President Bush’s proposal Wednesday to end decades-long bans on offshore oil and gas drilling may be a cynical political ploy, but he opens a useful debate. What trade-offs are there between the environment and energy production? Should we change policies made when energy prices were lower?
At present, we have a lopsided policy based largely on precedent. We allow substantial new drilling in waters off two states — Texas and Louisiana — that long have been the center of the U.S. oil industry. There also is minor production from existing wells elsewhere, largely California, where wells drilled before 1981 still produce enough oil each year to cover two days of our national consumption.
We don’t allow new offshore drilling in nearly any other area, even where the geology and drilling conditions are similar to places where it is allowed.
Two separate measures limit new offshore drilling. One law, passed by Congress in 1981, prohibited states from allowing drilling off the Atlantic and Pacific coasts and along much of the Gulf of Mexico. The second is an executive order issued by President George H.W. Bush in 1990. Neither caused any great stir at the time it was enacted. The oil industry objected, but the moves met with approval from the general public, particularly those living near the coasts.
According to geologists, there is considerable oil in coastal areas where drilling is banned. The figure often cited is 18 billion barrels overall, with some 7 billion to 10 billion off the coast of California. The Atlantic coast has little oil but large quantities of natural gas.
The amount off California, where the first offshore well was drilled in 1897, is about the same as the Alaskan National Wildlife Refuge that is the center of much controversy.
Opinion varies on how important such quantities are compared to overall national consumption. Those like Bush who see the barrel as at least half full, argue that the quantity available from the Outer Continental Shelf roughly equals 10 years of existing U.S. domestic production.
Those who see the barrel as half empty note that this amounts to less than three years of U.S. consumption. Moreover, they argue, that despite the president’s assertion that “there is no excuse for delay” and that “families across the country are looking to Washington for a response,” developing new offshore oil fields would take decades and do little to alleviate current high gas prices.
The bans on offshore drilling stemmed in great part from bitter experience. In particular, a 1969 blowout on a rig near Santa Barbara, Calif., contaminated over 30 miles of coastline. And, historically at least, Gulf drilling caused spills and other environmental damage.
Drilling proponents argue that much has changed in 40 years. New technology and more careful practice have greatly reduced the potential for spills. Such spills off Texas and Louisiana have dropped dramatically. That area of the Gulf remains an important seafood production area. Farm runoff into the Mississippi that causes an offshore “dead zone” in the Gulf is a greater threat to the environment than new drilling, they say.
Coastal property owners generally are adamantly opposed to drilling, and, as population density increases in places like coastal Florida and California, both the value of property at risk and anti-drilling political sentiment rise.
Indeed, the president’s brother Jeb was a vocal opponent of increased drilling while governor of Florida. Critics note that the president voiced no support for offshore drilling when it still mattered to his sibling. They also note that he could rescind his father’s executive order himself, rather than asking Congress to act. If he rescinded the order, the spotlight would be on him, they argue. Asking Congress to act passes the hot potato to them; if Congress fails to act, that gives fellow Republican John McCain a convenient campaign weapon.
Environmentalists emphasize the harm to wildlife and formerly pristine scenery caused by the greatly increased natural gas drilling taking place in Wyoming, Colorado, and other western states since Bush took office, holding it up as an example of problems that result from looser regulation.
Others interpret this differently. There has been a sharp increase in gas drilling on federal and private land since 2001. But no highly publicized spills or other dramatic damage has occurred. Increased gas drilling is a non-issue for most citizens.
Economists can say a few things about the issue. It does not make economic sense to have an absolute ban in most areas while we have federal programs that encourage drilling in others. Offshore drilling can engender substantial external costs, but so can onshore drilling. If fuel shortages really are a national problem, it makes little sense to implement policies to increase supply while refusing to consider measures that would decrease demand.
However, this is not an issue that will be settled by economic arguments. Pro-drilling and anti-drilling groups have their own minds made up. Whoever is most successful at convincing the swing voters in the middle will carry the day.
© 2008 Edward Lotterman
Chanarambie Consulting, Inc.