So We’re Drilling This Baby, Then?

Daniel Foster at The Corner:

The Obama administration will today propose ending a moratorium on new offshore drilling in the United States. The administration’s plan would open up large swaths of the Arctic Ocean — totaling some 130 million acres — to new drilling.

It would also open a massive segment of the eastern seaboard south of New Jersey, along with the Gulf of Mexico region, to exploration.

Drilling would still be restricted around military installations in Virginia and Florida, as well as in the commercial fishing waters of Bristol Bay in southwestern Alaska.

Marc Ambinder:

For a Democratic president, this is a pretty gutsy move to open the public debate about an energy bill. Or, well, maybe it’s not: it’s high-reward, low-risk; environmentalists will complain, but then again, environmentalists complain.  Aside from the substance, which is beyond our ken, the politics of this move is easy: with one fell swoop, Obama deprives Republicans of the major talking point they’d use to object to more expansive government-based climate remediation and energy prospecting policy.

Republicans will quibble over details: why is he not opening up more places? Why is he excluding Bristol Bay? Why is he excluding parts of the Gulf of Mexico? His steps are too slow, too limited…

The Republicans sort of have a point, although it’s not the point they’re comfortable with: estimates of how much oil can be extracted are very old — decades old — and, as the New York Times notes, “[i]n many of the newly opened areas, drilling would begin only after the completion of geologic studies, environmental impact statements, court challenges and public lease sales. Much of the oil and gas may not be recoverable at current prices and may be prohibitively expensive even if oil prices spike as they did in the summer of 2008.”

To which the White House responds by pointing to the headlines: “Obama to Open Offshore Areas to Oil Drilling for First Time.”  Grist, the environmentalist news website, considers the move a “stunning concession to fossil fuel companies.” It shows that the president has a sense of urgency about energy and the environment, etc.

Jonathan Hiskes at Grist:

This is … stunning. Baffling. With the new policy Obama appears to be taking a major step toward siding with carbon-polluting industries in the battle to defend the energy status quo.

I’m holding out hope that things appear worse than they are. Because the key isn’t how much offshore drilling is allowed. The crucial issue is whether oil and gas companies decide it’s worth their money to go out, find, and retreive the stuff. And things could be brighter on that front, because, as Joe Romm explains, the payoff in these reserves may not be worth the trouble. (Nobody knows precisely how much oil and gas are in these places.) GOP politicians like John McCain and Sarah Palin have used offshore drilling as a rallying cry, but energy companies need to keep clear heads, crunch the numbers, and decide if a given project pays.

Michelle Malkin:

If this were a sincere change of heart and an honest, stand-alone effort to wean America off foreign oil, it would be worth heralding.

But as always with this administration, there’s a catch, via the American Energy Alliance:

“One major flashpoint in the negotiations has been whether to share drilling revenue with states and to allow states to opt in or out of drilling along their coastlines. It was unclear late Tuesday whether Obama endorses revenue-sharing for states. “It appears the Northern Atlantic and entire Pacific Coast will now be under a de facto ban” for drilling, said Patrick Creighton, a spokesman for the Institute for Energy Research. Even if drilling is ultimately allowed in part of the Atlantic, Creighton said, revenue sharing is an essential incentive for states. The administration’s plans could meet resistance from at least 10 Senate Democrats representing coastal and Great Lakes states who last week raised concerns about “unfettered access to oil and gas drilling” that could jeopardize fishing, tourism and military exercises. The Interior Department retooled the current schedule of offshore leases governing 2007 through 2012 after a federal appeals court last April ruled that the second Bush administration had not done a sufficient environmental review of expanded drilling off the Alaskan coast.

GOP Rep. Mike Pence adds:

“As usual the devil is in the details. Only in Washington, D.C., can you ban more areas to oil and gas exploration than you open up, delay the date of your new leases and claim you’re going to increase production.

“The President’s announcement today is a smokescreen. It will almost certainly delay any new offshore exploration until at least 2012 and include only a fraction of the offshore resources that the previous Administration included in its plan.

