Looking Forward in the Domestic Drilling Debate: What Direction Should Policy Take on Offshore Drilling (11/08)

The following column by AGI/AIPG Geoscience & Public Policy Intern Corina Cerovski-Darriau is reprinted from the November/December 2008 issue of The Professional Geologist, a publication of the American Institute of Professional Geologists . It is reprinted with permission.

Energy policy issues are typically focused regionally, only gaining publicity in states with vested interests.  However, with gas prices at $4 a gallon nationwide, the issues have become more politicized with opinions falling along party lines.  As both parties are struggling to get relief to their voters, the almost evenly divided Congress is finding it difficult to get the two-thirds majority needed to pass expedited energy relief legislation.  Regardless of what is passed now, the focus needs to be on future decades.  A long-term solution to energy for transportation needs should be developed as oil demand increases and few alternatives exist to alleviate the pressure. 

According to the Energy Information Administration (EIA), the U.S. consumes nearly 8 billion barrels of petroleum products each year—or around 20 million barrels of oil products per day—so catering to our energy habits is no easy task.  Each year we import about 4 billion barrels of crude oil from foreign countries.  Most of the crude oil comes from Canada, but Saudi Arabia, Mexico, Venezuela, and Nigeria are our other top suppliers.  The U.S. produces less than 2 billion barrels of crude each year.  Our predominant reliance on foreign sources has many politicians worried.  Together, foreign dependence and high prices, have spurred legislation focused on boosting domestic production.

Legislative Debate
In mid-June 2008, President Bush gave Congress four ideas to increase domestic supply and lower prices, including lifting the Outer Continental Shelf (OCS) drilling moratorium.  Congress resisted, causing President Bush to lift the executive restriction in mid-July.  The move on its own does not allow any new drilling because Congress continues to renew a ban implemented in the early 1980s as part of the Department of the Interior (DOI) appropriations bill.  However, it did heighten the domestic drilling debate, with Republicans demanding new offshore drilling and Democrats insisting that lifting the ban would not reduce current gasoline prices.  The heightened debate resulted in a flurry of bills using a variety of tactics to reduce prices and foreign dependence.  Measures varied from curbing oil market speculation, to expediting drilling in leased areas, to opening up new leases, to working on new developments like oil shale.    

Outer Continental Shelf Potential
The potential for domestic oil production on and offshore is widely speculated.  Between undiscovered reserves, proven reserves, offshore oil fields, and possible additional sources like oil shale, the prospects are enormous.  The U.S. currently has 21 billion barrels of just proven crude reserves.  Focusing on the contentious OCS region—the area under U.S. jurisdiction extending from 3 to potentially 350 nautical miles offshore—the Minerals Management Service (MMS) cited 86 billion barrels of potential, yet undiscovered, oil resources in its 2006 assessment.  Based on estimations, it looks like domestic oil production could alleviate some demand on foreign oil markets.  However, there are limitations.  For example, widespread exploration and seismic assessment of potential offshore oil resources are sparse, incomplete, or outdated making it hard to accurately determine oil reserves. 

Offshore drilling relies heavily on preliminary surficial assessments collected by the U.S. Geological Survey (USGS), MMS, or private industry coupled with geological and geophysical models and theories to determine probabilistic findings.  The MMS, which is the bureau within the DOI responsible for natural resource exploration and development offshore including management of the leases on the 1.76 billion acres of the OCS, last assessed the OCS oil potential in 2006.  That assessment nearly doubled the projected undiscovered recoverable oil from the 1996 assessment, emphasizing that, to a point, oil discoveries will increase over time.  Yet these probabilistic assessments are the extent of exploration in most areas.  The popular slogan of the petroleum industry is “The More We Explore, The More We Know,” but no new seismic data or exploratory wells have been drilled in parts of the OCS for nearly three decades.  The most recently released seismic lines and maps from the MMS were completed between 1976 and1980.  There are not enough incentives or resources available to conduct modern exploration on the approximately 80% of offshore land included in the moratorium.  The understanding of the amount and location of oil resources are limited by the lack of scientific data. 

Looking Towards the Future
With increasing prices at the pump and calls to become less reliant on foreign oil, the offshore drilling option has been gaining political and public support.  Even Democrats who have been staunchly opposed in the past are working on measures to open up offshore leases, or at least pass legislation showing their support of domestic production.  Still, Democratic leaders in both the House and the Senate remain adamant about upholding the ban explaining that it is not the easy solution it is touted to be.  If offshore drilling were allowed, the price at the pump would not instantly decline.  It would still take at least 5-10 years for oil from OCS leases to reach the market if the ban was lifted today.  More importantly, we have no clear alternatives to meet energy demands for transportation in the coming decades.

Oil demand is rapidly catching up to, and at times surpassing, supply.  The transportation sector relies heavily on oil production that cannot be readily replaced by renewable energy prospects like wind, solar, or geothermal.  For the time being we are stuck at a crossroads, whether to increase investments in oil exploration and production or increase investments in alternative energy developments for transportation.  It remains a question of infrastructure, resources, research, cost, and willingness to accept alternatives in the future.  Right now the best option is to pair traditional oil production with increased research and development for more fuel efficient vehicles and better batteries for hybrid vehicles for example. 

The debate continues as to whether there is oil on the 68 million acres of already leased offshore land, or if companies are sitting on unprofitable pieces of real estate.  Congress continues to fight over who favors and how to best conduct domestic drilling.  All the while gas prices are rising.  It is clear no quick fix is possible to salvage prices or the demand on foreign oil.  As support grows for offshore drilling, others worry we are not working hard enough to wean ourselves from fossil fuels.  Despite a lack of direction being dictated by national policy, consumers may be taking matters into their own hands as petroleum saw its steepest drop in demand over the past 17 years last July.  Still national policy will emerge, so we need to focus on the best action plan for the long-term.  A plan that dictates further research and infrastructure development for alternatives to oil, and most likely, a continued search for those undiscovered reserves will surely emerge for the future. 

This article is reprinted with permission from The Professional Geologist, published by the American Institute of Professional Geologists. AGI gratefully acknowledges that permission.

Please send any comments or requests for information to the AGI Government Affairs Program.

Posted February 9, 2009

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