Washington's Dry Well

Saturday, July 19, 2008

WITH OIL hovering around $130 a barrel and an American public increasingly antsy about gasoline prices resting comfortably above $4 a gallon, President Bush ratcheted up the pressure on Congress this week to open the Outer Continental Shelf to oil drilling by rescinding the executive order prohibiting such exploration. There's just one catch: For the president's action to take effect, Congress has to lift its own ban, which has been in place since 1983. And that's not going to happen.

House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) oppose giving states the power to permit offshore drilling for oil because -- as they correctly point out -- drilling for the estimated 18 billion barrels of oil underneath the Outer Continental Shelf would have no immediate impact on the pain consumers are feeling at the pump. Yet, after spending the Fourth of July recess getting an earful from their constituents about high gas prices, they feel the need to do something. Thus the recent push for the passage of "use it or lose it" legislation that would force the oil companies to use the offshore oil leases they already have. Mr. Reid's office released a series of statistics on the number of acres "not producing oil" and "not being drilled." That tally makes three assumptions: that in a time of record prices Big Oil would let viable areas sit untapped; that every lease represents a guarantee of oil; and that areas not producing or not being drilled are inactive.

The Shell Perdido project off Galveston, Tex., shows the weakness both of President Bush's proposal and the Democratic response. After winning five leases for ultra-deepwater tracts in 1996, Shell had to submit an exploration plan and secure a number of environmental permits. Oil was found in 2002. This required the company to file a resource development plan, including an oil spill response strategy, before it could build any infrastructure. Building of the spar hull, a partially submerged cylinder upon which the production platform will sit, was not sanctioned until 2006; it arrived in Texas last month. The production facilities are now being constructed. During that 12-year timeline, all of Shell's five leases have been classified as "nonproducing." According to Shell, "The platform is capable of producing 130,000 barrels of oil equivalent (or 100,000 barrels of oil and 200,000 cubic feet of [natural] gas per day)" when production finally begins "around the turn of the decade."

"To reduce pressure on prices . . . we need to increase the supply of oil, especially here at home," Mr. Bush said on Monday from the Rose Garden. He's right. But that can't happen soon, and what's needed in the meantime is an increase in the supply of political courage to bring about a bipartisan energy policy that is rooted in long-term solutions rather than short-term political gain. With six months to go in Mr. Bush's term and Congress about to go away for the summer, Washington is going to hit a dry well.

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