OilPrice.com
August 20, 2017
A key public comment period just ended for revising the offshore exploration program along the U.S. Atlantic Coast, and the path forward might not be as smooth as the Trump administration had hoped.
The Department of Interior, which regulates offshore drilling and also conducts lease sales to the industry, had closed off the possibility of drilling in the Atlantic and Arctic Oceans during the Obama era. But President Trump has tried to move quickly to reverse that decision, kicking off the process to open up the Atlantic for exploration.
But the President can’t just open up the Atlantic at the stroke of a pen – there is a protracted legal and regulatory process that the Department of Interior must go through. One step of that process just came to a close.
The Interior publishes five-year plans, which detail what offshore areas under federal control they will auction off. The public comment period for the 2019-2024 five year plan ended last week.
Because drilling has not occurred along the Atlantic Coast, unlike the Gulf Coast, it was always going to be controversial to open up the region for exploration. To be sure, industry groups, such as the American Petroleum Institute, support Atlantic drilling. They also argue that other areas that are off limits – including the Arctic and offshore Florida – should also be opened up.
But opposition is growing and it is coming from a lot more places than the Trump administration likely expected.
For example, Virginia Governor Terry McAuliffe (D) opposes drilling, both on concerns that an oil spill will foul the coastline and because of the federal government’s stance on revenue sharing. He added that he would be more open to allowing drilling if coastal states were given a greater slice of the pie, although conceded that such an outcome is unlikely. In the past, McAuliffe has supported offshore drilling, and he is the only Democrat on the Outer Continental Shelf Governors Coalition, which supports energy development in the Atlantic.
But it is the opposition from more Republican-friendly states that are raising eyebrows. For example, coastal communities in both North and South Carolina are lining up against the Atlantic drilling. According to E&E News, an expanding coalition of coastal business interests, fishing and tourist industries, municipal and state governments, residents, and environmentalists are building a “wall of resistance” that is bipartisan in nature. E&E News reports that every municipal mayor in coastal South Carolina oppose the Trump administration’s plan to open up the Atlantic.
As a result, with an eye on their own constituents, the state governments are also coming out against Atlantic drilling. South Carolina Governor Henry McMaster (R) has opposed drilling. North Carolina’s governor Roy Cooper (D) opposes drilling – he was elected last year, replacing his drilling-friendly predecessor.
Even South Carolina’s two Republican Senators, Lindsey Graham and Tim Scott, have been quiet on the issue. Normally allies of the oil and gas industry, they have taken a back seat as South Carolina residents have increasingly opposed drilling plans.
“Look, they can see the handwriting on the wall with opposition from their constituents,” Frank Knapp, president and CEO of both the South Carolina Small Business Chamber of Commerce, told E&E News in an interview. “Why would they go out on a limb and do that? That doesn’t mean they’re opposing it — it means that they’re shifted into a neutral position, but, hey look, that’s an achievement. … Turn the clock back 12 months and they would have signed it in a heartbeat.” A few Republican members of the U.S. Congress from North and South Carolina have also come out against Atlantic drilling.
Meanwhile, New Jersey Governor Chris Christie (R), a strong ally of President Trump, also officially came out against drilling last week.
All of this unexpected opposition does not mean that Atlantic drilling is doomed. Katharine MacGregor, acting assistant secretary for Interior, told reporters last week that the agency is not close to making a final determination on Atlantic drilling. The next step is to sift through all of the public comments and issue a draft five-year plan.
In other words, it will likely be years before the oil and gas industry can start drilling in the Atlantic, even in the best case scenario. But even then, it is unclear if there will be any interest. The Atlantic has not been explored very much, and as a result, the exact nature of the oil and gas reserves in place is unknown. That likely means that development costs will be high. If oil prices fail to rise much from current levels, it is not at all clear that the Atlantic will be very competitive.
In a world of $50 oil and too much supply, a new expensive frontier would struggle to attract a lot of drillers. But, the political opposition to Atlantic drilling might make that a moot point.
http://oilprice.com/Energy/Crude-Oil/Trumps-Atlantic-Drilling-Plan-May-Be-A-Lost-Cause.html