Director Global Studies
C.T. Bauer College of Business
University of Houston
H-Energy Discussion on Presidential Candidates Energy Plans: Offshore Drilling
Before the breathtaking financial collapse this past month, one of the key issues facing the presidential candidates and congressional leaders was whether or not to lift the 27-year congressional moratorium on offshore drilling along most of the nation’s Outer Continental Shelf (OCS). Senator John McCain and the Republican leadership was firmly in favor of this proposal, while Senator Barack Obama and the Democrats grudgingly said they would consider it as part of a broader energy package that would fund renewable energy by repealing certain tax breaks for oil companies.
Offshore oil has always been a controversial subject in the United States (see my HNN piece: http://hnn.us/articles/54465.html). Political polarization on the issue has given us one of the most restricted coastlines on earth for oil activity. Eighty five percent of the OCS is off limits for drilling. The most recent debate replays many of the same arguments that have polarized the issue from the Tidelands conflict in the early 1950s, to the aftermath of the Santa Barbara blowout in 1969, to Richard Nixon’s “Project Independence” in 1973, to James Watt’s reform of the offshore leasing system in the early 1980s. Republicans and oil companies want to open up more of the OCS. Democrats, by contrast, prefer strict limitations or at least a higher degree of federal control. Polarization continues on the issue as both sides play to the bases impulses on their fringe.
Drilling for conventional sources of domestic petroleum should be a part of U.S. energy policy. The fanatics who chant “Drill, Baby, Drill!” at McCain-Palin rallies see this as the only solution necessary. Environmentalists, on the other hand, want anything but the development of conventional petroleum. The transition to alternative energy is going to take a long time, and we should support policies that encourage this transition. But while this takes place, we will continue to consume large volumes of oil and gas. It will enhance our energy security if we obtain at least some of this supply closer to home.
Although I support Obama over McCain on most issues, including overall energy policy, I find McCain’s position on offshore drilling more sensible and sincere in this regard.
Offshore is one of the safest, most secure, and potentially largest sources of new supply that we have. The environmental concerns that animate Democratic opposition to offshore drilling are relics of an earlier era, when domestic energy was relatively abundant, and safety and environmental practices in the industry were rudimentary. There has not been a major spill from U.S. offshore drilling and production in nearly 40 years. Tankers, not platforms or undersea pipelines, are the source of most marine oil pollution. In the Gulf of Mexico, natural seeps inject a lot more oil into the water than offshore installations. If environmental organizations like the Sierra Club had their priorities in order, they would focus their criticism on U.S. oil imports from Nigeria, where platforms routinely flare natural gas into the atmosphere, or on imports from Canadian tar sands, where oil is produced by pillaging the landscape and hogging water resources. Opening up more acreage offshore would also remove some pressure to issue leases in the Alaska National Wildlife Refuge (ANWR), which is a much more sensitive environment and does not hold as much promise for new discoveries.
Obama’s ‘Use It or Lose It’ position on existing offshore leases pretends to be a strategy for increasing domestic oil resources, but is in reality a red herring. Offshore leases already carry 5, 8, or 10 year terms, depending on water depth. If a company does not establish production by the end of the term, it must surrender the lease. Companies also pay a rental fee that escalates annually on non-explored or non-producing leases. Hundreds of non-producing, 10-year “deepwater” leases (greater than 400 meters) issued in the late 1990s are already being surrendered. In fact, many of the highest bonus bids (the price to obtain a lease, awarded in a sealed bid auction) in recent offshore lease sales have been placed on expired and relinquished deepwater blocks unavailable for leasing since 1996-1998. A Use it Or Lose policy is already in place, and it is working.
In Congress, Democratic “compromises” on offshore drilling so far have been disingenuous. The bill passed by the House last month would reduce the area off limits from 85 to 75 percent. It would allow drilling only outside of 50 miles, and only if individual states approved. By offering so little and by not sharing revenue generated by federal leasing with the coastal states, the bill insures that few, if any, states would go along.
We need a gradual approach to encouraging new offshore drilling that does not deliberately antagonize environmentalist constituencies, as Republicans since the ‘Sagebrush Rebellion’ of the 1980s often have done. But the Democrats must make more of an effort if they really are sincere about promoting domestic energy. In the process, they might even win over some Republicans to their alternative energy proposals. Let’s hope that Barack Obama, who appears headed for victory next week, will be able to exercise his celebrated pragmatic leadership on behalf of a truly pragmatic energy policy.