T. Jay Collins,  CEO and President, Oceaneering International Inc., and Chairman, National Ocean Industries Association

Until 2008, the offshore oil and gas industry in the United States operated under administrative and congressional policies that arbitrarily placed over 80% of federal offshore lands off limits to exploration for nearly three decades.

With these restrictions now removed, one might think that a path has been cleared for increased access to offshore energy. Think again.

Despite a favorable shift in public opinion toward offshore drilling and an ongoing global economic crisis, more than a year after the moratoria ended we are no closer to developing energy from new offshore areas.

While the absence of blanket bans against offshore oil and gas exploration is encouraging, a number of regulatory and legislative hurdles remain to be cleared. 

Five-year leasing program. The US Interior Department is developing a new five-year Outer Continental Shelf (OCS) oil and gas leasing plan. This is important because none of the acreage that is newly “moratoria free” can be leased until it is included in the plan. In fact, a mere 13% of the 1.7 billion acres of OCS land is available for leasing consideration under the current 2007–2012 leasing plan.

The Bush administration handed the Obama administration a two-year head start on the next five-year plan by initiating the planning process for a 2010–2015 OCS leasing plan, even though the current plan will not expire until 2012. However, the clock is quickly winding down on that head start.

In January 2009, the Bush administration published its draft proposal for 2010–2015. The plan included leasing in areas off California, parts of the eastern Gulf of Mexico and the Atlantic coast for the first time in over 25 years.

On Feb. 10 of this year, new Interior Secretary Ken Salazar announced a 180-day extension of the comment period for the draft proposed plan. When the comment period closed on Sept. 21, public comments totaled more than 500,000, including those obtained during several listening sessions around the US. Although a complete analysis of the comments is yet to be released, there are indications that the majority are in support of offshore drilling.

Another comment period and more public hearings will potentially occur in 2010 when the proposed plan and draft environmental impact statement (EIS) are made available for public review.

Any further delay in implementing a new plan that includes areas formerly under moratoria essentially extends the old limits, resulting in a de facto continuation of the moratoria. Thus, the industry must continue to push Interior and the administration as a whole to implement a new plan as soon as possible.

Marine spatial planning. One new area of debate involves the notion of establishing a national ocean policy that incorporates versions of ocean zoning and mapping, or marine spatial planning (MSP). While proponents argue that MSP is a tool that brings together multiple users of the ocean to make informed and coordinated decisions about how to use marine resources, detractors fear that, if misused, MSP could serve as a political tool to hinder commercial development of ocean resources, including both traditional and alternative energy.

 On June 12, President Obama created an Interagency Ocean Policy Task Force led by the White House Council on Environmental Quality. The task force is charged with providing recommendations on ocean policy, including MSP. The offshore industry has been actively engaged in educating the task force about the implications of its decisions. The challenge for the task force will be to develop a system of better coordination that does not result in the imposition of de facto moratoria on new energy development.

State interests in OCS access. Significant action has also taken place in the last few years in various state legislatures and governors’ offices that has impacted the larger access picture.

For instance, under the Gulf of Mexico Energy Security Act of 2006, states that support oil and gas production in the GOM receive 37.5% of the royalty revenues collected by the federal government for offshore production. The first of those revenue payments are to Texas, Louisiana, Mississippi and Alabama for a total of $25 million.

Other states are taking notice. Virginia, for example, could potentially receive over $165 million annually if it were to have equal treatment for production in its adjacent waters.

Not surprisingly, local and state government leaders are seeking passage of federal legislation to allow all coastal states to receive a fair share of royalty revenues derived from oil and gas production adjacent to their shores.

Many opponents of offshore energy production, however, oppose such revenue sharing because they fear that such a system will result in states and local communities better understanding the gains they stand to reap through offshore E&P.

Energy, jobs and revenue. It is worth reiterating what exactly is at stake in this discussion. Physical and economic access to offshore resources are key to long-term strategies to moderate prices, increase energy supply and security, and stimulate economic growth and employment.

The OCS currently produces 27% of US oil output. However, that production comes from only one-half of 1% of the 1.7 billion acres of OCS lands.

Producing energy from the previous moratoria areas holds the potential for hundreds of thousands of jobs and hundreds of millions of dollars in revenue. The oil and gas industry is in the position to contribute to the US economy with virtually no cost to the taxpayer.

According to a recent study, oil and gas in these areas could generate $1.3 trillion in additional federal, state and local government revenue, and more than 76,000 jobs. And these would be family-supporting jobs. E&P wages average $93,575 per year, according to 2007 Bureau of Labor Statistics data—over twice the average annual pay of $44,458 across all US industries.

The US OCS is conservatively estimated by the Minerals Management Service (MMS) to hold undiscovered technically recoverable resources of over 419 Tcf of gas and 86 billion bbl of oil. That’s enough gas to heat 100 million homes for 60 years, and enough oil to drive 85 million cars for 35 years or to replace current Persian Gulf imports for almost 60 years.

In fact, there may be even more oil and gas offshore, because the more that oil companies explore, the more they find. In the parts of the GOM where industry has been allowed to buy leases and explore, they have found about five times as much oil and three times as much gas as was once thought to be there. In 1987, MMS estimated that the GOM held about 10 billion bbl of oil and 100 Tcf of gas; yet, earlier this decade the Gulf was estimated to have 45 billion bbl of oil and 230 Tcf of gas yet to be developed, in addition to the 6 billion bbl of oil and 75 Tcf of gas already produced since 1987.

Safe development. The technology that powers the offshore energy industry rivals that of the space industry. Oil and gas are safely being explored for in waters more than 10,000 ft (nearly 2 mi) deep. Moreover, the injury and illness rate for offshore workers is about 70% lower than for all of private industry.

Highly regulated, the offshore industry produces 1.4 million bbl of oil from the OCS every day, yet has a 99.999% record for clean operations. A 2002 National Academy of Sciences report entitled Oil in the Seas III found that less than 1% of oil in North American waters is from drilling and extraction, while 63% comes from natural seepage and the remainder from nonpoint sources. Clearly, the offshore oil and gas industry enjoys an enviable environmental record.

A future for offshore oil and gas. Fossil fuels currently provide about 85% of the US energy supply, while alternative energy sources provide less than 10%. These figures are predicted to remain nearly unchanged through 2030. As the US strives toward greater reliance on alternative energy, fossil fuels will serve as bridge fuels to the future.

There may be no easy solutions to the current energy situation, but this much is clear: In order to achieve energy security, America must develop all sensible sources of energy—both traditional and alternative. We know that we can safely explore and develop the nation’s vast offshore oil and gas resources. Our industry is quite capable of accomplishing this task if given the opportunity through expanded access to the offshore areas.

THE AUTHOR
	T. Jay Collins serves as CEO and President of Oceaneering International Inc. and is Chairman of the National Ocean Industries Association. Mr. Collins joined Oceaneering in October 1993, initially serving as Senior Vice President and CFO. He also served as Chairman of the Board, CEO and Acting CFO of Friede Goldman Halter Inc. Mr. Collins started his oilfield career in 1969 with Shell Oil Company. Prior to joining Oceaneering, he held several executive-level positions in operations, finance, and administration with Sonat Inc. and Teleco Oilfield Services. Mr. Collins received his MBA from Harvard Graduate School of Business and both his BA degree and a master’s degree in chemical engineering from Rice University.