“Unfortunately, this is yet another feeble attempt to gain votes for the President’s national energy tax bill that is languishing in the Senate. At the end of the day this Administration’s energy plan is simple: increase the cost of energy on every family in America and trade American jobs oversees at a time when millions of Americans are looking for work.”

Vladimir at Redstate:

But don’t mistake oil and gas leasing as a green light for an oil operator to “Drill. Baby, Drill”. An oil and gas lease is full of all kinds of “subject-tos”. Most significantly, an operator’s ability to drill and explore a lease is subject to his ability to secure the requisite approval from the various government agencies that issue permits for that activity.

So, theoretically, the Feds could issue a lease, but if one of the regulatory bodies refuses to issue a permit, there’s no drilling.

But that would never happen, would it?

Well, it did, less than two weeks ago.

Montana oil leases suspended

BILLINGS – A federal judge has approved a first-of-its-kind settlement requiring the government to suspend 38,000 acres of oil and gas leases in Montana so it can gauge how oil field activities contribute to climate change. …

[Note: These are leases that have already been sold by the BLM. Operators have put up their money but have done no drilling pending resolution of this case. - ed.]

Under the deal approved Thursday by U.S. District Judge Donald Molloy in Missoula, the Bureau of Land Management will suspend the 61 leases in Montana within 90 days. They will have to go through a new round of environmental reviews before the suspensions can be lifted.

“We view this as a very big deal, if a modest first step, in the BLM addressing climate change in oil and gas development,” said plaintiffs’ attorney Erik Schlenker-Goodrich. “It’s quite a dirty process, but there are ways to clean it up.” …

A parallel lawsuit challenging 70,000 acres of federal lands leased in New Mexico remains pending.

A BLM spokesman, Greg Albright, said reviewing lease sales for climate change would be a first for the agency. How it will be done was still being worked out, and it was unclear if the BLM would adopt such reviews as a standard requirement.

[emphasis added]

Bear in mind that these two cases represent 108,000 widely dispersed acres in areas that have been under oil and gas development for decades. These permits are make-work for the bureaucrats and their consultants and allow the environmental “stakeholders” to drag out developemnt and make it easier for the interested operator to pull up stakes and go elsewhere.

If it’s this easy in Montana and New Mexico, offshore areas will be a piece of cake.

Kevin Drum:

I guess this makes me a bad environmentalist, but I’ve never really had a big problem with opening up these offshore tracts as long as (a) the affected states are OK with it and (b) oil companies don’t get sweetheart deals. But here’s what I don’t get. When it comes to energy, conservatives are crazy about two things: nuclear power and offshore drilling. Now Obama has agreed to both. But does he seriously think this will “help win political support for comprehensive energy and climate legislation”? Wouldn’t he be better off holding this stuff in reserve and negotiating it away in return for actual support, not just hoped-for support? What am I missing here?

Ed Morrissey:

Obama could see this concession to conservative and industry pressure as a means to have them relax their opposition to cap-and-trade.  However, that bill will have devastating effects on the energy sector, and trading off for domestic resources isn’t going to be a good deal for them in any case.  The effort to produce that raw material will cost billions, and if Obama and Congress impose a cap-and-trade system on energy production, it will be a money loser for them in the long run.  In fact, cap-and-trade is specifically designed to make carbon-based energy production a red-ink affair in order to force industry towards so-called “green” energy alternatives, even if those alternatives can’t possibly keep up with our energy needs.

A trade-off seems unlikely.  It seems much more likely that Obama has realized that without cheap and plentiful energy, the American economy is not going to get off the floor and start expanding.  That would explain his recent push for nuclear power stations, a welcome change in attitude, as well.  Freeing up the coastlines for oil and gas production will add close to a million jobs, most of them high-paying union positions, in the first couple of years of expansion, which will be appealing to an administration that has proven itself inept at job creation.

