Offshore drilling
Dan Reed

Drill Here, Not There: Obama’s Cynical Energy Policy

All Presidents and their Administrations have great potential to make people angry with the decisions they make and actions they take. President Obama’s Administration, however, scored a rare “two-fer” when it unveiled its newest approach to accessing oil and gas resources in regions where drilling wasn’t previously allowed.

Within a two-day span in late January, the White House managed to:

  • Anger the oil industry and every politician in Alaska by blocking efforts to further develop energy resources in the enormous Arctic National Wildlife Reserve in far northeast Alaska for several more years
  • Upset environmentalists by pitching a plan to open up offshore drilling in the Atlantic off Virginia and the Carolinas and in sections of the Arctic Ocean.

Obama Administration Angers Politicians

But a careful sorting out of those two seemingly contradictory decisions uncovers a remarkably cynical approach by the Administration toward the long-running energy development vs. environmental protection debate. A decibel meter measuring the intensity of the screams coming from the offended parties in both cases also would reveal the Obama Administration’s cynicism.

To be sure, environmentalist groups registered obligatory expressions of outrage over the Administration’s draft proposal to sell a small number of mid-Atlantic and Alaskan north shore drilling leases to exploration companies. Peter Lehner, executive director of the Natural Resources Defense Council, told Bloomberg News that Obama’s proposal to allow limited drilling off the Mid-Atlantic states in the years ahead “takes us in the wrong direction. It would expose the Eastern Seaboard, much of the Atlantic and most of the Arctic to the hazards of offshore drilling.”

But Lehner’s complaint was mild – and rather lonely – in comparison to the cries of Alaskan politicians whose blood was brought to boiling temperature by Obama’s move to designate an additional 12.28 million acres of the ANWR as protected wilderness. Only Congress can actually make such a designation, but until Congress acts (or until some future president changes Administration policy toward drilling in ANWR), that pristine, energy-rich sector of land on the Arctic Circle will remain off limits to drillers.

Given new Republican control in the Senate to go along with previously-existing Republican control of the House, there’s no way that this Congress will pass legislation enacting Obama’s policy proposal. But Senate Republicans also lack the votes necessary to override a veto of any legislation they might pass overriding the Administration’s policy toward drilling in ANWR. Thus, Obama effectively has blocked energy development there for at least another two years.

That set off Sen. Lisa Murkowski (R-AK), who first accused the Obama Administration of making a “stunning attack on (Alaska’s) sovereignty” and later escalated her rhetoric by saying the administration “had effectively declared war on Alaska.”

The rest of the 50th State’s Washington delegation was just as outraged, albeit with slightly tamer language. Sen. Dan Sullivan, also a Republican, said “This is a classic President Obama tactic… take legally dubious action through executive orders to do what you know Congress won’t do.” Rep. Don Young (R-AK), chimed in, calling the President “King George Obama,” and asserting that the President had gone “wacko.”

Unusual Agreement Makes Oil Production Crucial

State legislators in Alaska, and even Alaskan Gov. Bill Walker, an Independent who took office only in January, are also angry over Obama’s move to block energy exploration in ANWR for at least another two years. The deal that was made with the federal government to make Alaska a state in 1959 gives the state 90 percent of any revenue from development of any kind on federally-owned lands within the state.

That unusual arrangement – most western states get a 50-50 split – is critical to Alaska’s budget because the state is so sparsely populated and because more than 90 percent of its land is federal land on which taxes aren’t levied. And now that oil prices have fallen sharply, and production from the state’s North Shore oil fields has fallen to half of what it was at its peak 20 years ago, the state now is looking at a $3.5 billion annual revenue shortfall that can only be made up by increased energy exploration and production. And the most likely place that that can happen successfully and quickly is in ANWR.

The Administration, however, points to the fact that it also plans to issue three new offshore leases in the Chukchi Sea region of the Arctic Ocean.

Administration Only Approves Undesirable Drilling Locations

But that – and the proposal to offer mid-Atlantic offshore leases – is where the Administration’s cynicism becomes visible. Not only would the three potential Arctic offshore leases be pushed to at least 50 miles offshore (which is further out than any previous limits), those leases won’t be granted in the what are believed to be the most oil-rich regions off Alaska’s north shore in the Chukchi and Beaufort seas. Similarly, the potential mid-Atlantic offshore leases would be for locations at least 50 miles offshore.

Furthermore, limited test drilling in that region in the 1970s showed that while there are oil and gas reserves that can be tapped off the coasts of Virginia and the Carolinas, there wasn’t enough economic potential from those reserves to justify full production at the time. Since then, the federal government imposed the restrictions on drilling that the Administration now proposes to lift.

The timing of the Administration’s proposal to lift those restrictions is not accidental. Drilling 50 miles offshore in deep water is enormously expensive, and generally only financially worthwhile when energy prices are high. Now that oil prices have fallen more than 40 percent, it is not clear when, or even if, any exploration company will be willing to invest in such a project.

That problem exists in spades in the Arctic off Alaska. Drilling is inherently more expensive in Arctic conditions to begin with. Pushing platforms 50 miles offshore and into deep Arctic waters that aren’t believed to be the best locations for drilling will increase the cost and financial risks even more – perhaps to the point that companies won’t even bid for those leases.

Finally, the cynicism of the emerging new elements of the Obama Administration energy exploration policy is further displayed by the continued blocking of exploration in the Eastern Gulf of Mexico, where large, easy/cheap-to-access oil and gas deposits are believed to exist.

So, taken as a whole, these moves show that the Obama Administration is offering energy companies the “opportunity” to pay significantly above-average prices to go after modest amounts of oil and gas at a time when prices are low and won’t support such spending. Meanwhile, it’s moving to keep large reserves of cheap/easy-to-reach oil and gas off the market.

If “cynical” isn’t the right word to describe such an approach, what is?

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