OTC Commentary: Expanding offshore access is critical for energy security

By Erik Milito

Erik Milito is upstream director at the American Petroleum Institute.

Last week marked the 100-day milestone for the Trump administration, and the White House is making steady progress on pledges to remove roadblocks to oil and natural gas development. At the heart of executive orders aimed at scaling back regulatory overreach, expanding offshore access and cutting through red tape on pipeline construction is the recognition that energy production is a key pillar of U.S. economic growth and national security.

American families and businesses are experiencing that reality firsthand. Drivers saved over $550 at the pump in 2015, while household budgets saved $1,337 on utility bills and energy-related expenses. U.S. industrial electricity costs are 30 to 50 percent lower than those of our foreign competitors, spurring a manufacturing renaissance.

We lead the world in production and refining of oil and natural gas, but we’re still not taking full advantage of our energy resources – especially offshore, where restrictions keep 94 percent of federal offshore acreage off limits to responsible energy exploration.

Opening areas in the Atlantic, Eastern Gulf of Mexico and Pacific could lead to production gains of more than 1 million barrels of oil equivalent per day and generate thousands of well-paying jobs in both blue collar and STEM job fields. Alaska’s Beaufort and Chukchi seas are considered home to the world’s largest remaining conventional, undiscovered oil and natural gas reserves – enough to meet California’s energy demands for close to 40 years.

Eighty percent of American voters support increased domestic production of oil and natural gas, but a vocal minority opposes energy development – not based on the merits of individual projects, but as part of an overarching goal to permanently halt oil and natural gas production. It stands to reason that cutting off supplies of affordable, reliable energy could lead to skyrocketing costs and plummeting employment.

New research from OnLocation — a firm with more than 20 years of experience providing technical support for Energy Information Administration (EIA) modeling — reaches exactly that conclusion. Using EIA’s Annual Energy Outlook for 2016 and applying the “keep it in the ground” movement’s policy wish list, we can quantify the potential impact of policies to halt oil and natural gas leases, ban hydraulic fracturing, prohibit new or expanded coal mines, and stop permitting energy infrastructure, including pipelines and import/export facilities.

It’s not a pretty picture. The modeling shows domestic oil and natural gas production experiencing a steep decline, adding potential costs of $40 per barrel for crude oil and $21 per million BTUs for natural gas – taking us back to energy dependency and erasing the economic benefits of the American energy revolution. The average American household could see its costs jump $4,550 in 2040 due to increased costs for transportation fuel, electricity, home heating, and goods and services.

The U.S. economy could lose a projected 5.9 million jobs, plunge the economy into persistent recession-level unemployment throughout 2020 to 2040, with major energy-producing states hardest hit.
That’s a lot of economic upheaval to inflict on ourselves based on the false premise that energy security is incompatible with environmental progress.

The United States leads the world in carbon reductions thanks primarily to availability of natural gas. Carbon emissions from power generation have plunged to nearly 30-year lows, and more than 60 percent of those reductions from 2005 to 2016 have been the result of switching to generation from clean-burning natural gas.

Even under the most optimistic scenarios for renewable energy growth, oil and natural gas will supply 60 percent of U.S. energy needs in 2040. With worldwide energy consumption projected to increase by 38.6 percent by 2040, it’s clear we’ll need more energy to meet U.S. needs and remain dominant in lucrative world markets.

It makes no sense to forfeit potentially massive resources offshore. Comprehensive efforts focused on safety systems and capabilities ensure offshore development is safer than ever. Plus, decades of experience operating in Arctic environments show the oil and natural gas industry has the technology and expertise to safely develop Arctic offshore resources.

So long as the vast majority of offshore areas remain off limits, the United States will never realize the full economic and security potential of our energy resources. Expanding offshore access is a significant achievement for the first 100 days of a presidential administration but it’s even more important for U.S. energy security over the next several decades.

Erik Milito is group director, Upstream & Industry Operations at the American Petroleum Institute.