President Obama’s offshore drilling announcement: the details are less dramatic than the headlines

As the details emerge of president Obama’s proposals to open up more areas of the US coast for oil and gas development, the modest scale of his plans has become clear. Indeed, in Alaska the restrictions on access are being strengthened, not relaxed.

The industry has welcomed the proposals as a good start, but some majors are privately pointing out what more they would like to see done.

The plan as set out by the Department of the Interior supports the contention that the significance of the move is largely political.

To understand the significance of the administration’s move, we need a short history lesson. The question of new offshore leases has been politically sensitive for both sides of US politics for almost three decades – as history of the moratorium from the Republicans shows, the moratorium was introduced in 1981 where it enjoyed ongoing support from Congress, with George Bush Snr even adding an executive moratorium in 1990. The present set of rules for offshore access covers the period 2007-12, and prevents drilling up and down the east and west coasts of the US. As he was on his way out of office, president George W. Bush proposed a new programme for 2010-15 to supersede those existing rules, which would have allowed a huge increase in access.

President Obama has emphatically rejected much of his predecessor’s plan. The programme for 2007-12 will remain in place, with some minor adjustments, and the proposals to increase access will take effect in the next plan, to run from 2012-17.

The changes to the 2007-12 plan affect Alaska. The president has confirmed that the leases already held in the Chukchi and Beaufort seas off the north coast of Alaska will remain valid; a decision which is likely to be particularly welcome for Royal Dutch Shell, which holds rights to 410 blocks in the area, and paid more than $2bn for leases in the Chukchi Sea in 2008. There are, however, also some new restrictions: no new licences will be sold during the present programme, and the Bristol Bay area, a rich fishing ground considered of particular environmental importance, will be off limits for as long as president Obama remains in office.

The new access offered on the east coast, in the mid-Atlantic and south Atlantic regions stretching from Delaware down to northern Florida, will not take effect until the next programme, in 2012-17. That this area will be opened up, however, is not yet certain. Scoping studies will begin in June, there will be road-shows for public consultation, and then assessment of the environmental impact of drilling. Many people in the states affected are likely to support the move, particularly as they may be given some share in the revenues from future production, but some will continue to object.

Once the politics is settled, there is also the question of the geology. There are very rough estimates of the resources that the area could hold, but they are three decades old. So there will have to be an extensive campaign of seismic and other surveying – estimated in the industry to take two years – before any drilling can start.

In the Gulf of Mexico, access remains unaffected during the 2007-12 programme. The administration set out a plan to open up the western half of the eastern Gulf, which is estimated to hold two thirds of the resources in the restricted area, but that will require the agreement of Congress. That should be forthcoming, as it is likely to attract solid Republican support, but there will also be opposition.

Put all that together, with the fact that the east coast north of Delaware, and all the west coast, remains closed, and you can see why the reaction of the industry has been positive, but at the same time it – and some Republicans – want more.

Related links:

Missing the point on offshore drilling - Energy Policy Information Center
Has the White House painted itself into a corner on climate change? – FT Energy Source

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