President Trump will take a major step Friday to expand oil and gas drilling off U.S. shores, directing the Interior Department to lift restrictions that President Barack Obama imposed in the Arctic and Atlantic oceans. But local political considerations and the global energy market are likely to influence future exploration far more than an executive order in Washington.
Several industry officials and experts predict that oil and gas firms will bid on areas the administration plans to open to drilling, including those off the East Coast. But the targeted Arctic areas are much less attractive to investors right now, and even potential drilling in the Atlantic could be complicated by long-standing resistance from coastal communities.
Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former Obama energy and environment adviser, said that while the Trump administration can rescind the former president’s efforts to end exploration in the two regions, that process would be complex and involve at least two years of revamping the government’s long-term drilling plans.
“The question then is, does anybody show up, and does anybody want these [leases]?” Bordoff said. “It depends quite a bit on what the oil market looks like in two years.”
If it looks anything like it does today, with low oil prices and most industry growth taking place onshore, Trump’s new policy might have little practical effect.
National Ocean Industries Association President Randall Luthi, who headed the Minerals Management Service under President George W. Bush, said what matters most is that there has been “just a complete change of attitude” toward offshore development since Trump took office.
The hope with the executive order is “that once the economics fall into place, the federal and regulatory regime will be right for increased leasing off the Outer Continental Shelf,” Luthi said.
Interior Secretary Ryan Zinke has made clear he wants to boost drilling in federal waters to generate more royalties. While this money goes directly to the U.S. treasury, Zinke suggested in a speech Tuesday that the royalties should be spent on a maintenance backlog within the national parks system.
Thursday night, he pledged that environmental protections would not be compromised as the administration looks for opportunities to develop energy offshore. He said current restrictions would probably stay in place for two years.
“We’re going to give local communities a voice,” he said. At the same time, he said, “it is better to produce energy here, under reasonable regulation, than have it produced overseas with no regulations.”
But opposition remains intense among politicians of both parties in the Southeast.
According to the advocacy group Oceana, 90 percent of coastal municipalities from Cape May, N.J., to Cape Canaveral, Fla., have formally opposed drilling or seismic testing off their coasts. Prominent South Carolina Republicans, including Gov. Henry McMaster and U.S. Rep. Mark Sanford, have come out against drilling there.
“It’s not the environmentalists and the dolphin huggers,” said Jacqueline Savitz, Oceana’s senior vice president for oceans. “It’s the business community. What you’ve got is a different fight now.”
In Beaufort, S.C., Mayor Billy Keyserling said he is ready to again fight the prospect of offshore drilling — just as he did during the Obama administration — because of concerns over environmental threats, the potential impact on tourism and concern that more local jobs could be destroyed than created.
“We will fight it harder than we did in the past,” Keyserling said. “We all feel very, very strongly.”
In other states, elected officials remain split on the issue. Virginia Gov. Terry McAuliffe (D) backs drilling in federal waters off his state’s coast only if the state gets a share of the royalty revenue, which would require a change in current law. Rep. Barbara Comstock (R-Va.) has introduced legislation calling for a lease sale off Virginia Beach within the next year, along with two additional lease sales off Virginia’s coast during each subsequent five-year period.These lease sales would be exempt from review under the National Environmental Policy Act until 2022, according to the bill, which would accelerate the process.
Despite the drilling restrictions Obama put in place for Alaska’s Arctic, activity continues there. The Italian oil giant Eni wants to reach reserves in a federal area of the Beaufort Sea off Alaska by doing directional drilling from an artificial island it is using in state waters. Hilcorp has taken over a project formerly owned by BP. And Shell, after deciding to drop further exploration plans, gave its offshore acreage to the Arctic Slope Regional Corp., an Alaska Native entity.
Christy Goldfuss, who headed the White House Council on Environmental Quality at the end of Obama’s second term, said that the executive order he issued in December specifically allowed exploration in 2.8 million acres in the near-shore Beaufort Sea where commercial interest is greatest.
“The idea that people are breaking down the administration’s door to get access to the Arctic is just false,” said Goldfuss, who now serves as vice president for energy and environment policy at the Center for American Progress, a liberal think tank.
Several industry officials said that even with a change in leasing policy, additional regulatory changes would be needed to make drilling in the Arctic more economically viable. Just last July, the Interior Department finalized stricter rules for exploratory drilling there.
Luthi said that the rules add “another two or three layers of difficulty to drilling” and that he was “fairly optimistic” the new administration would look at revising them as part of its broader regulatory overhaul effort.
Yet the bipartisan National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling is urging Congress to preserve them. Arctic drilling rule. “We believe that these exploratory drilling regulations are necessary to prevent or reduce the severity or duration of a catastrophic oil spill in the Arctic Ocean,” the commission wrote to lawmakers last month.
Still, broader energy trends are likely to shape the future more than any regulatory decision.
“If the last 10 to 15 years teaches us anything at all, it’s that we should be humble about our ability to forecast oil prices,” said Bob McNally, a former Bush administration energy official and president of the Rapidan Group consulting firm.
Over the past decade, he noted, those prices have fluctuated between $26 and $140 a barrel. They now hover around $50, but should that start to creep up, interest in offshore exploration and drilling could rise, too.McNally pointed to the recent five-year oil market forecast from the International Energy Agency, which found that demand is expected to “grow strongly” through 2022 and that “the need for more production capacity becomes apparent by the end of the decade, even if supply appears plentiful today.”
“At $100 a barrel, the economics and the politics change,” McNally said. “You’d see more industry interest and political calls for offshore development.”
No matter what the future brings, the current administration is lifting restrictions that the industry sees as unnecessary and unwise.
“Trump is concluding that what Obama put in place was unreasonable,” McNally said. Policy “should set reasonable standards and let market forces and technology — and geology in the case of oil and gas — dictate what activity takes place.”
Steven Mufson contributed to this report.