First published in SeafoodNews.com and reprinted with permission
We have been deluged with press releases and news stories reacting to the executive order by President Trump opening up virtually all U.S. coastal
waters to oil drilling. This is something that has been opposed for more than 50 years by both the fisheries and tourism industries, and is opposed by all coastal states except for Alaska, and those in the Gulf of Mexico where drilling is already taking place. We doubt this decision will stand.
First of all, the oil markets are not signaling any strong interest in offshore drilling, although they do want the political payoff from the administration of opening up public lands in protected areas within the continental U.S. Oil analysts say that current and projected prices simply don’t support expansion of offshore drilling into new expensive areas. The Shell project to do a test site in the Beaufort Sea off the North Slope of Alaska ended in humiliating failure, as they could not even get the rig into place. After spending $7 billion, Shell has withdrawn its interest.
Secondly, drilling has a long-term time horizon. It will take about 18 months for rules to be in place; then if there were leases, it would take ten years or so for exploration and development. During this time, the political equation in Washington is very likely to shift back to the consensus that has existed for 40 or 50 years, which is that fisheries and tourism are more important to the U.S. economy than the oil companies.
Third, the U.S. now is on track to produce a record amount of oil, surpassing the previous highest output in 1970. This is all due to improved technology for land-based recovery. Why oil companies would turn from their successful fracking model that is bringing old wells to life, to a far more risky offshore strategy makes no economic sense.
Finally, with the exception of Alaska, Texas, and Louisiana, virtually all other coastal states are vehemently opposed to offshore drilling. Florida lost billions of dollars in the Deep Water Horizon disaster, and no Florida politician can survive who does not protect that state from offshore drilling.
Likewise, California experienced the Santa Barbara channel spill that turned the entire state against offshore drilling there, and it is highly unlikely that the state would allow the regulatory process to proceed to bring oil ashore. In Massachusetts, there is a long-running international moratorium on drilling on Georges Bank, and again, the local opposition to any oil company attempting to use a lease would be ferocious.
Given the lack of economic return, no oil company is going to take up this fight for any reason other than to gain political points with Trump. That is not a good position on which to base a long-term strategy.
The one state where this might make a difference is Alaska, where the state budget is dependent on oil, and has been hit more than anywhere else by the global oil glut and the turn to natural gas and solar. Alaska is desperate to gain more drilling, and Sen. Lisa Murkowski succeeded in getting a provision opening the Alaska National Wildlife Refuge (ANWR) to oil drilling. But no matter how much the current state government may want more drilling, the economics dictate where such drilling might take place, and it certainly does not appear to be offshore.