It’s interesting what $3-a-gallon gasoline will do to Americans’ views on energy exploration.
In 1990, when President George H.W. Bush issued a presidential directive that prohibited energy exploration off the Atlantic, Pacific and Alaskan coasts and in the eastern Gulf of Mexico, the environmental movement cheered and few objected. We could afford to be magnanimous. Energy prices were a third of their current level, the prospect of finding more seemed open-ended, and China and India were placing little demand on the world market.
In 1998, with little having changed, President Clinton extended the moratorium on exploration in these areas to 2012. Again, with little objection.
Today, the urgency is overwhelming. High energy prices, unstable and/or unfriendly governments in the top oil-producing regions and significant demand from the two most populous countries have Americans taking a second look at those moratoria.
The House of Representatives has made its move with the Deep Ocean Energy Resources, or DOER, Act of 2006. DOER, as currently constructed, wouldn’t repeal the current restrictions. But it would give coastal states that want offshore drilling the power to opt out of them.
The legislation makes permanent the ban on energy production within 50 miles of the coastline unless a state legislature votes to end those restrictions and allow drilling. From 50-100 miles, states would have to affirmatively pass legislation to prohibit drilling. Only beyond 100 miles would states would have no authority to stop drilling.
Under the legislation, states that allowed drilling would share in the royalties collected on oil and gas leases in the new areas opened for exploration. Today, with just the western and central Gulf of Mexico open for drilling, the federal government collects between $4 billion and $8 billion annually in such royalties. Obviously, this number would increase if the rest of the America’s coastal regions were opened for exploration.
Given that it’s been years since estimates were last attempted -- the last oil company lease was abandoned in 1990 -- nobody knows for sure how much energy lies in the areas that the DOER Act would open. But the Department of the Interior, which regulates offshore drilling, suggests that 19 billion barrels of oil and 84 trillion cubic feet of natural gas could be available. Considering we use 7 billion barrels and 23 trillion cubic feet annually, this could be a substantial source of additional supply for decades to come.
And initial estimates often prove considerably low. The Prudhoe Bay field in Alaska, originally projected to produce no more than 9 million barrels, recently sent its 15 billionth barrel south through the Alaska pipeline. The western and central Gulf also already has produced more energy than originally expected.
With all this energy out there, demand at all-time highs and prices remaining high, what has taken so long? The biggest problem has been environmental concerns on the part of Florida lawmakers worried what a spill would do to their tourism industry. But we haven’t had a major oil spill from an offshore well since a 1969 accident near Santa Barbara, Calif. Even the National Academy of Sciences says that “improved production technology and safety training of personnel have dramatically reduced both blowouts and daily operational spills.”
The danger of such spills has been reduced so much that only 1 percent of the oil in North American waters comes from offshore oil wells -- most comes from natural seepage from the sea floor. And during Katrina and Rita, despite winds that reached 170 miles per hour and lashing waves that took out a quarter of America’s domestic energy production, no significant spills were reported.
Opposition from Florida lawmakers appears to be softening. Sen. Mel Martinez, a Republican, is part of a group that has reached a compromise to get an offshore bill onto the Senate floor, although Sen. Bill Nelson, a Democrat, has gone no further than to call the proposal “promising.” Compared to the House bill, the Senate’s approach is narrower, seeking to open one specific energy-rich region in the eastern Gulf. If the Senate passes this measure, the House and Senate would then have to reconcile their respective bills and send the final version to the president.
It’s hard to predict what would emerge from such a process, but anything that gets the ball rolling towards more domestic energy production would be welcome.
America has a problem: high oil and natural gas prices and competition for scarce resources that figures only to grow more intense. Thankfully, it also has something of a solution -- substantial reserves under its control that could be captured with little risk to the environment. It’s time Congress gets serious about bridging the growing gap between supply and demand. And this could be just the way to do that.
Ben Lieberman is senior policy analyst in the Roe Institute for Economic Policy Studies at The Heritage Foundation.