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Industry riled by ‘no we can’t’ US energy policy

Representatives of the US offshore industry are demanding that the Obama administration lift political obstacles to exploration

Five US US coastal states have joined forces in an effort to pry more permits for offshore energy development from the fists of federal regulators. They have invited leaders from 20 other states to take part in the Outer Continental Shelf Governors’ Coalition because, they said, delayed offshore development adversely affects shoreline states, but also US energy independence and security, jobs and the economy.

Federal regulatory bodies have been reluctant to issue offshore exploration and production (E&P) permits in the aftermath of the Deepwater Horizon disaster in the Gulf of Mexico in April last year.

Improve communication

Speaking at the Offshore Technology Conference in Houston, officials from Mississippi, Texas, Louisiana and Alaska – states with a rich heritage of offshore E&P – and Virginia, which hopes to follow in their footsteps, said the coalition aimed to improve communication and co-ordination between the federal government and the offshore industry, and to heighten regulators’ understanding of the effect restrictive energy policy is having on the industry and the US. But they sounded disinterested in engaging in constructive conversation.

Mississippi governor Haley Barbour, who recently abandoned plans for a 2012 presidential bid, said the US economy cannot grow and jobs cannot be created at a reasonable rate unless the federal government promotes abundant, affordable domestic energy supply, “yet environmental policy has trumped energy policy repeatedly”.

He claimed President Barack Obama’s goal of reducing US oil imports by one-third in the next 10 to 15 years cannot be achieved if policies that drive down oil production remain in place. Although reducing demand could help curb imports, Barbour noted that the only time the country cut back its oil consumption was during a recession.

Scott Angelle of the Louisiana Department of Natural Resources (DNR) warned that since 1972, the US has experienced six recessions, “each preceded by a spike in energy prices”.

Texas land commissioner Jerry Patterson called US energy policy “a series of no-we-can’ts”. He also said federal law requires the government to discuss vital decisions about offshore development with individual states. To do otherwise, he said, is “not an option”.

The missing partner

Dan Sullivan, commissioner of Alaska’s DNR, reminded the audience that his agency manages one of the world’s largest energy portfolios and should be part of addressing the US’ significant energy challenges. Alaska is home to Prudhoe Bay, the country’s largest oilfield.

The state is implementing a comprehensive energy strategy, including fiscal reform, lowering production taxes, an overhaul of state permitting systems and new energy infrastructure construction projects, to boost oil production. “The missing, critical partner is the federal government,” he said.

“Companies that have invested billions in [offshore] leases have essentially gotten nowhere,” Sullivan said, referring to Shell’s unsuccessful efforts since 2005 to develop its leases offshore Alaska.

Alaska’s environmental policies are among the strictest in the world, he added. “When domestic exploration and drilling is discouraged, the result is that the US gets its oil from places that have less-stringent environmental standards.”

After the Deepwater Horizon disaster, plans to drill offshore Virginia were postponed until at least 2017. State DNR secretary Doug Domenech called the move “government overreach”, adding: “There is no rational, technical or scientific basis for that decision, just purely political.”

A second set of panellists, representing industry and business sectors, echoed the state officials’ sentiments. Lori LeBlanc, executive director of the Louisiana-based Gulf Economic Survival Team, claimed the federal response has compounded the damage inflicted by Deepwater Horizon by sucking the life out of local economies that are dependent upon the offshore energy sector.

An industry shut down

Her organisation was formed to help alleviate bureaucratic bottlenecks and speed up the issuing of offshore drilling permits. But the first permit to drill in the Gulf was issued 314 days after the Deepwater Horizon tragedy and, to date, only a dozen have been authorised. “How many industrial accidents in this country have resulted in shutting down an industry for 314 days?” LeBlanc asked.

Jack Gerard, president and chief executive of the American Petroleum Institute, called the energy industry a “significant economic engine that has the potential to be even greater with the right public policy”, adding: “We merely need the government to develop policies that allow us to develop [our] vast resources”.

The industry already supports 9.2 million jobs and is responsible for 7.7% of the nation’s GDP, and it could create a further 1 million US jobs, Gerard claimed. In addition to the $100 million a day it pays the federal government, it could contribute billions more to state and federal coffers – given the opportunity.

Presenting a different perspective, Vince Beltrami of Alaska’s arm of the American Federation of Labor and Congress of Industrial Organizations explained that organised labour could be much more of a partner with the industry in influencing legislation to promote offshore drilling. But he added: “If industry wants labour’s help getting the US offshore developed, give us jobs.”

Organised labour’s relationship with oil and gas developers has been strained since the Trans-Alaska Pipeline (Tap) was built in the 1970s to move oil from Alaska’s North Slope to the state’s southern coast. Of the 13,000 jobs in Alaska’s oilfields, only a few hundred are union, Beltrami said. “Tap’s producers have given us few reasons to jump on the bandwagon,” he explained. “I hope that will change.”

US un-competitiveness

Steven F Hayward of the American Enterprise Institute noted that while the US ranks in the global top 10 in terms of overall international competitiveness, it stands 44th in the IHS Cera ranking of countries’ investment climate for oil and gas; by comparison, Angola ranks 18th. “It’s astonishing to suggest that the US ranks that much farther down than Angola,” he declared. “That ought to be a scandal.”

Despite the need for greater domestic production to secure the US’ energy future, government policy has resulted in rinsing imports and domestic energy costs, said Karen Harbert, of the US Chamber of Commerce’s Institute for 21st Century Energy. She offered this description of US energy policy: “Shooting ourselves in the foot, reloading and shooting again.” 

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