The New York Times reports that both Democrats and Republicans have turned the corner on offshore drilling and will now try to move their strategies into law. Clifford Krauss notes that the Democrats favor a mandate-laden bill that would force oil companies to expedite their work on existing leases, while Republicans want to expand the territory available to oil companies on the outer continental shelf. Despite the pessimistic quotes Krauss gathers from analysts, the industry strongly favors the Republican approach:
The two political parties have settled on markedly different strategies for improving domestic oil supplies to help lower gasoline prices.
Republicans want to end the 27-year ban on offshore drilling along much of the nation’s coastline, while Democrats want to force companies to speed up exploration in certain offshore areas that they already control. A version of the Democratic plan may come to a vote in the House of Representatives as early as Thursday.
But oil experts say that neither approach will give drivers any relief in the short run from prices that stood Wednesday at nearly $4.07 a gallon, on average. They say the simple reality is that no one knows how much oil is to be found offshore, how difficult producing it would turn out to be or how many years that might take.
And oil companies, amid a global drilling frenzy, are stretched so thin they will be hard-pressed to take on big new projects anytime soon. More than 400 major drilling and production projects are competing for engineers, rigs, seismic equipment and steel to build platforms, and the costs of doing the work have skyrocketed.
Well, if that’s true, it doesn’t appear to worry the oil companies. They see the GOP strategy as the better of the two. One impact of expanded research would be the creation of jobs and a big boost to the economy. Private sector work expands to meet demand, a concept that apparently eludes Congress — hence our current economic issues in energy — as well as the analysts contacted by Krauss, who normally does good work at the Times.
Democrats complain that millions of acres of OCS leases have hardly been touched by the oil companies, but the industry disputes that characterization as a deception. They have to do a number of surveys, which can take years, to determine whether to drill even test holes — and where to put the drill if they do. It’s a fascinating process, as I discovered myself on an API-sponsored trip to Houston and Corpus Christie last year. The technology has vastly improved over the last two decades, but even then the cost of a dry hole is still $80 million. Oil companies want to get it right as often as possible.
When Congress allowed more drilling in the Gulf, we discovered six times the reserves that we had once thought existed there. Exploration of the OCS could produce similar finds, or perhaps even greater reserves than that. Brazil has found fields that rival the Saudis off its coast, and we have much more coastline than Brazil. Right now, estimates of the banned areas of the OCS say that it holds 17.8 billion barrels of oil, and over 75 trillion cubic feet of natural gas. Even without finding more reserves, that could seriously lower our need for foreign oil and help resolve the supply crisis as well as calm speculation in the oil markets.
Critics say it would take years to get the oil to market, and that it won’t affect gas prices in the short term. We have been warning about the supply crisis while India and China expand their energy needs, and after 9/11, when everyone should have understood the national-security implications of the vast transfers of American wealth to overseas oil producers. Had we taken action then, we would already be bringing that oil on line. If we dither for another seven years, we will still be seven years from a solution and worse off. It’s time to start thinking long term.
It looks like we’ve gotten Democrats and Republicans to agree to that much. Now we need to make sure that we implement a strategy that gives us the greatest flexibility, one that identifies our actual resources and attempts to access them. The Republican strategy does that. The Democrats want to continue to put blinders on our energy industry.