Obama Nixes Drilling Off the Atlantic Coast for 5 Years

Last year the Obama administration announced that offshore drilling along the southeast Atlantic coast was on the table, but yesterday the Interior Department reversed course. In a statement issued on Tuesday, Secretary of the Interior Sally Jewel and Abigail Ross Hopper, director of the Bureau of Ocean Energy Management (BOEM), announced that sites off the coasts of Virginia, North Carolina, South Carolina and Georgia would not be included in the BOEM’s outer continental shelf (OCS) oil and gas leasing program.

After what the Department of the Interior described as a lengthy public comment period, Secretary Jewel said that several reasons were behind the Obama administration’s policy shift. In an interview with the Washington Post, a spokesman from the Pentagon said military officials had reviewed the Interior Department’s assessment of offshore regions ripe for oil exploration — and revealed that they were integral to live training exercises and systems testing activities that are important to the U.S. military’s readiness. Local opposition, even in South Carolina, one of the most politically conservative states in the U.S., was another factor.

Limited infrastructure and current market dynamics within the global oil market were also behind the decision to delay any Atlantic coast offshore drilling until at least 2022. Depending on the amount of investment, offshore oil drilling has a long payback period. Chevron’s Jack/St. Malo offshore oil project 280 miles south of Louisiana, for example, was planned with the expectations that it would generate 100 million barrels of oil at $100 a barrel to pay off its $8 billion price tag plus operating expenses. As Forbes has noted, when oil fell to $68 per barrel in late 2014, the company needed to pump another 50 million barrels to cover its costs. With the price of oil now hovering between $30 and $40 a barrel, that payback period has been drawn out another few years. Depending on the water’s depth at which oil is drilled, the break-even price for offshore oil projects runs anywhere from $60 to $80 per barrel.

Most environmental groups welcomed the administration's decision, but overall their support was tepid. “What’s needed now is for the administration to finish the job of protecting essential American waters and all they support by keeping oil and gas rigs out of Atlantic and Arctic waters  —  permanently,” said Rhea Suh, president of the Natural Resources Defense Council (NRDC), in an emailed statement to TriplePundit. “That’s what it will take to safeguard both of these oceans and to defend future generations from the growing dangers of climate change. We can’t afford to lock our children into decades more of carbon pollution from burning these dirty fuels.”

Other activists were quick to point out that the Department of Interior has approved oil and gas lease bids for 10 potential sites in the Gulf of Mexico, and another three in the Alaskan Arctic. “President Obama has spared the people of the Atlantic coast from another oil catastrophe, but in allowing new drilling in the Gulf and Arctic, he’s keeping all of us on course for climate catastrophe,” said Elijah Zarlin of Credo, a wireless telecommunications firm that has donated a portion of its revenues to environmental causes since the mid-1980s. “Any new offshore drilling is incompatible with a stable future and it is incompatible with the commitments that President Obama has made.”

The energy industry was largely unhappy with this announcement and portrayed President Obama as a one-man economic wrecking ball. The American Petroleum Institute, the largest trade group representing the U.S. oil and gas sector, slammed the Department of the Interior’s decision as one that “appeases extremists,” and called the announcement a mistaken one as “this is not how you harness America’s economic and diplomatic potential.” The U.S. Chamber of Commerce’s Institute for 21st Century Energy also lashed out, issuing a statement that pegged the Obama administration’s drilling plan as “catering to fringe constituencies at the expense of energy security and the American economy.”

Correlation does not necessarily mean causation, but U.S. production of crude oil has skyrocketed during the Obama administration. When Bill Clinton was president, domestic oil production ranged from 5.8 million to 6.8 million barrels per day. Those numbers were generally in decline, and they continued to drop while George W. Bush was president, falling to a low of 5 million barrels a day in 2008. Since then the rate of domestic oil production has leapfrogged rapidly — last year the daily average crude oil production was 9.4 million barrels, almost double Bush’s last year in office.

Meanwhile, renewables such as solar and wind power, the oil and gas industry’s kryptonite, have also been on the upswing since 2009. About 10 percent of the country’s power is now generated from clean energy. And oil will hardly go away anytime soon, due to American’s affinity for driving and the country’s reliance on trucking to move goods across the country. As the cliché goes, if a politician is angering everyone across the political spectrum, he or she must be doing something right.

One could certainly say this applies to President Obama with yesterday’s announcement and his energy policy since he took office in 2009.

Image credit: Leon Kaye