The oil and gas industry is viewing with extreme alarm Interior Secretary Ken Salazar’s decision to extend by six months the comment period for the Bush administration’s draft offshore leasing program.
Secretary Salazar’s announcement “means that development of our offshore resources could be stalled indefinitely,” said Jack Gerard, president of the American Petroleum Institute. “That would delay Americans’ access to nearly 160,000 new, well-paying jobs, $1.7 trillion in revenues to federal, state and local governments and greater energy security.” In these tough economic times, “Salazar’s delay does a disservice to all Americans,” Gerard said.
Barry Russell, president and CEO of the Independent Petroleum Association of America, said he welcomed “greater public input in the regulatory process,” but expressed disappointment at the decision “to delay moving forward on domestic energy development – especially at a time when our economy is struggling, unemployment is rising and state treasuries are suffering.”
Okay, everybody chill. Development of US offshore resources won’t be stalled indefinitely. Development (and leasing) is ongoing and will continue under the current five year plan, which runs until 2012. If the Obama administration adopts the draft Bush plan, the new leasing program will replace the current program in 2010. If the administration follows the regular order, it will prepare a new five-year plan to begin in 2012.
Of course, the Obama administration has indicated that it intends to slow, review and scale back development plans put in place by the Bush administration, which disquiets the industry. But at this point, it’s over-the-top rhetoric to accuse Salazar of a “disservice to all Americans,” for delaying a proposed offshore leasing plan by six months.
Furthermore, the Bush administration rushed the plan out before it left office. It was was announced January 16 and published in the Federal Register on January 21, the first full day of the Obama administration. The proposal adds lease sales in areas previously covered by congressional and presidential moratoria – in the Atlantic and Pacific oceans and Eastern Gulf of Mexico.
Salazar said the initial deadline for public comment, which expired March 23, “Does not provide enough time for public review or for wise decisions.” He also said information about what resources may be available in the offshore areas, particularly in the Atlantic, “is very thin, and what little we have is twenty to thirty years old. We shouldn’t make decisions to sell off taxpayer resources based on old information.”
He asked department scientists to prepare a report about available offshore resources, both conventional and renewable, and plans to hold regional conferences – on the Pacific, Atlantic and Gulf coasts and in Alaska, to review those findings.
According to the USGS and the Minerals Management Service, the Atlantic oil assessment has been essentially unchanged since 1975 and the Pacific oil assessment has been static since 1996.
As for Gerard’s assertions about new jobs and revenues, which he suggests will result from development on the OCS, are drawn from a report commissioned by API from the consultancy, ICF International. The report assumes that leasing in the former OCS moratorium areas begins in 2010 and that first field development begins three years to five years after a one-year period for exploration.
The employment figures cited by Gerard (160,000), are high-end estimates for 2030, based on development not just offshore, but also in the Arctic National Wildlife Refuge and areas in the Rocky Mountains where development is restricted. The employment impact (based on a middle resource case), solely from developing new oil and gas resources on the OCS is 39,000 jobs (10,000 direct jobs, 10,000 indirect jobs and about 19,000 “induced” jobs).
Similarly, Gerard’s assertion of $1.7 trillion in revenue represents estimated “all time” government revenues from development in all of the onshore and offshore areas where development was or continues to be prohibited. Government revenues from development of just the former OCS moratoria areas through 2030 are estimated in the ICF report at $27.9 billion. Post-2030 revenues are estimated at $333 billion. It’s not chump change and neither are 39,000 jobs something to sneer at, but it’s well below the figures that Gerard suggested are the economic benefits of OCS development.
(In an alternative case, based on the possibility that resource estimates increase over time as fields are developed, the IFC said that OCS development in the former moratrorium areas could result in 76,517 new jobs by 2030, and generate all-time government revenues of $1.4 trilion).
In any event, estimates about potential jobs and government revenues, while not necessarily cut from whole cloth, are speculative until the leases are sold, resources proven and development begins. The potential oil and gas resources in question also are undiscovered, and you can’t book undiscovered resources.