OE Thoughtstream: Stepping towards energy security

Randall Luthi

July 9, 2014

It is the first step in a long process. That is probably the best synopsis of the recent announcement by the Department of Interior’s (DOI) Bureau of Ocean Energy Management (BOEM) requesting information on areas to be included in the next Outer Continental Shelf (OCS) oil and gas leasing program. Known as the five-year program, it derives from the Outer Continental Shelf Lands Act authorizing the DOI (through BOEM) to conduct sales of oil and natural gas leases in federal waters off the US. We are currently in the 2012-2017 five-year program. This call for information starts the information gathering process for the 2017-2022 program.

The recent surge of US energy has occurred largely from onshore oil and natural gas development. Production from the Marcellus Shale in Pennsylvania, Eagle Ford in Texas and, in particular, the Bakken in North Dakota, has propelled the US to be the world’s leader in natural gas.

We may also soon be the leader in oil production, provided US policies don’t end our run before we reach the finish line. That could well happen, because the great oil and natural gas production of the past five years has occurred in spite of federal policies, not because of them. Ninety-six percent of the new production occurred on state and private lands.

While some of that is due to geology, the fact remains that oil and gas companies can only look in areas they are allowed to explore, and federal decisions have greatly limited that target area. For more than 40 years, almost 87% of the OCS has been closed to oil and natural gas exploration. In 2008, the US Congress and the White House allowed nearly all congressional and executive moratoria prohibiting oil and natural gas exploration activities to expire.

The Obama Administration even recommended opening up part of the Atlantic Coast for a lease sale in an early version of the 2012-2017 program. However, post-Macondo, the program was cut back to include only the approximate 13% of the OCS already open.

As a nation, we cannot afford for the upcoming program to suffer a similar fate. However, President Obama’s recent remarks on the energy impact of turmoil in the Middle East indicate he still looks abroad, even when there are tremendous untapped energy resources at home, resources the president is overlooking.

As unrest in Iraq caused oil production to drop, the president called upon Middle East Gulf oil producers to “pick up the slack.” Once again, the US shows our dependency on the Middle Eastern coun- tries. Many of these are not our political allies and wouldn’t hesitate to cut off all oil exports to the US. The president has misdirected his plea. He needs only to clear the way for domestic oil and natural gas producers to increase production by opening up more areas offshore where companies can explore and produce to pick up the slack.

While the US has sat on its offshore assets, other countries have not. The current five-year program that expires in 2017 included no new access, and has put the US far behind many other nations that are actively pursuing offshore oil and natural gas energy development, Brazil, Norway, Russia, Cuba and west African nations are examples of countries moving ahead with Atlantic and Arctic offshore exploration and development plans.

The energy resources on the OCS are vital to our economic prosperity. Allowing oil and natural gas development in the Atlantic could result in as many as 280,000 new jobs; US$24 billion annually to the economy; $51 billion in government revenue; and 1.3MMbbl of oil and natural gas. Frankly, these num- bers likely underestimate the potential.

The DOI’s request for more information is crucial, but still only a first step in truly adopting a holistic energy policy. The over-320-member companies of NOIA look forward to cooperating enthusiastically with stakeholders, including states and consumer groups, and with BOEM to provide information about what areas to include in the 2017-2022 five- year program. NOIA will also continue to work closely with Congress on legislation to identify areas to include in the program that would open up new and vital areas to enhance our enersecurity and reliability.

Randall Luthi became president of the National Ocean Industries Association (NOIA) on 1 March 2010.

Luthi most recently served as the direc- tor of the Minerals Management Service at DOI from 2007-2009, overseeing activities such as offshore lease sales and the collection and distribution of mineral revenues and royalties.

The former Wyoming speaker of the house, Luthi was also the director of a Federal agency, a legislative assistant in the US Senate, and an attorney at both the DOI and the National Oceanic and Atmospheric Administration (NOAA).