Predictions of oil drilling on the Atlantic continental shelf have turned out to be dry holes for close to a half-century now.
We may soon see another attempt. With new marching orders from the Trump administration, the National Oceanic and Atmospheric Administration has started the process for granting permits to five geophysical companies to conduct seismic surveys off the East Coast.
With oil prices parked around $50 bbl. and U.S. inland producers still routing the OPEC competition, it is hard to see an economic case for prospecting potential Atlantic plays that already face ferocious political opposition.
But like so much in American public policy, immediate economic reality may be less important than politics.
The first months of the Obama administration brought out an ambitious plan for developing offshore energy under an “all of the above” policy umbrella. In April 2009, then-Interior Secretary Ken Salazar presided over a public session in Atlantic City, outlining the program.
The big sell was potential offshore wind energy development, with Salazar tossing out the possibility of 1 million MWs of electrical generation — a prospect the group FactCheck.org found “far-fetched.” But Obama was also far from ignoring oil and gas; developing leases on the Atlantic outer continental shelf was part of the plan too.
The beguiling prospect of petroleum just over the horizon from East Coast markets has been around a long time. Page 52 in the July issue of WorkBoat flashes back to our July 1967 issue, recounting how in summer 1967 Humble Oil & Refining Co., Gulf Oil Corp., Mobil Oil Corp. and Chevron Oil Co. conducted a core sampling program along the 100-fathom line on the OCS.
The 1973 Arab-Israeli war, ensuing oil embargoes and escalating prices renewed interest. In August 1976 companies bid $1.1 billion for 93 lease tracts in the Baltimore Canyon Trough on the shelf slope.
Exploratory drilling began in March 1978, but the prospects and interest proved short-lived. A 1979 lease sale drew $41.7 million for 39 Baltimore Canyon tracts, and another spate of drilling in 1980-81 came up empty. Natural gas seemed more promising but declining prices put an end to that as well, and all exploratory wells in the region were finished by 1984.
One consequence of the drilling experiments was to spur Mid-Atlantic states toward paying attention to environmental protection. With its existing ports and refineries, New Jersey in the 1970s was seen as a natural epicenter for developing a new industry. State lawmakers reacted by imposing strict laws on coastal development and protecting forests before the industry could build terminals and pipelines.
Forty years on, that conflict has widened. Now coastal South Carolina is a hotbed of opposition to drilling, where environmental groups like the Natural Resources Defense Council and Oceana found ready allies in prosperous coastal towns and the fishing and tourism industries fearful of spills.
Just a year after the Obama offshore plans rolled out, the 2010 Deepwater Horizon accident led to a hiatus in leasing. A 2014 assessment by the Bureau of Ocean Energy Management updated its estimate of technically recoverable oil reserves by 43%, to 4.72 billion bbl., and the Atlantic leases were still a possibility.
But the oil price decline was giving skeptics and renewable energy advocates free rein to predict that East Coast drilling could not make economic sense. Pressured by other coastal interests and their political allies in the states and Congress, Obama nixed the lease plans — and seismic surveys — in his last year in office.
In cancelling the lease offers, then-Interior Secretary Sally Jewell said low oil prices “were not a material factor in this decision.” It was the intense opposition from coastal communities.
Now the politics have shifted again. Industry advocates are hailing this as a victory, as their environmentalist adversaries did with Obama’s decisions. The economics have a long way to go.