Last week, the Trump administration opened up pretty much all US coastal waters to oil and gas drilling with a new draft proposal for lease sales of 47 new offshore blocks between 2019 and 2024.
It’s the largest lease sale ever, and a huge reversal from the status quo of protecting these waters. It’s also created an odd coalition of opponents including environmental groups and Republican governors in coastal states like South Carolina and Florida.
But on Tuesday, the Department of Interior was already starting to walk back parts of its sweeping proposal. Interior Secretary Ryan Zinke announced in a tweet that he was removing Florida from the draft proposal because Florida is “unique and its coasts are heavily reliant on tourism as an economic driver.” (Many interpreted it as a brazen political favor to Gov. Rick Scott.)
Now leaders of other coastal states are now irritated — they not only object to the proposal but are also questioning why the Interior Department heeded Florida’s concerns about drilling’s threat to tourism and wildlife but not theirs.
“What makes the beaches of Florida or the opinion of Governor Scott somehow more valuable than the beaches of other states or opinions of other elected officials and communities?” wrote Sen. Maria Cantwell (D-Wash.), the ranking member of the Senate Energy and Natural Resources Committee, in a letter to Zinke.
Twenty-two senators across 12 states then signed a separate letter on Thursday asking for exemptions from the new drilling proposal.
It was, after all, only eight years ago that 4 million gallons of crude oil spilled into the Gulf of Mexico in the epically disastrous Deepwater Horizon oil spill. Its residue still lingers on beaches in the Southeast, and environmental experts have warned that we don’t yet have sufficient regulations on the industry to prevent future events like it.
And while Zinke has tried to frame the new offshore drilling proposal as a huge win for energy policy, it’s another example of a sweeping energy pronouncement from the administration wilting under scrutiny in the real world. Though the White House pledged to pursue a policy of “energy dominance” by harvesting the United States’ vast supplies of coal, oil, and gas, the country’s current fuel production is already so high that it’s driving down prices, undermining the case for extracting even more.
A fight between states and the federal government is looming
The DOI announcement opens up more than 90 percent of the region known as the Outer Continental Shelf, a coastal domain that extends between 10 and 250 miles off the US shoreline. If the draft proposal goes through, energy companies will be able to bid on 47 lease auctions in 25 “planning areas” along the edges of the lower 48 states and Alaska.
This is a 180-degree turn from the current rules that make 94 percent of these waters off limits to drilling. The proposal puts 98 percent of undiscovered offshore oil and gas within reach of developers, according to the Interior Department.
So far, Florida is the only state to receive an exemption, even though leaders from other coastal states are suggesting they’d like one too.
As Alexander Kaufman at the Huffington Post observed, Florida’s Gov. Scott has a long history of supporting coastal drilling around the state, even after the 2010 Deepwater Horizon oil spill coated Florida beaches in black sludge.
In fact, Scott didn’t even object when the Department of the Interior was putting together its drilling proposal, though other governors did.
Before the @Interior Dept assembled its draft plan for selling offshore drilling rights, governors had a chance to weigh in w/ their views. Plenty of governors asked that their states to be left out of the proposal. Per BOEM, Florida Gov. Scott wasn't one of them. pic.twitter.com/DYZiXdw6SA— Jennifer A. Dlouhy (@jendlouhyhc) January 10, 2018
Many are reading Scott’s about-face on drilling as a nakedly political maneuver, burnishing his green credentials as he hits his term limit and looks to challenge Florida Democrat Bill Nelson for a Senate seat this year.
We'd like a word in Virginia. https://t.co/hKumvPMcV4— Ralph Northam (@RalphNortham) January 10, 2018
Meanwhile, other states opposed to drilling may be able to use Florida’s exemption as a foot in the door to drastically dial back the scope of this proposal and as fodder for legal challenges.
Taking #Florida off the table for offshore drilling but not #California violates the legal standard of arbitrary and capricious agency action. California and other coastal states also rely on our beautiful coasts for tourism and our economy. I believe courts will strike this down https://t.co/xWyB69F7Gg— Ted Lieu (@tedlieu) January 10, 2018
DOI did acknowledge that there would likely be changes to their proposal. “Inclusion of an area in the DPP [draft proposed program] is not a final indication that it will be included in the approved Program or offered in a lease sale, because many decision points still remain,” according to a press release.
Why do oil companies want this?
Oil majors including BP, Statoil, and Shell have expressed interest in drilling in these coastal areas, and the industry certainly treating the announcement as a win. It follows a string of victories, with favorable tax policy and environmental deregulation now all checked off the industry’s wish list.
But when it comes to the prospect of actually planting new drilling platforms in coastal waters, other considerations may get in the way. For one, political fights at the state level are already shaping where oil and gas companies can mine.
There are other factors too: We’re in an era of low oil and gas prices, and overall energy demand in the United States is poised to hold fairly steady.
The US already has vast onshore fuel reserves, and drilling in the water costs 15 to 20 times as much as it does on land. There’s also growing competition from other energy sources and applications, with electric vehicles and renewables gaining ground and challenging the place of oil and gas in transportation and power production.
Given this backdrop, I asked Jack Gerard, CEO and president of the American Petroleum Institute, whether there is a business case to drill for oil and gas in these new areas. “The answer to that is, ‘We’ll have to see,’” he said.
For now, the big thing the industry wants to do is find what’s out there, something that’s hard to discern without drilling test wells. Then they want to see where it would be cheap and easy to extract, which is governed largely by the presence of existing oil and gas infrastructure.
That means new offshore drilling is likeliest in areas that already have offshore oil platforms. But having new waters to explore is still important for oil companies because it allows them to hedge in a notoriously volatile industry.
“It’s our view that more options are always preferable when it comes to potential lease acreage — both on and offshore,” said Curtis Smith, a spokesperson for Shell, in an email. “But it’s too early to know, specifically, how the Draft 5YP [five-year plan] would play into future portfolio decisions.”
Oil prices can still spike, and even if demand holds steady, drillers still need to find new wells to replace the ones that are tapped out. Meanwhile, oil and gas infrastructure, from wells to pipelines to refineries, all cost billions of dollars and take years to build.
And despite political tailwinds, just getting from the point of buying leases and securing permits to actually going out into the water to see what’s there can stretch up to 15 years, according to Gerard.