WASHINGTON — The economic benefits that would flow from offshore oil drilling in U.S. Atlantic waters outweigh the potential environmental costs of the activity, according to a study released Wednesday.
The report, commissioned by the Interstate Policy Alliance and South Carolina’s Palmetto Policy Forum, says oil and gas drilling from Delaware to Georgia would generate $10.8 billion to $60 billion in added economic value for those states, plus $2.1 billion to $11.6 billion in tax revenues.
Environmental effects from the activity — including costs associated with air emissions, carbon pollution and oil spills — are estimated to have a price tag of $395 million to $19 billion.
The wide dollar ranges are because the study uses models of what would happen if oil production and environmental valuations are low, medium or high.
“The results suggest that the economic benefits of offshore oil and gas development are likely to far exceed the economic value of environmental damages,” according to the analysis by Timothy Considine, a professor of energy economics at the University of Wyoming.
“The economic benefits of oil and gas development significantly outpace” even high environmental impacts and costs, Considine told reporters in a conference call to discuss the report.
The paper comes as the Interior Department’s Bureau of Ocean Energy Management is in the early stages of weighing whether it should sell oil and gas leases in the Atlantic Ocean from 2017 to 2022.
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The current offshore leasing plan schedules sales of territory in the Gulf of Mexico and around Alaska, with no Atlantic acreage on the auction block.
Supporters of offshore drilling hope the promise of big economic returns to East Coast states will help convince Interior Department regulators to include the Atlantic this time around.
Rep. Jeff Duncan, R-S.C., stressed that the economic benefits don’t just hug the shoreline.
“When you talk about energy jobs related to offshore production, a lot of folks just concentrate on the guys in the hard hats and uniforms out there on the rigs,” he said. “But there’s an enormous impact” from the companies and workers that support that offshore activity, including supply vessels and manufacturers of pipe and other equipment.
“You can simply go to Louisiana and drive along (the coast) and really get a feel for the type of economic impact,” Duncan added.
Under the newly released analysis, North Carolina, South Carolina and Virginia would be the largest economic winners if oil and gas companies began plumbing Atlantic depths. For instance, the study finds that North Carolina could realize $24.5 billion in economic output and $4.3 billion in additional tax revenues, far beyond the $6.9 billion projected in environmental costs for the state from offshore oil and gas development.
Although Considine’s report is based on existing estimates about the amount of oil and gas in the region — data based on decades-old geophysical research and modeling — he multiplied the numbers by 2.06 to reflect the expected growth in actual proven reserves over the typically conservative initial forecasts. That reflects how Gulf of Mexico oil and gas estimates have climbed over time.
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Considine folded in several environmental costs, including potential oil spills, relying on previous research finding that 32,329 barrels of oil are spilled for every billion produced. Another study estimated cleanup costs between $30,000 and $107,000 for each barrel spilled.
Conservationists opposed to offshore drilling say it is impossible to put a dollar figure on the environmental risks, including damage to marine life amid any spills.
Some political leaders in the Northeast argue that tourism and fishing also hang in the balance.
“Fishing, tourism, recreation and other activities generate billions of dollars in revenue for our states each year,” said nine Democratic senators from northeast states in a letter to Interior Secretary Sally Jewell last month. “Offshore drilling in federal waters anywhere in the Atlantic would threaten these important economic drivers in our states as well as our coastlines, beaches and environment with the dangers of an offshore oil spill.”
Although much of the U.S. coastline is technically open for oil and gas exploration, that work can only be conducted on active leases, purchased through periodic government auctions. The Interior Department’s five-year leasing plan dictates the schedule and territory covered by those sales.
The U.S. Atlantic is not virgin territory when it comes to oil and gas development; 51 wells were drilled in the region between 1975 and 1984, with all but four in shallow waters with less potential for a big find.