the federal Bureau of Ocean Energy Management (BOEM) on its draft offshore oil and natural gas leasing program for the 2017-2022 time period:

• Given how much offshore acreage was excluded from the proposed draft, BOEM should not remove any areas proposed in the draft from the final lease plan.
• The government is missing key opportunities to harness U.S. offshore energy in the Atlantic, eastern Gulf of Mexico and off Alaska. Other countries are implementing robust offshore development programs.
• Energy development on the outer continental shelf (OCS) would generate significant job and economic benefits to the U.S.
• Industry continues to press ahead with technological, safety and environmental protection improvements – all designed to foster increased safety in offshore operations.

The comments are among those being collected by BOEM before it finalizes the five-year leasing program later this year. The leasing plan is a blueprint for offshore development; areas not listed in it won’t be offered for lease 2017 to 2022. Given the 10 to 15 years needed to develop offshore oil and natural gas – from the time the lease is sold to production – the federal plan is critically important.   

While the plan has positive aspects, it doesn’t go far enough – not for an energy superpower like the United States. For example, despite strong public support for offshore development in Florida, Georgia, North Carolina, South Carolina and Virginia, the draft plan proposes just one lease sale for the Atlantic coast of those states – and then not until nearly the end of the plan, in 2021. The draft program would continue to limit development in the waters off Alaska and wouldn’t allow development off the West Coast and in the eastern Gulf of Mexico. Erik Milito, API’s upstream director:

“America’s energy security depends on our ability to produce oil and natural gas here in the U.S. The administration should not make the map or the list of lease sales any smaller. Too many promising areas are already excluded, taking off the table hundreds of thousands of potential jobs and tens of billions of dollars in government revenue.”

API joined in submitting comments to BOEM with the National Ocean Industries Association, the Independent Petroleum Association of America, the U.S. Oil and Gas Association, the American Exploration & Production Council, the International Association of Geophysical Contractors, the Petroleum Equipment and Services Association and the Alaska Oil and Gas Association.

The associations point out that, according to the U.S. Energy Information Administration (EIA), U.S. energy demand will grow 12 percent by 2040, while global energy needs will increase 56 percent. More than half of that demand will be met by oil and natural gas, the groups say. From the comments:

Growing U.S. production has dramatically increased our resistance to energy shocks, but our long-term energy security can only be ensured with a lasting commitment to expanding offshore oil and natural gas development to new areas as the DPP (draft plan) has done. However, to continue this resurgence, the associations believe that OCS areas should not be prematurely removed from leasing consideration as the administration has done in the Atlantic or permanently removed from future consideration as happened in Alaska. These areas have not been adequately explored and, in the case of the Atlantic, the decision to include a 50-mile buffer zone was made without the benefit of a full environmental analysis and could remove substantial resources from future production.

A vigorous offshore leasing plan is needed to offset inevitable declines in existing production areas – to support a true all-of-the-above U.S. energy policy and to help meet future energy needs in the U.S. and around the world.

The comments detail projected benefits from offshore development. According to recent studies by Quest Offshore Resources, by 2035 offshore leasing and development could create nearly 840,000 new jobs, add about 3.5 million barrels of oil equivalent per day, generate more than $200 billion in cumulative revenue for government, lead to nearly $450 billion in new private-sector spending and add more than $70 billion per year to the U.S. economy.

The oil and natural gas Industry is poised to do its part. The comments note that industry has worked independently and with regulators to make offshore operations safer – through advanced technology, improvements in spill prevention, intervention and response capabilities and enhancements in the offshore safety and regulatory framework. In addition, industry stood up the Center for Offshore Safety to help improve operators’ safety performance and to work with companies and regulators to engrain safety into day-to-day operations. The comments:

The oil and natural gas industry has also established a robust oil spill response research and development program that oversees more than 25 projects in eight areas: planning, mechanical recovery, dispersants, in-situ burning, remote sensing, shoreline protection, alternative technologies, and inland spill response. Oil spill response organizations have increased their capabilities by increasing training and keeping in inventory more equipment that is fit for specific purposes such as in-situ burning, and the industry has invested in international oil spill preparedness and response programs focused on improving industry operational capabilities in all parts of the world, including the Arctic.

In that context, the draft leasing plan isn’t what it needs to be. The associations:

The Associations appreciate that BOEM has chosen to propose new Atlantic OCS areas for leasing and to continue leasing in OCS areas where industry has traditionally operated. However, because the Five-Year Program development process allows only for the removal of additional areas from consideration at subsequent planning stages, the fact that significant areas in the Atlantic and Alaska have been excluded from leasing consideration in the DPP is alarming. We view the DPP and the associated Section 12a Presidential withdrawals as the bare minimum that could have been offered at this first stage of the Five-year Leasing Program development.

The associations urge federal officials to hold the single proposed sale in the Atlantic a year or two earlier than 2021, as set out in the draft program. They also ask BOEM to add a second Atlantic sale.

They write that BOEM has “missed an opportunity” by not including any additional areas of the Eastern Gulf in the draft program – an area known to have significant oil and natural gas reserves. “The Associations feel that excluding the Eastern Gulf Planning Areas in the first stage of the multi-stage leasing program evaluation process is not aligned with the intent of the Five-year Leasing Program process that is designed to take multiple factors into account and not pre-determine the outcome,” they write.

They point to declining production from Alaska’s North Slope (2.145 million barrels of oil per day in 1988, down to less than 520,000 barrels per day currently) and argue that new offshore development in Alaskan waters is “essential to the long-term viability of the Trans-Alaskan Pipeline System.” The comments:

The Chukchi Sea offers more potential resources than any other undeveloped U.S. energy basin. The Beaufort Sea, while smaller, nevertheless provides among the largest undiscovered resource accumulations in the U.S. … However, while other Arctic nations such as Russia and Norway are aggressively developing Arctic resources, the U.S. risks being left behind. The DPP fails to recognize decades of safe and environmentally responsible resource development in Alaska, and a history of offshore exploration that has addressed concerns of Alaska’s indigenous residents.

Safe and responsible offshore energy development is occurring, generating important energy and economic benefits for the country, which argues that the next federal leasing plan should be robust, not timid; expansive, not limited – an approach that limits America’s energy potential. Milito:

“The Obama administration should carefully consider America’s long-term energy needs because these decisions will impact the country for a long time.”