What is Next in the Gulf?
Posted May 3, 2010 at 11:03 am 
Filed in: Two weeks after the initial accident on the Deepwater Horizon, it is worth thinking about what may happen with respect to offshore drilling policy in response to the accident and the spill.
The President has called the oil spill a “massive and potentially unprecedented environmental disaster.” But he and his administration have not acceded to calls to end all offshore oil and gas production. We agree.
It goes without saying that the first priority needs to be to stop the leak, contain the oil and mitigate the damage, to the extent possible.
Before moving on, we will need to understand exactly what happened, and take steps to ensure that substantially reduce the likelihood of this ever happening again. In response to the Exxon Valdez accident (here), Congress passed the Oil Pollution Act of 1990, which significantly strengthened safety standards on tankers operating in U.S. waters, and there has not been a major tanker spill of a tanker in U.S. water since then. There is no doubt that this accident also will spur a legislative response that will ultimately require an upgrade of the technology routinely employed in the offshore oil and gas production industry.
Even so, the big question is whether or not this will prevent us from opening up new areas to oil and gas exploration, a policy that has been viewed as part of a compromise in an energy (and perhaps climate) bill. (See also here, here, here). While it is far too early to see how this will play out, it is worth observing that offshore exploration was halted in vast swaths of offshore acreage in response to the 1969 oil spill in Santa Barbara, California, and those areas remain unopened today (See here, here.) Nevertheless, opening up new areas is an important part of a comprehensive energy policy, and once we have upgraded the environmental protection standards for offshore drilling and production, we expect that policymakers will see the value in opening up new areas, as the President recently proposed.
But whether or not we open up new areas to new oil and gas exploration and production, we are likely to continue drilling in existing areas for several reasons.
First, the industry has operated in recent years with few oil spills and spilled relatively small volumes of oil. This was an unusual event. That is, an oil spill of this size in U.S. waters is unusual. More oil was spilled in this accident than in the entire Gulf of Mexico during Hurricanes Katrina and Rita in 2005. The fact that an unusual accident occurs does not always mean we stop engaging in the type activity in which the accident occurred. Planes crash, and sometimes we never learn why, but millions of people still fly every day around the world.
Second, we need the oil. The United States produces about 5 million barrels of crude oil a day, of which about 25 percent comes from the Gulf of Mexico. Were production in the Gulf treated as production from a nation, it would rank in the top twenty nations in terms of oil production. If we did not obtain the oil from the Gulf, we would obtain it from abroad, losing jobs and exporting dollars in the process. Yes, we believe that we must transition away from oil for a wide variety of reasons, but that process will take decades, and we will continue to consume prodigious volumes of oil for years to come.
Third, the uncomfortable truth is that we pay a price, sometimes a terrible price, for the lifestyle we lead. Occasional accidents harm the environment and occasional accident cost lives. Eleven lives were lost in the explosion on the Deepwater Horizon. Yet, 21 were lost in the oil and gas production industry in the United States in 2008 and 15 the year before that. And earlier this month, 29 lives were tragically lost in a West Virginia coal mine. And no one suggested that we stop using coal to generate power.
In fact, this is yet one more reason to accelerate the process of electrifying our transportation system. In addition to all of the economic and security benefits it offers, its environmental profile is better than internal combustion engine-powered vehicles, and the risk of catastrophic environmental accidents is far smaller.
In the end, because of the benefits we derive from our use of oil, we are reasonably confident that what we will do is learn what happened, tighten safety standards – significantly – and then move on and keep drilling in those areas already open. The fate of areas that currently are not open, however, is likely to take longer to resolve, but opening them as well is an important part of the comprehensive policies needed to enhance our energy security.
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