Zaid Jilani at Think Progress:

During an appearance on MSNBC’s Morning Joe, former Bush official Dan Bartlett said that the move is unlikely to get any Republican votes for an energy bill. While saying that he thinks it is a “shrewd move” that will “demonstrate…that the Democratic Party doesn’t just cater to the extreme aspects of their base,” Bartlett conceded that it will likely not win any Republican votes because “Republicans have made a calculation that cooperating with this administration at this time is not necessary for them to pick up seats“:

BARTLETT: This is a shrewd move by the White House this announcment they’re doing on energy and offshore oil drilling. … These are the things they need to demonstrate to their constituents that the Democratic Party does not just cater to the extreme aspects of their base … Now, do I think that this measure here will help grease the path for a climate change bill and bring Republicans on board? No. Republicans in the Congress have made a calculation that cooperating with this administration at this time is not necessary for them to pick up seats. So if this is more of a legislative maneuever in order to get a broader bill on climate change, unfortunately this is going to come up short.

Brad Plumer at TNR:

Back in 2008—during peak “drill baby drill” season—Congress let the federal moratorium on offshore drilling expire. Now this move pushes drilling slightly closer to reality. So what’s Obama thinking here? One possibility is that he’s looking ahead to the climate-bill debate in the Senate. A number of conservative Democrats and even some Republicans like Lisa Murkowski have said that new drilling has to be a key part of any big energy legislation that tackles carbon emissions. (A separate bloc of coastal Democrats, meanwhile, has warned that drilling would be a dealbreaker for them.)

Still, it seems bizarre to fork over this bargaining chip before the bill is even released. What kind of negotiating tactic is that? Especially since this move is going to infuriate environmentalists—the folks you want pushing for your climate bill. Note that the administration did the same thing with nuclear power, another item that could lure swing senators. Back in January, the White House proposed a massive expansion of the nuclear loan guarantee program without getting anything tangible in return from pro-nuke Republicans. John McCain still wanders around complaining that the administration’s not “serious” about nukes. Now, maybe that’s the point—offer an olive branch and watch Republicans swat it down and look unreasonable. Right on cue, John Boehner’s already whining about Obama’s drilling plan. Not sure that strategy makes sense, though.

Another possibility, meanwhile, is that this move isn’t focused on the climate-bill debate and is geared more toward public opinion. According to the EIA, gas prices are expected to go up quite a bit this summer (probably shooting north of $3/gallon), and the administration may want to step out ahead of the inevitable teeth-gnashing and garment-rending over the issue. So this could be more about the midterms than rounding up votes in the Senate. Though, granted, this drilling announcement won’t affect summer gas prices in the slightest.

And that leads to the separate question of how much oil will ever come out of these areas. After all, it’s not like companies can just start drilling tomorrow. As The New York Times reports: “In many of the newly opened areas, drilling would begin only after the completion of geologic studies, environmental impact statements, court challenges and public lease sales. Much of the oil and gas may not be recoverable at current prices and may be prohibitively expensive even if oil prices spike as they did in the summer of 2008.”

About these ads

1 Comment

Filed under Energy, Environment, Political Figures

One response to “So We’re Drilling This Baby, Then?

  1. I haven’t seen anywhere in the comments someone addressing Obama’s comments about drilling not helping us in the short term. I know for a fact, you can have a well producing long before a nuclear power plant can be built. Land based drilling can be completed in under 30 days with tanks in place for production. Off shore should be about the same once the rig was in place. Pipeline a somewhat longer, but still pretty quick.

    Environmental concerns? I don’t know what they are. Some the best fishing I have found is around production platforms. Modern drilling and production platforms are very clean operations. There is always the possibility something could go wrong, but that would be a rare event with the newer technology.

    I was raised in the oil patch, way back when in the dirty days. Things are much better today and faster. Cost to punch a hole wet or dry on land based rig is somewhere in the neighborhood of a million per hole. When you risk that kind of capital, you do want to make a profit.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s