Natural Gas Drilling Offshore Encouraged by McCain

Drilling Takes Center Stage
July 11, 2008
Ken Silverstein, EnergyBiz Insider
Editor-in-Chief
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America's energy policy is at the center of the presidential contest. The debate has escalated into a war of words now that President Bush is pushing Congress to pass recently introduced legislation that would lift the ban on offshore drilling.

The comments have ignited a long-standing feud between conservatives and liberals who generally hold different views on how to end this country's dependence on foreign oil as well as how to approach environmental policies. Republicans want to work with those states that favor increased oil and gas production to enact policies that would allow drilling in areas that are at least 100 miles offshore - a cause repubiated by leading Democrats who say that such policies capitulate to big industry.

Record-high gasoline prices along with volatile natural gas indexes have given new credence to the conservative position that producers should have greater access to areas now off-limits to development. But liberals object to that thinking, noting that the resulting ecological destruction would have little bearing on immediate prices and that those resources are dwindling. Instead, they say the country must conserve and plow its capital into sustainable energy forms.

To be clear, critical differences exist between the development of oil and gas. Californians, for instance, recall the oil spill near Santa Barbara in 1969 while Alaskans and the rest of the country remember the Exxon Valdez oil spill in Bristol Bay in 1989. Concerns are apparent among all citizens in those locations that perpetual strong winds and turbulent seas could cause a repeat of those accidents.

Natural gas, by comparison, would have to be piped out, creating the potential for leaks. But the gas industry says that it has advanced its drilling and transport techniques so that the environmental footprint is nominal. Moreover, it says that existing climate change legislation on Capitol Hill would increase the demand for its product by 20-30 percent over the next couple decades.

"Despite protests from some sectors, natural gas exploration is in fact an environmentally safe process that will increase our nation's domestic energy supply and lower prices from today's record-breaking levels, providing much-needed financial relief for consumers," says David Parker, chief executive of the American Gas Association. "It is estimated that up to 420 trillion cubic feet of natural gas could be developed from the Outer Continental Shelf, or to put it another way -- 22 years of supply at current rate of U.S. production."

Americans are feeling squeezed. A Gallup Poll report says that 57 percent would favor increased access to not just the deep waters in the Atlantic and Pacific Oceans, and the Gulf of Mexico, but also to wilderness areas such as those in Alaska. But those same respondents insist that developers must adhere to strict environmental guidelines.

New Paradigm

In 2006, Congress gave natural gas producers greater drilling rights in the Gulf of Mexico but denied them such guarantees off the shores of the Atlantic and Pacific Oceans. It's all part of a moratorium first enacted in 1982 that forbids oil and gas leasing in most of the Outer Continental Shelf. Beyond 3 miles from the shoreline, the federal government regulates drilling activity.

The presumptive Republican presidential nominee John McCain wants to lift that moratorium now that prices are so volatile. While McCain had once been opposed to granting more drilling rights, President Bush has long advocated them as a way to become more self-reliant. Barack Obama, conversely, opposes expanding such rights, arguing that nation cannot drill its way out of energy dependence.

"The president's proposal sounds like another page from the administration's energy policy that was literally written by the oil industry: give away more public resources to the very same oil companies that are sitting on 68 million acres of federal lands they have already leased," says House Speaker Nancy Pelosi, D-Calif.

The U.S. Interior Department estimates that if areas now closed to drilling were accessed, 86 billion barrels of oil and 420 trillion cubic feet of natural gas are technically recoverable. The question is whether the added production would affect prices. No one disputes that it would take several years for the new supplies to come on line. But some experts such as Daniel Yergin, head of the Cambridge Energy Research Associates in Boston, says that it would send an immediate psychological signal - one that would tell foreign suppliers that this country will not be held hostage to their whims.

And then there are the practical concerns. While Florida Governor Charlie Crist, a Republican, has reversed his position and now supports John McCain's view, other key politicos in the state have said that drilling there would hurt tourism. Meanwhile, in California opponents of drilling that include Governor Arnold Schwarzenegger say that the added supplies would quickly run out at the current rates of consumption.

Currently, about 35 percent of the natural gas consumed in the United States each year is produced off-shore. But proponents of greater drilling rights say that about 85 percent of all off-shore areas are off-limits to both oil and gas production. If more supplies came to market, commodity prices would fall, they add.

"We have proven oil reserves of at least 21 billion barrels in the United States," McCain said in a speech in Houston to oil executives. "But a broad federal moratorium stands in the way of energy exploration and production. And I believe it is time for the federal government to lift these restrictions and to put our own reserves to use."

Change is assuredly coming to Washington. Oil and gas development will take center stage no matter who wins. The debate, which will help determine the next president, is pitting record high energy prices and economic disruption against environmental prudence. The goal in either case is to write a new paradigm that will become the bedrock of America's energy policy well into the future.

More information is available from Energy Central:

* Natural Gas: America's Untapped Resource, EnergyBiz, March/April 2006

* Gas Heats Up - AGA Leader Downes Defines Big Issues, EnergyBiz, Jan/Feb 2006

* Schwarzenegger's California Overhaul - A Conversation with His Leading Energy Advisor, EnergyBiz, Sept/Oct 2005