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Op-eds & Essays by Jason Bordoff • January 11, 2018
This article was originally published on TheHill.com.
The Trump administration’s decision this week to drop Florida from its offshore leasing plan was quickly derided by many as a politically expedient giveaway to the state’s Republican Gov. Rick Scott.
Environmentalists and lawmakers in both parties took to social media to remind the administration that many other states also oppose the plan to open nearly all offshore waters to leasing. However, the exemption granted to Florida should provide a critical reminder that the plan may not necessarily portend a future in which energy companies are drilling and producing energy in all these waters.
Before the government can lease any offshore areas for development, the Department of Interior must go through a three-step planning process that takes around 18 months to complete.
The process typically considers a wider set of options and narrows them over time in response to public input. The Trump administration’s announcement last week was just step No. 1 in this process. It essentially put everything on the table for consideration — opening up more than 90 percent of U.S. waters in the Atlantic, Pacific, Gulf of Mexico, and off Alaska.
This scope is far beyond what prior administrations, both Democrats and Republicans, have even considered opening up. But the final plan is likely to be far narrower, as there are many hurdles that still must be overcome.
First, even if offshore areas are made available for leasing, the energy sector may not be interested in all the acreage. While industry associations praised Trump’s announcement, the major oil and gas companies were more muted.
Shell’s experience in the Alaskan Arctic recently is a reminder of how costly and challenging some offshore areas can be. Other areas, like the Atlantic, may be of interest, but much remains unknown about the resources and economics of the region.
Ironically, the most commercially attractive “new” area for oil companies was the Eastern Gulf of Mexico off of Florida — which the administration just appears to have ruled out to appease Scott.
Oil companies may also be skittish to invest in higher cost offshore projects having faced a tough low oil prices environment for much of the last three and a half years that forced difficult investment decisions. Moreover, the shale revolution has created very large and economically attractive investment opportunities onshore, with less capital, environmental and reputational risk.
Second, political opposition is not limited to Scott. When the Obama administration considered potential leasing in the Atlantic, it was met with a groundswell of opposition from state and local governments both Republican and Democratic, environmental groups, and interests ranging from tourism, commercial and recreational fishing, and shipping.
Immediately after Trump’s plan was announced, outcry on both coasts was even louder. The Trump administration was already facing political pushback due to its efforts to scale back certain reforms and drilling safety standards implemented following the 2010 oil spill in the Gulf of Mexico.
Third, there’s no way that Interior could pull off the proposed 47 offshore oil and gas lease sales in a five-year period, especially because many of those sales would be in areas that have not been leased in decades — or ever. Interior currently conducts two or three offshore sales annually, and would be hard-pressed to pull off three times that many or more in a way that could withstand legal scrutiny.
Fourth, even if Interior were able to conduct this many lease sales, they would inevitably face legal challenges. Interior must conduct a thorough environmental review prior to each lease sale, and those are subject to litigation, and may be especially vulnerable in new areas or if the exceptionally demanding schedule leads to less thorough reviews.
Finally, if a Democrat were to win the presidency in 2020, leasing in the more controversial areas outside the Gulf of Mexico would likely be scrapped and the whole planning exercise would need to be started again from scratch.
This is not to say the Trump administration’s proposal is not consequential. In the end, it will still result in the opening of new areas to leasing, most likely portions of the Alaskan Arctic and of the Atlantic. Moreover, from industry’s standpoint, even if there is little commercial interest today, a more permissive leasing program creates the optionality to bid on offshore areas if market conditions and higher prices justify it in the future.
Perhaps the biggest lesson from Florida’s fast — and effective — outcry against opening up its waters for leases to the oil and gas sector will be that translating the Trump administration’s intentions into massive new offshore oil and gas production may prove more difficult than it expected.
Jason Bordoff, a former special assistant to President Obama, is a professor of professional practice in international and public affairs and founding director of the Center on Global Energy Policy at Columbia University. Follow him on Twitter @JasonBordoff.
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Op-eds & Essays by Jason Bordoff • January 11, 2018