Trump's offshore oil ambitions sinking
A clumsy roll-out has imperiled a plan to open nearly all of America's waters to drilling
"After talking with @FLGovScott, I am removing #Florida from the draft offshore plan," the US interior secretary Ryan Zinke tweeted on 9 January. It's a tweet he and the Trump administration could come to regret.
The announcement came after a meeting with Florida's Republican governor Rick Scott in which the latter had lobbied Zinke to remove the state from a recently released draft proposal that would open waters off nearly every inch of America's coastlines to oil and gas drilling.
Zinke's quick acquiescence to Scott's request raised protests from nearly every corner. Democrats saw a cheap political stunt. The prospect of offshore drilling is deeply unpopular in Florida, where coastal communities worry the industry could hurt tourism. In their eyes, Zinke was handing Scott, who plans to challenge a sitting Democrat in the closely contested Senate, an easy political victory. Lawyers saw a cavalier breach in the elaborate regulations, including extended interagency reviews and public hearings, that are supposed to govern such decisions. The oil industry saw its chances to drill in potentially rich waters in the eastern Gulf of Mexico suddenly disappear.
The Trump administration has big ambitions to dramatically expand offshore drilling in the US. In January, the Interior Department released its draft 2019-24 offshore leasing programme. It is pretty much everything the oil industry could have asked for. Federal waters long off limits to drilling, from California to Florida to Virginia to Alaska and everywhere in between, potentially holding billions of barrels of oil, have been proposed for new lease sales. It is in line with a string of proposals that would expand drilling opportunities for the industry as the Trump administration looks to juice America's oil and gas production.
The problem for the Trump administration is that nearly every coastal state included in the plan is opposed to offshore drilling and governors for those states are asking why they aren't getting the same treatment as Florida's. "Local voices matter," Zinke said in his statement after the meeting with Scott. "I support the governor's position that Florida is unique and its coasts are heavily reliant on tourism."
3bn barrels—Estimated oil reserves off Florida
It's a pitch that governors from nearly every coastal state are making and Trump's Interior Department will have a hard time justifying why the argument is good enough for Florida but not California or New York. In its draft proposal, the Interior Department gathered comments from officials in states where new waters would be opened to drilling under the plan and only Alaska, Georgia and Maine expressed support. Twenty-one states, covering the entire Pacific Coast and most of the Atlantic, were opposed.
The worrying precedent is why the American Petroleum Institute, an industry advocacy group, offered a rare rebuke to the Trump administration's energy policies. This announcement is premature, the API's Jack Gerard said, "the administration and policymakers should follow the established process before making any decisions or conclusions that would undermine our nation's energy security".
Taking Florida off the table so quickly was a particularly big blow to the industry. Florida's waters include the Eastern Gulf of Mexico, where drillers have long wanted to expand their operations. The area's waters and geology are well known because of the industry's long experience elsewhere in the Gulf of Mexico. Companies could also use their existing infrastructure and base of operations, an important cost-saving aspect in today's depressed offshore market. The US estimates the waters hold more than 3bn barrels of oil and more than 11 trillion cubic feet of gas, a major potential prize that has long been near the top of the industry's wish list.
Other areas, even if opened to auctioning, look far more speculative. Southern California has the largest estimated oil reserves of any proposed new area at more than 5bn barrels. But local resistance to drilling would be fierce and there's little industry interest setting up shop in Southern California. The Atlantic Coast has been of some interest to the industry in recent years, especially after sizable discoveries across the Atlantic off Africa's northwest coast. But the resource potential isn't well known and it would be among the more high-risk propositions in any oil company's portfolio.
Even with the price rebound, companies are more focused on keeping their financial house in order rather than rushing headlong into new frontier projects. BP's Bob Dudley summed up the industry's coolness to new frontier offshore exploration in the US in a recent interview with Axios: "We've got a very full plate in the United States. We don't have a plan that says, 'here's what we're interested in' because we have prioritised a lot of activity, including reducing exploration."