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Govs. Haley, McDonnell & McCrory Urge Drilling the Atlantic Offshore

Radical environmentalists whould not be allowed near sharp objects or energy policy debates.

Sally Jewell is CEO of REI, Inc.*, and President Obama’s choice to replace outgoing Interior Secretary Ken Salazar. In anticipation of Senate confirmation hearings, the Republican governors of three coastal Atlantic states have written a letter to Ms. Jewell to urge her support of oil and gas exploration on the Outer Continental Shelf (OCS) adjoining their states.

The letter is signed by Governors Nikki Haley of South Carolina, Bob McDonnell of Virginia and of Pat McCrory of North Carolina.

Haley appeals to Obama’s interior pick to open offshore oil, gas exploration

In a letter to Sally Jewel [sic], the governors enlisted her support of their quest to “prudently take advantage of abundant off-shore resources.” They said energy production from the Atlantic’s outer continental shelf would create 140,000 jobs within the next 20 years.

“During your nomination hearings, we will be listening intently to your answers regarding energy exploration off the coasts of our states and hope you will signal your willingness to revise the administration’s current policy to one that is committed to safely harnessing our coast’s vast natural resources,” the governors wrote.

Before the BP spill, plans were in place to offer leases in the relatively small area offshore Virginia. The regulatory overreaction to the spill changed that. There are no Atlantic leasing plans in the current Five-Year Plan (2012-17), but the Administration dipped its toe in the water with a tentative proposal for seismic data acquisition.

However, the Interior Department’s Bureau of Ocean Energy Management is on track to unveil a final environmental study of possible seismic research program from Delaware to Florida that could help identify potential oil and gas in the region. Any data indicating potential big untapped resources could add pressure for future administrations to lease Atlantic tracts and help plan any auctions in the area. (Source.)

Environmental opposition is reflexive, not just to drilling but to the relatively non-invasive seismic exploration of the area.

… The government believes the Virginia leasing area could produce 130 million barrels of oil and 1.1 trillion cubic feet of natural gas. Environmentalists have said that will provide the U.S. with six days of oil and 18 days of natural gas, and it’s not worth the risks. “There just isn’t much oil out there,” said Jackie Savitz of the environmental group Oceana. “Even opening up all U.S. coasts to drilling won’t lower the price of gas more than a few cents per gallon, and not until 2013.”

The industry has questioned the oil and gas estimates, which they say are based on decades-old seismic studies. They said advanced testing techniques will likely discover more reserves.

This response is illustrative of why it’s often difficult to take radical environmentalists seriously in energy policy debates.

The reserve estimate of an unexplored region is statistical and risk-weighted, not a predicted outcome. (For what it’s worth, the statistical, risk-weighted outcome of the roll of a single die is 3.5.) The quantity of oil and gas that might be produced from a given area ranges from a minimum of exactly zero and some larger amount. The only way to find out what’s really there is to drill a well.

Seismic surveys can give some indication of whether an area presents attractive prospects, but they cannot confirm the presence of oil and gas. The current seismic survey of the Atlantic coast is over 30 years old. Much of the U.S. Geologic Survey’s estimate is based on the best available geologic analog – offshore Mauritania, which was juxtaposed to the Virginia/Carolina coast before there was an Atlantic Ocean!

Urban planners don’t use Fred Flintstone’s car and house as typical. But our oil and gas assessment model is just that outdated.

Before the deepwater Gulf of Mexico was drilled, the conventional wisdom (shall we use the word consensus?) among geologic scientists and industry professionals was that the deepwater would never be the major petroleum province that it has proved to be. Conventional science taught that the proper environment for the formation of commercial oil and gas deposits was in shallower water, closer the mouth of the Mississippi River. It held that the sandstones necessary for petroleum reservoirs would never have been deposited in deep water — but drilling proved them wrong. Now the deepwater Gulf of Mexico produces over a million barrels a day, some 15% nation’s total production.

In the end, there’s either oil and gas is the Atlantic OCS or there’s not. If there’s not, there’s virtually no environmental risk in drilling. If there is, then we need to retool our geologic models and keep drilling. On the other hand, if we never drill, we guarantee the outcome: zero jobs, zero economic benefit and continued reliance on foreign sources of petroleum. Plus: no government programs or tax credits are needed. Unlike “green energy” pie-in-the-sky programs, only private capital will be at risk.
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* Yes, that REI. I’m actually encouraged by this, because if there’s one thing in short supply in the Obama Administration it’s real-life capitalist managers.

Cross-posted at stevemaley.com.

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