A setback shows it is time to redouble the push for offshore drilling in US federal waters
When it was first announced in early 2018, a five-year draft plan for offshore drilling proposed by the Trump administration would have included the largest number of lease sales in US federal waters in the nation’s history.
The plan hinges on President Trump’s attempt to use an executive order to reopen nearly 90% of US federal waters for offshore drilling, including areas where President Obama enacted a ban on drilling.
In March, a district court judge in the state of Alaska stymied the attempt, ruling the executive order unlawful and invalid. The judge sided with environmentalists in the case who argued that a president has the power to remove federal lands from consideration under the Outer Continental Shelf Lands Act, but not the authority to reopen land that had been previously protected.
If the ruling were to be allowed to stand, then it would be up to Congress to rescind President Obama’s ban – an unlikely outcome given that Democrats who support the ban control one half of the US’ bicameral legislature.
So, it is looking increasingly likely the matter will be fought and decided in court.
In an interview with the Wall Street Journal, newly confirmed US Interior Secretary David Bernhardt said that his agency could wait for the legal process to play out before moving ahead with its plans.
But how long would that take? The potential for significant delays is a frightening spectre to face during a time when the offshore market is showing signs of recovery.
The only feasible option for our industry is compromise – and that is exactly what industry leaders in the US need to be pushing for. The opportunity is just too good to miss, particularly given the alternative of stalemates and the associated negative impact that delays would have on the offshore sector’s tentative forward momentum.
As industry advocacy body National Ocean Industries Association (NOIA) president Randall Luthi said, “A hard stop negates months of environmental and economic analysis that could be used to move the plan forward.”
Mr Luthi called on the US Department of Interior, which oversees leasing of federal lands to “evaluate the option of moving ahead with a proposed plan, with the caveat that the areas that are affected by the previous withdrawal could be excluded from an eventual sale.”
And he is absolutely right.
First of all, it is unrealistic to think that 90% of the US Outer Continental Shelf (OCS) would be opened up to exploration. Setting aside the political complexities that accompany proposed drilling off the Alaskan coast, oil and gas drilling has been restricted in the Atlantic coast since the 1980s, and the last lease sale on Pacific coast OCS was in 1984.
However, any compromise that saw even a small proportion of the proposed leasing areas opened would represent a monumental shift in the OSV sector's fortunes.
Taking the US' Atlantic OCS alone, studies conducted for NOIA and the American Petroleum Institute show initial capital investments would total US$194.5Bn, resulting in 1.3M barrels of oil equivalents per day (boe/d) and remain at US$139.8Bn and 1.2M boe/d by 2035.
Of course, many Democratic lawmakers in state offices along the US' Atlantic coast disagree with Mr Luthi. New York's Democratic Governor Andrew Cuomo moved quickly to sign legislation banning offshore drilling in state waters.
And many Republicans are making similar moves. In South Carolina, Georgia and Florida which are led by Republican governors and Republican-majority legislatures, lawmakers are using their party ties with the White House in attempts at being removed from the federal leasing plan.
Even so, compromise points may remain and with international oil companies starting to spend again, the potential financial opportunities could throw added weight behind the argument to open up US federal waters to offshore oil and gas development.
With utilisation rates in the US Gulf of Mexico among the world’s lowest, any progress towards opening new drilling areas would certainly be welcome news to American OSV owners.
The offshore projects that could come would require support, construction and subsea vessels, vessels to conduct exploratory seismic surveys, as well as mobile offshore drilling rigs and production equipment along with related services including engineering and the regular supply of consumables and maintenance. It would boost the economies of local ports, offer a boon to industry and create new jobs.
With that kind of potential, it is time to see the current setback for the opportunity it is.
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