Offshore Resources: Digging Up the Facts
By Robert L. Bradley, Jr.
Interior Secretary Ryan Zinke's proposal to expand offshore oil and natural gas drilling has set off a bipartisan uproar among politicians and pundits from coastal states.
Critics paint pictures of black beaches, tar balls, and wildlife slicked with oil. They point to the damage done from the wreck of the Exxon Valdez and the more recent explosion of Deepwater Horizon.
Both disasters not only stained the environment but also the net worth and reputation of some of the largest companies in the world. Deepwater Horizon cost priceless lives too.
But to assume that expanded drilling off America’s coasts portends a repeat is to ignore a new generation of technology and business best practices, not to mention regulatory reform.
Secretary Zinke’s 2019–2024 proposal would liberate more than 90 percent of the OCS acreage, representing 98 percent of “undiscovered, technically recoverable oil and gas resources.”
The US Bureau of Ocean Energy Management estimates that the newly authorized lease areas could hold almost 90 billion barrels of oil and more than 327 trillion cubic feet of natural gas, potentially worth several trillion dollars. Federal royalties would provide, in Zinke’s words, “billions of dollars to fund the conservation of our coastlines, public lands and parks.”
Contrary to the claims of environmental activists and their allies, offshore drilling is getting safer.
The industry has doubled down on training employees to recognize potential problems with rigs. Companies have also authorized their workers to shut down operations single-handedly, if need be.
Tankers are now double-hulled. Regarding ship management (an issue with Captain Joseph Hazelwood of Exxon Valdez), ExxonMobil has taken strict preventive measures, instituting drug and alcohol abuse screening and prohibiting any employee with a history of substance abuse from performing sensitive operations or duties.
BP’s tab for Deepwater Horizon currently sits at $65 billion. With approximately five million barrels spilled, the cost of the accident is about $13,000 per barrel. On April 23, 2010, three days after the explosion, a barrel of crude oil cost $85.12. Meaning BP paid out 152 times as much money for each barrel as they would have made selling it.
Because the cost of a spill is so consequential, companies also seek locational surety. ExxonMobil, for example, capped a Gulf of Mexico well after spending $187 million because of safety issues with its portending completion.
Progress is evident in spillage statistics both domestically and globally. In the early 1990s, for example, there were nearly 35 oil tanker spills per year. There were less than one-sixth that number in 2017. Regarding total spillage in and around US waterways, 2016’s total of 7,200 barrels (that’s all) was less than half of that in 2014 and less than one fourth of the 2000 total.
Energy producers should certainly be held accountable for their mistakes -- and they have been. Excessive fines for trivial violations, or requiring unrealistic technology, is a subtle means for a keep-it-in-the-ground, anti-drilling ethos.
The states are in line for an economic boom from offshore drilling in the years and decades ahead. Expanding offshore access in the Atlantic could support nearly 280,000 jobs nationwide and generate almost $200 billion in investment and operational spending.
There's a vast expanse of untapped energy just off our shores, waiting to be inventoried and then developed according to market signals (consumer demand). It would be wise for coastal states to embrace the benefits it can bring them -- and for all America.
Robert L. Bradley Jr. is the founder and CEO of the Institute for Energy Research.
