Offshore Development and the Five Year Plan

Today, the House of Representatives will be considering legislation to scrap the Obama Administration’s current five-year plan for offshore development and replace it with a plan that would expand the areas available for oil and gas leasing.  The Obama Administration’s plan was announced at the end of June, and under current laws allows for Congress to have 60 days to review the plan and pass an alternative before the plan takes effect.

The five-year plan process allows for the orderly development of offshore federal resources and takes advantage of systematic environmental reviews to expedite the process.  The plan proposed by the administration will allow for leasing in the Gulf of Mexico and some additional leasing offshore in Alaska, but it does not allow for any additional leases on the Atlantic Coast, the Eastern Gulf of Mexico, or the Pacific Coast.  The Administration’s plan includes plans for 15 separate lease sales through 2017.  The alternative proposed by Republicans in the House of Representatives would include 28 lease sales over the same period tripling the number of lease sales in the Chukchi Sea, accelerating lease sales in the Gulf of Mexico, and lease sales off of Virginia and South Carolina.

A number of recent articles have come out about the lure of the offshore development and the new capabilities of some industry participants, particularly Statoil and accessing deepwater resources.  While major offshore resources have been discovered off of Angola, Norway, and Brazil, the potential offshore in the United States remains incredibly attractive since the U.S. has a stable and reliable regulatory environment and its royalty/tax rates are far more attractive than the other countries mentioned above.  Brazilian resources are tied up in regulatory knots over requirements involving the use of Brazilian deepwater drilling gear, which simply does not exist.

In all likelihood, the House legislative proposal will pass, but it will not be taken up by the Senate, and the Administration’s plan will go into effect.  While not as aggressive as many energy proponents would want, at least there will be some modicum of certainty that lease sales (and the regulatory and legal protections that go along with those) will take place.  As a pro-energy development person, half a loaf is a good thing.

On the other hand, should a new administration come into the White House next year, they could direct the creation of yet another five-year plan that would be more robust.  The hope is that the lease sales proposed in the current plan could take place while the new plan is being constructed, which brings us back to a bigger question about  this  entire process.  Does it make sense for natural resource decisions such as the five-year plan to be almost solely in the hands of the Executive Branch?

Like most of my posts, I believe that there are benefits in both.  The Executive Branch by its very nature retain institutional knowledge and technical expertise, making it a more natural venue for long-term planning for resource extraction decisions and responsible use determinations.  Its benefit is that the decision can be made based on set criteria uninfluenced by changing political moods.  The down side is that it is uninfluenced by changing political moods, making it appear either non-responsive to public sentiment or worse it is pursuing its own agenda within the government without check from legislative branch.

What is great about our system is that if Members of Congress want something to happen, they do have the ability to simply pass a law that directs the executive branch to do what it wants.  In terms of offshore development, the State of Florida secured statutory prohibitions from development in the Eastern Gulf of Mexico through 2022, which is why none of these areas are considered in the five-year plans that have been published.  However, these areas could be opened up immediately if Congress passed a law dictating that such development take place.

There really is a good balance here when the branches do what they are designed to do.  Currently, it does not seem that the legislative branch is able to get much done, but that is likely more of a reflection of the current mood of the country than a structural problem.  But one thing’s for certain, such stagnation empowers the other two branches.

So, as far as offshore leasing goes, the U.S. is not doing everything it can to produce more, but it does have mechanisms in place to ensure that the country is still a very attractive place for resource extraction and foreign investment.  This should give us some solace as we work our way through the next five years.


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