The oil and gas industry is more interested in drilling in the waters off Florida’s Gulf Coast and the Straits of Florida, even though the Department of the Interior’s proposal, open to public comment for the next 60 days, would more than quadruple the number of drilling leases available in U.S. waters.
The proposal would also open the waters off California, the Atlantic Coast and the Arctic to drilling. But accessing the Eastern Gulf Coast waters would likely require the consent of the U.S. military. This area has been off-limits to drilling since 2006 due mainly to the Defense Department’s concerns that oil development would interfere with extensive military testing and training exercises in the area.
“The eastern Gulf of Mexico could be very attractive to industry because of the proximity to existing infrastructure in the central and western Gulf of Mexico,” the National Ocean Industries Association, which represents the offshore oil and gas industry, said in a statement.
“Investing in the eastern Gulf could yield results – new jobs, new oil and gas production and increased energy security – quicker than investing in other offshore areas.”
The industry appears to be “chomping at the bit”
The American Petroleum Institute and the Independent Petroleum Association of America are also interested in the eastern Gulf waters, and Royal Dutch Shell Plc told Reuters in October that “we have an appetite and we are interested” in the eastern Gulf.
Shell spokesman Curtis Smith said while the company welcomes Trump’s move, they have not committed to any new activity. Major offshore producers such as Exxon Mobil Corp, BP Plc, Anadarko Petroleum Corp, and ConocoPhillips declined to comment. Chevron spokeswoman, Veronica Flores-Paniagua said they are happy with Trump’s move and wants to explore parts of Gulf, and also to better understand the geology of the Atlantic Seaboard.
The Interior Department has set up an “interagency working group” with the Defense Department to discuss the deal, and Reuters is reporting they have seen a letter sent by Deputy Secretary of Defense Patrick Shanahan to Interior Secretary Ryan Zinke in September, Shanahan says the Pentagon “supports the development of national domestic energy resources in concert with enabling military operations, training, and testing.”
Florida’s Republican Governor Rick Scott, who previously opposed protections put in place by the Obama administration, objected as well as Democratic Sen. Bill Nelson and Republican Sen. Marco Rubio. “I have already asked to immediately meet with Secretary Zinke to discuss the concerns I have with this plan and the crucial need to remove Florida from consideration,” Scott said in a statement.
The good news – Sort of
One of the biggest things that will save many of the areas under the proposed new drilling sites will be the ample and cheap opportunities to continue drilling in shale formations on land.
And with the Tax Cuts and Jobs Act of 2017 also sneaking in legislation that now opens the Arctic Wildlife Refuge to oil and gas drilling, many companies realize the Arctic is remote and drilling would be expensive. Bud Coote, a senior fellow with the Atlantic Council’s Global Energy Center said, “In the current economic environment, it’ll be a tough sell.”
He pointed out, “The coastal plain is in the northeastern corner of Alaska, far from the infrastructure and proven reserves of the North Slope.” Not only that but with the price of oil so low and not much exploration having been done, not much is known about the reserves available.
Sajjad Alam, an analyst focusing on oil and gas in Moody’s corporate finance group, said the high costs and difficulties in many of the areas offered for lease under the plan are likely to keep them low on an oil company’s priority list.
