Offshore drilling in Atlantic Ocean likely under Obama, Romney policies

After decades of inactivity, drilling off North Carolina’s coast seems more likely than at any time since state authorities blocked an effort by Mobil Oil to drill off the coast of Hatteras in 1990.

Both presidential contenders are pursuing policies – offshore leases and seismic testing – that could move the nation closer toward eventual offshore energy exploration if significant energy reserves are discovered.

Opponents of offshore drilling are treating both candidates’ strategies as threats.

“There’s been no slowdown on offshore drilling,” said Michael Jasny, director of the marine mammal program at the Natural Resources Defense Council. “Ultimately this is a political issue. It’s vital that folks understand the impacts of offshore oil on their livelihood.”

Republican Presidential candidate Mitt Romney’s push for opening Atlantic waters to drilling puts North Carolina dead center in the energy debate by explicitly identifying the state’s offshore waters as one of the first new areas for potential development. As part of a strategy to achieve energy independence by 2020, Romney calls for an “aggressive” policy by leasing offshore federal lands to drillers.

President Barack Obama in 2010 adopted a similar strategy but has since opted for a more cautious approach: a federal review to decide next year whether energy companies will be allowed to conduct seismic tests to gauge the extent of undersea oil and gas resources. Obama backed off from leasing federal offshore lands after the BP Deepwater Horizon spill that killed 11 people and disgorged 4.9 million gallons of oil into the Gulf of Mexico two years ago.

The recent thaw on the nation’s long-held off-limits stance to offshore drilling portends dramatic changes in North Carolina, which is heavily dependent on tourism, and whose eastern counties are among the most economically distressed in the state. Advocates of drilling see the promise of thousands of jobs and lucrative leases to the state from federal leases.

But North Carolina’s waters have not been parted by a single exploratory drilling well, and Romney’s approach could turn the state into a national test case on whether the public is willing to open up its waters and coastal areas to heavy industry and accident risks in exchange for promises of jobs and lease revenues that could eventually top several billion dollars.

Mobile Oil’s case

More than two decades ago, when the state rejected Mobile Oil’s drilling plans offshore, it took a decade for the case to work its way through federal courts and the U.S. Supreme Court before the company gave up.

In many ways the drilling issue would mirror the state’s divisive debate over fracking for natural gas, said Bill Weatherspoon, director of the N.C. Petroleum Council. Offshore drilling would not only pit the oil lobby and chambers of commerce against environmental groups and other critics, but local governments would also get involved to protect their ecological interests or to advance economic goals.

In recent years, for example, the coastal town of Duck and Dare County have passed resolutions against offshore drilling, while Carteret County has supported drilling in ocean waters.

Oceana, an anti-drilling organization in Washington, D.C., brought 45 people to a public meeting in Wilmington in April to discuss the Obama Administration’s review of seismic testing. Oceana on Tuesday plans to discharge air horns before the Department of Interior headquarters in Washington to protest seismic testing as a threat that can stun and deafen marine animals. The group is planning a national tour later this year with a layover in Wilmington.

“It’s moving forward well past the point where we’re comfortable,” said Matt Dundas, Oceana’s campaign director, of the revived interest in drilling and testing. “The seismic test by itself, with air guns, is catastrophically destructive to ocean life.”

‘A hollow promise’

The American Petroleum Institute, the nation’s oil and gas lobby, regards the Obama testing review as a long-shot for drilling. Seismic testing can cost millions of dollars.

“It’s a hollow promise,” said the group’s senior policy advisor, Andy Radford. “Without the prospect of a lease sale, we don’t understand what the incentives are for a company to collect data because they won’t be able to sell it.”

But even if the Atlantic Ocean is opened to energy companies, oil and gas production would likely not get underway for at least a decade. The energy exploration cycle is heavily regulated and requires seismic testing, environmental assessments, oceanographic mapping, military reviews and other regulatory hurdles before any oil and gas can start flowing.

“There’s no way to speed this up,” said Athan Manuel, director of the Sierra Club’s lands protection program.

The latest federal estimates from the U.S. Bureau of Ocean Energy Management for the entire Atlantic coast is between 11 trillion cubic feet and 54 trillion cubic feet of natural gas – well below the 84.2 trillion cubic feet found in the Marcellus Shale that spans New York and Pennsylvania. The amount of oil is likely between 1.3 billion barrels and 5.58 billion barrels, less than a year’s supply.

With the market price of gas hovering near all-time lows, the Energy Information Administration, a division within the U.S. Department of Energy, has estimated that no oil or gas will be produced in the Atlantic or outer continental shelf before 2035.

Drilling offshore could begin 3 miles beyond the coast, the point at which federal waters begin, extending as far as 200 miles in the ocean. Each mile away from land increases the cost of pipelines, land-to-rig travel and drilling in ever-deeper waters.

$66M to $400M a year

Beyond the engineering and technical challenges, offshore drilling would mobilize state governments to press Congress to change federal law to allow states to collect royalties on the lease fees, as is done for Gulf Coast states.

North Carolina could collect $66 million to $400 million a year for the life of the reserves, according to a 145-page report issued September 2011 by a scientific advisory panel created by Gov. Perdue. The revenue amount, at the top end, could approach 2 percent of the state’s $20.2 billion annual budget.

“You could scatter that money around all over state government,” said Weatherspoon of the N.C. Petroleum Council. He said the money could bolster programs such as environmental regulation, mental health services, community colleges and others that have been hard-hit by budget cuts.

Weatherspoon said that offshore exploration would pit neighboring states against each other to host shore bases that would supply and support the offshore rigs. Such bases could involve hundreds of jobs in metallurgy, food preparation, transportation and related work.

A 2009 report from the Southeast Energy Alliance, an industry trade group, estimated that offshore drilling could create 6,700 new jobs in North Carolina.

Bill Holman, director of the State Policy Program at Duke University’s Nicholas Institute for Environmental Policy Solutions, said chances are slim that North Carolina could compete with larger ports in South Carolina and Virginia. Holman based his assessment on his tenure as a member of another offshore study panel, the Legislative Research Commission’s Advisory Subcommittee on Offshore Energy Exploration, which prepared a report in 2010.

He said little research has been done on offshore resources, and noted that projected natural gas prices suggest that little will change in this regard in the near future.

“We’re at the same state of knowledge on these issues as we were 20 years ago,” Holman said. “Until the price of natural gas goes way up, I’d be surprised if there would be very much interest, given the cost of developing those offshore resources versus the cost of developing the known resources.”