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April 28, 2016

The Obama Administration Reneges On Offshore Drilling

  Investor's Business Daily

The Obama administration’s decision to reverse course and withdraw a proposal to allow oil and natural gas drilling off the southeast Atlantic coast is more about the president’s future than the country’s. The decision comes as President Obama tries to “build an ambitious environmental legacy” for himself, as the New York Times describes it.

We’ve seen this story before. Obama is determined to be remembered as the president who passed comprehensive health care reform, no matter how many Americans lose their doctor and coverage and are forced to pay much higher premiums. He is determined to be remembered as the president who signed a deal with Iran, no matter how many times that country publicly and flagrantly violates the agreement. And he is the president who wants to be remembered as a green warrior, no matter how that action affects U.S. security and energy independence, the trade deficit, and the loss of high-paying jobs.

In January 2015, the Obama administration released a “Draft Proposed Program” (DPP)  for expanding offshore oil and natural gas drilling leases in Alaska, the Gulf of Mexico and in the mid- and south Atlantic. Of course, environmentalists were outraged.

But now, a year later, the Bureau of Ocean Energy Management (BOEM) has apparently changed its mind: “After a robust public comment process, the Mid- and South Atlantic Program Area lease sale proposed for 2021 in the DPP has been removed from the Proposed Program for a number of reasons, including strong local opposition, conflicts with other ocean uses, and current market dynamics.”

The BOEM did receive complaints from some coastal communities concerned that a Deepwater Horizon-type oil spill might affect their coasts and economies. But many prominent elected officials from all four of the affected states — Virginia, North Carolina, South Carolina and Georgia — also supported the plan because the drilling would provide jobs and royalties for their states.

The fact is that large spills are extremely rare, and the industry has since adopted numerous additional safeguards. Plus the proposed Atlantic drilling area has a minimum 50-mile buffer zone from the coast — Deepwater was about 40 miles out.

The BOEM also mentions commercial and military “conflicts.” But commercial and military interests are also present in the Gulf of Mexico, and energy companies have been drilling there for decades. Yet BOEM is willing to expand leases there. Given that the Atlantic rigs would be scattered over more than 100 million acres of open water, and the Department of Defense’s limited objections, it’s hard to see why a workable compromise couldn’t be reached — just use the Gulf as a model.

Finally, the agency’s comment about “market dynamics” refers to the current global oil glut that has depressed oil and natural gas prices and resulted in many U.S. energy companies scaling back capital spending. Given that offshore drilling usually costs more and involves significantly longer lead times than onshore plays, companies may not be rushing to add to the glut — at least immediately.

But the BOEM’s time frame for a lease sale was not until 2021. A lot can change in the energy markets and the global economy between now and then. Offshore rigs don’t appear on location overnight. It can take years, not to mention billions of dollars, for energy companies to go from signing a lease to full production in the off-shore arena.

Energy prices are cyclical, and in a few years oil may be approaching $100 a barrel again. Plus the U.S. has begun exporting both oil and natural gas to other countries. If those exports expand quickly — especially since many countries dependent on Russian natural gas would prefer ours — companies could soon be scrambling to produce more. Those exports would help lower the trade deficit and create greater energy security for the U.S. and our allies.

In short, the Obama administration’s reasons for reneging on is initial proposal are weak and politically suspect, just as the president’s decision to reject the Keystone XL pipeline. In that case, the State Department, which had to assess any potential environmental impact, green-lighted the Canada-to-Nebraska pipeline — more than once. Yet Obama rejected it, too, a decision that cost thousands of high-paying mostly blue-collar jobs.

The Obama administration’s reversal from its original lease proposal was another disappointment from a president who has had a long string of policy disappointments. Like his health care and Iranian nuclear legacies, the president wants a green legacy, and he’s willing to make the country pay any price to get it.


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