GUEST COLUMN OPINION

Open up the US Outer Continental Shelf now!

Whether offshore Alaska or Florida, or off the East or West Coast, the timing, technology and need are aligned to make drilling in these areas a reality.  

Katie L. Benko, US Interior Department, Bureau of Reclamation 

When the global economy revives, demand for oil and gas will return with a vengeance. The trouble is, while there are ample global supplies, the industry will be hard pressed to bring them into production to keep pace with resurgent demand. The result could well be another oil shock, as Cambridge Energy Research Associates demonstrates in an important study released in March that says almost 8 million bopd are at risk of being deferred or cancelled due to reduced investment and low oil prices.

This means the US industry must act now to prepare for future demand; opening up new areas of the US Outer Continental Shelf (OCS) is critical to meeting that demand. It is also critical to strengthening energy security, reducing oil imports and meeting the global energy challenge.

Government estimates show the enormity of what lies offshore: nearly 100 billion bbl of oil and more than 460 Tcf of gas, enough to heat 100 million homes for 60 years and power 85 million cars for 35 years.

For decades, 85% of the US OCS has been off limits to exploration and production. The moratorium ended last summer, but in Washington the debate continues. This is not responsible government. The economic and security costs are simply too high to justify more debate. US oil imports cost more than $600 billion last year and account for almost two-thirds of the nation’s consumption, exceeding 10 million bopd. The environmental risks posed by E&P, though often cited by opponents, are low. Offshore production technology, science and safety have improved dramatically in recent decades.

How, then, can Washington policymakers reasonably contemplate restricting access to resources that can help address US economic and energy security challenges?

Economic benefits and environmental security. The economic benefits of new oil and gas production should be a beacon in the global recession. Producing more US energy resources on the Outer Continental Shelf will:

• Create jobs and fuel economic recovery
• Keep investment at home, rather than exporting trillions of dollars to pay for imported oil
• Increase North American energy security
• Generate significant new revenue streams for federal, state and local governments.

Shell believes that addressing the energy challenge head-on can help the nation recover from the financial crisis. The US oil and gas industry directly employs about two million people at an average salary of $93,000 per year (about twice the national norm) and generates an additional four million jobs related to oil and gas activities. Access to more domestic resources will bolster the federal treasury and help with US balance of payments—a classic win-win proposition.

Money from the OCS leasing program, now restricted to parts of the Gulf of Mexico and Alaska, is the second largest federal revenue source. The Minerals Management Service (MMS) collected and distributed a record $23.4 billion to state, American Indian and federal accounts from onshore and offshore energy production in 2008. Development of oil and natural gas resources that have been kept off limits (both offshore and onshore) could put more than $1.7 trillion in government coffers.

These benefits will not come at the expense of the environment. The industry’s record for responsible drilling and production offshore is excellent. For instance, Shell has had no significant offshore well blowouts in more than 30 years or significant platform spills in more than 25 years.

OCS experience in the Gulf and Alaska. Shell has been exploring the Gulf of Mexico safely and efficiently for decades. It has developed a host of new technologies that have enabled it to find and produce oil and gas in waters approaching 10,000 ft, and at ever-greater depths below the seafloor. Advances in subsea technology allow us production of more oil and gas from fields scattered over wider areas through tiebacks to a single platform. This cuts the environmental footprint dramatically.

The federal waters off Alaska hold enormous resource potential—an estimated 25 billion bbl of oil and 122 Tcf of gas. Shell paid the federal treasury more than $2 billion for leases to secure the right to explore for some of those resources. The company has 434 leases in the Beaufort and Chukchi Seas and has invested heavily in equipment, support vessels, baseline studies and workforce training. It developed, staffed and equipped what is arguably the most environmentally sensitive and thoroughly responsible exploration plan in history.

Despite this massive investment and years of effort, Shell has yet to drill a single exploration well. There are many lawsuits challenging federal government actions in the Alaska OCS. In 2007, the US Ninth Circuit Court of Appeals issued an injunction against the MMS permit approving Shell’s plan for exploration. This blocked all exploratory drilling during Alaska’s ice-shortened offshore seasons in 2007 and again in 2008. After nearly 16 months delay, in November 2008, the court ordered MMS to vacate its approval of our Beaufort Sea Plan of Exploration, pending further environmental study. The court later vacated its own ruling and is back in deliberations.

Until government finds a way to strengthen our regulatory and legal processes, offshore production opponents will continue using the courts to delay vital projects. Washington must address this de facto moratorium of the Alaska OCS. Leasing, exploration and production lead times are too long. Clearly, we must act now.

What we need going forward. For too long, OCS debate has been framed as an “either-or” and “us-against-them” proposition. It is not a tradeoff of energy and economic value vs. the environment. This stalemate has gotten us no closer to energy security.

Shell is ready to work with Congress and the regulatory agencies to enable proper exploration and development in the Outer Continental Shelf, including issues involving marine sanctuaries and no-go areas, ecosystem-based management, states’ rights and revenue sharing. Providing revenue sharing to states and local communities with future oil and gas production off their coasts would bring new money into the federal treasury by providing an incentive for states and local communities to support such activities.

Americans have heard a great deal lately about public stimulus dollars needed to fund jobs to build roads and bridges. That work and those jobs are important, but we need to also talk about jobs that can be created by opening up the offshore. These are good paying, long-term jobs—the kind that build careers and can last for generations.

They don’t require stimulus money. Just regulatory certainty and government will.