Was the government shutdown key to breaking Washington’s worst stalemate?

DICK ALARIO, Chairman, President and CEO, Key Energy Services; and Chairman, National Ocean Industries Association (NOIA)

American energy entered a renaissance in 2013 that could change the economic direction of the U.S. for generations. For the first time since former President Richard Nixon and his successors vowed to achieve American energy independence, the U.S. is on the verge of that milestone. Our industry has provided the backbone for a steadily recovering economy that has stabilized growth and provided much needed energy resources. 

To a large degree, our success has been in spite of, not because of, federal policies.  This year saw increasing polarization in Washington, D.C., culminating in a federal government shutdown and the still-looming threat of defaulting on national debt payments. From these crises sprouted a bi-partisan compromise, showing that Congress and the White House can work together (on some issues). 

Will 2014 bring more agreements or more knock-down, drag-out battles?  My hope is that the shutdown in October was the tipping point of a new conversation that breaks through the partisanship gridlocking D.C., and results in the implementation of sound energy policies in 2014. While the shutdown didn’t shutter offshore permitting entirely, had it continued, there is no question that production on federal lands would have been hurt.  While nearly all reports predict that Congress and the White House will not endure another shutdown in 2014, there are some lingering effects on the offshore arena.

Administration actions. Citing the shutdown, the Bureau of Safety and Environmental Enforcement (BSEE) has delayed new requirements for blowout preventers, as well as vital new standards for oil and gas activity in U.S. Arctic waters. These regulations will bring needed clarity to offshore operators, but now they won’t be unveiled until sometime in 2014. To the average layperson, such delays seem harmless, but for companies with literally hundreds of thousands of dollars on the line EVERY DAY, that adds up to a real economic disincentive to work in the U.S.

Other delays were granted at the behest of industry, itself, to ensure that the most relevant, scientifically proven information is brought to bear, as was the case with BSEE’s proposed offshore production safety systems rule and the U.S. Coast Guard’s proposed Safety and Environmental Management Systems regulations for vessels. The proposed vessel-specific SEMS regulations come on the heels of final SEMS regulations from BSSE.

Of course, there are groups that seek to shut down the process entirely with endless delays; environmental organizations have launched targeted attacks on seismic surveys.  The administration has long held a position that new OCS access hinges on science-based decisions as to where resources lie.  Among the first steps toward making a science-based decision are seismic surveys. Yet, DOI’s Programmatic Environmental Impact Statement (PEIS) on Atlantic seismic activities has been delayed multiple times. Held up since fall 2012, DOI now says that due in part to the government shutdown, the PEIS on Atlantic seismic may not be released until February 2014, followed by a Record of Decision in March 2014. The decision on Atlantic seismic activities is critical, since DOI is expected to begin work on the 2017-2022 leasing plan in 2014. Secretary of the Interior Sally Jewell has made it clear that the decision to include new areas will hinge upon known resource potential. Continued EIS delays could result in the Atlantic being left out of the planning process, future lease sales, and the continued energy boom.

This PEIS decision is not without controversy. Will the administration and Washington listen to unfounded claims by environmental groups that seismic studies harm marine mammals and wildlife? Or will they listen to the facts? A report by the National Academy of Sciences’ National Research Council stated that “No scientific studies have conclusively demonstrated a link between exposure to sound and adverse effects on a marine mammal population.” The decision, if based on science, would allow for seismic surveys in the Atlantic and the opportunity for oil and gas exploration in an area with proven reserves.

Turning to Congress, there is a glimmer of hope for bipartisan agreement on energy. The Senate and the House passed similar versions of the U.S.-Mexico Transboundary Agreement, opening over 1.5 million acres in the Gulf of Mexico for E&P, and allowing for U.S. companies to work with Pemex. The House also passed a bill providing sales in the Atlantic, Eastern Gulf of Mexico, Pacific and offshore Alaska.  The Senate has not been cooperative to date, but there is hope. Senators Mary Landrieu (Dem. – La.) and Lisa Murkowski (Rep. – Alaska) introduced a revenue sharing bill, which would increase the amount of revenue received by coastal states. It holds the possibility of being amended to open up more areas offshore. 

The continued economic prosperity of this country hinges on Washington’s ability to put aside partisan politics and implement a united American energy policy is based on the science of where the resources actually are, and which empowers our country in an ever-growing, competitive global market. The next 100 years will see countries that have affordable energy, and aggressive energy policies, prosper.

America is fortunate that our private and state lands helped produce the energy that, in large part, pulled this country out of one of the worst recessions since the Great Depression. Our offshore federal lands hold even more potential, if only we had the right policies in place.  As we lock up over 85% of our outer continental shelf (OCS) to offshore energy development, emerging countries, such as Brazil, or even old stalwarts like Russia, understand the promise of offshore energy, and they will go to the ends of the seas to pursue it. A nonpartisan solution, based on science and economics, is the key to unlocking the OCS. The next 100 years of economic prosperity, not just for Republicans or Democrats, but America as a whole, are at stake.