More than three months after the Obama administration announced an end to its moratorium on deepwater oil and natural gas production in the Gulf of Mexico, the administration has nevertheless yet to approve a single new drilling project. Gulf Coast communities whose economies depend on oil and natural gas production are expressing worries that the administration’s obstructionism constitutes a de facto continuation of the moratorium, and industry experts say the delays are spreading to other regions of the country.
Oil companies have invested heavily in the Gulf, having spent $8 billion on oil and natural gas leases during the past three years which they have yet to tap. The U.S. Energy Information Administration estimates domestic offshore oil production will fall a further 13 percent this year because of the lasting effects of the official moratorium.
The Obama administration estimates the moratorium has cost the Gulf Coast region 8,000 to 12,000 jobs, but others’ estimates have been much higher.
The Obama administration claims the main cause for the continued delay in new drilling permits is greater regulatory scrutiny. The administration now requires energy companies to bring in more outside experts to certify the safety of drilling equipment, conduct more rigorous safety tests, hold more worker safety training, and better document its risk management plans.
Even so, rig operators are wondering why they now wait months at the very least to obtain drilling permits when the wait used to be weeks.
Other Regions Affected
Kathleen Hartnett White, director of the Armstrong Center for Energy and the Environment at the Texas Public Policy Foundation, says the de facto moratorium has been extended to other parts of the nation as well.
“In the Gulf of Mexico, Alaska, and the western United States, a restrictive de facto moratorium expands although the official moratorium on deep water wells in the Gulf is ostensibly over,” White explained. “On deep and shallow offshore wells and onshore wells, needed permits hang in limbo. New restrictions in Alaska reduce existing production and freeze long-planned production.”
Royal Dutch Shell, for example, announced on February 2 it is dropping plans to drill an exploratory well in the Beaufort Sea off the coast of Alaska this summer.
“Despite our investment in acreage and technology and our work with stakeholders, we have not been able to drill a single exploration well,” Shell CEO Peter Voser said in a conference call with reporters.
“Despite our best efforts, critical permits continue to be delayed, and the timeline for getting these permits is still uncertain.”
Begich Pleads for Action
Alaska Senator Mark Begich (D) sent a letter on January 27 to U.S. Environmental Protection Agency Administrator Lisa Jackson urging her to speed up the resolution of outstanding permit applications. Begich explicitly appealed for approval of the Royal Dutch Shell exploratory well, but his appeal has garnered no results.
“It is frustrating that this delay revolves around a type of permit routinely issued by the former Minerals Management Service in the Gulf of Mexico. It is further frustrating that the affected company, the State of Alaska, my Alaska [congressional] delegation colleagues, and I all sought to help provide additional resources for the creation of a robust permit process and those efforts met with little interest,” Begich stated in his letter to Jackson.
Begich acknowledged EPA’s responsibility to protect the environment, but said EPA needs to act more quickly in making permit decisions. The alternative, said Begich, is to unnecessarily stifle natural resource production and impair Alaska’s economy, the nation’s economy, and American energy independence.
“If our government cannot resolve this problem expeditiously, we stand on the threshold of sending the signal to those who have invested significant resources that we do not take their investment seriously and to the American people that we are not truly committed to maintaining our national and economic security by lessening our dependence on foreign oil,” Begich added.
D. Brady Nelson ([email protected]) is a Milwaukee-based economist.