BOEM Refuses to Say When Gulf Leasing Moratorium Will Lift, Area Residents Say Impacts Already Felt
Residents of the Gulf Coast are already feeling the impacts of the Biden administration’s offshore leasing moratorium, which has thrown the once-vibrant offshore energy industry into a period of significant uncertainty. Despite this, federal officials will not say whether the administration will lift the moratorium or extend it into a permanent ban.
During a Senate Energy and Natural Resources committee hearing on Thursday, Bureau of Ocean Energy Management Director Amanda Lefton refused to commit to Sen. Bill Cassidy (R-LA) that the leasing would someday resume in the Gulf of Mexico, responding instead:
“I am committing to you, sir, that we will have an interim report that is going to be out in the early summertime and we’re very glad to continue the conversation.”
Lefton reiterated this point later in the hearing, telling Sen. Cindy Hyde-Smith (R-MS that BOEM would work toward “an expeditious decision” after the report’s release.
In a statement, the Independent Petroleum Association of America (IPAA) expressed disappointment with Lefton’s unwillingness to say when the moratorium would be lifted. IPAA Vice Present of Government Relations Mallori Miller said uncertainty was hurting the Gulf area economy:
“This uncertainty is stifling investment for offshore energy producers, hindering not just future wells but ongoing operations as well. The Gulf of Mexico is one of the country’s most prolific oil and natural gas basins – Interior’s leasing ban is cutting off access to a critical energy source for Americans while also impacting jobs and important revenue for states.”
On Capitol Hill, the future of offshore energy was the focus of hearings in both the House and the Senate on Thursday, as lawmakers debated legislation that would further limit offshore production.
Louisianans Agree: Gulf Leasing Ban Would Hurt Economy, Environment
Lawmakers and community members from Louisiana testified about the importance of energy production to the state’s economy and the many ways in which the leasing moratorium was already hurting the state. Since the moratorium was announced, new well exploration and development has slowed, hurting Gulf Coast businesses, while lower royalty and tax receipts mean less funding for environmental programs in the state.
Louisiana Governor John Bel Edwards urged the senators not to impose permanent restrictions on production and encouraged the administration to resume leasing by the third quarter of this year:
“An abrupt restriction of these [offshore oil and gas] activities, whether on state, private or federal lands, would be devastating to our state… At a minimum, we must have a responsible transition period for continued production and use of oil and gas resources that allows our state government, local governments, public institutions, businesses and people to reposition themselves for a future, sustaining economy.”
Offshore energy production in the Gulf accounts for about 20 percent of American energy production, 345,000 U.S. jobs and $28.6 billion in GDP, along with hundreds of millions of dollars in taxes that fund conservation projects.
Because offshore wells are a long-term investment, the leasing moratorium has already impacted projects. Regulatory uncertainty has made it more difficult for companies to secure the funding they need to proceed, and some have already tabled planned projects.
Mike Minarovic, CEO of Arena Energy, explained to the senators that a deep well in the Gulf of Mexico could cost $100 million to drill, only to turn up dry and that:
“The temporary ‘pause’ on federal lease sales for public lands and federal waters has had an immediate chilling effect on offshore oil and gas producers and capital markets.” (emphasis added)
These sentiments were echoed in a House Natural Resources committee hearing. Henri Boulet, executive director of the Morganza Action Coalition, explained how revenue from lease sales in the Gulf of Mexico provide essential funding for infrastructure projects in his area and that this revenue source has already been jeopardized by lease sale cancellations:
“None of this would be possible without the concentration of major assets of our energy industry that have developed in the U.S. Gulf of Mexico. Assets which we must protect and prioritize… However, critical protection and environmental projects like the Morganza to the Gulf levee system are at stake with the federal leasing moratorium. Already, GOMESA has been deprived of tens of millions of dollars from the cancellation of the March Gulf lease sale. And we have to assess that BOEM has not put out a notice or otherwise done anything to prepare for an August lease sale. Based on sale statistics from the past few years, these would have been anywhere from $200-300 million of revenue for the federal government, with anywhere from $20-40 million to Louisiana alone to fund exactly the environmental projects I’ve been describing. So, our environment has been deprived of that support.” (emphasis added)
Boulet continued by reinforcing that these funds are unique and not easily replaced:
“As stated, for many years I’ve advocated for resilient infrastructure along our coasts. Please don’t tell me that these dollars are going to be easily replaced with other federal funding. I already begged for that as part of my job. To not even let the region generate them ourselves is a double impact.”
Beyond these revenues, energy production is an investment in the future of the region. Companies investing in offshore projects are committing to a continued relationship with the region that will provide high-paying jobs for decades to come.
Port Fourchon Executive Director Chett Chiasson explained to representatives how offshore oil and gas production provide not only near-term benefits but has also enabled workers to develop the skills needed for renewable energy:
“For Port Fourchon to have a successful future continuing to create jobs throughout the economy and facilitating development for our community, continued Gulf of Mexico energy exploration and development is critically important. Robust levels of exploration and development have the ability to energize oil and gas service companies, their suppliers and their suppliers’ suppliers throughout the country, who are planning for future development. It facilitates critically needed investment by entities that service these offshore activities, which has a positive ripple effect throughout the national economy. Equally as important in today’s world, the offshore exploration, development and service industries that have been involved in hydrocarbon production have already transitioned into offshore renewable energy activities.” (emphasis added)
Offshore Development Doesn’t Sacrifice Safety
Opponents of offshore drilling frequently imply that deepwater production inevitably means ocean spills. A cute, but inaccurate phrase that was thrown around during the House The officials who regulate the industry, however, say that continued technological advancements mean that offshore drilling is safer for workers and the environment than ever before.
Center for Offshore Safety Director Russell Holmes explained during the Senate hearing that the industry has been working to improve its ability to protect workers, prevent spills, and to respond to any spills that do occur quickly and effectively. These changes benefit both workers and the environment:
“While the benefits of the U.S. offshore oil and gas program are unquestionably many, it is a balance to produce these natural resources while ensuring the safety of the offshore workforce and protecting the environment…Today, offshore energy development occurs using state-of-the-art standards and a safety management culture, due in large part to industry leadership and the lessons learned a decade ago.”
The effects of these improvements are seen in the fact that offshore drilling opponents are forced to refer to events from as far back as the 1960s, something highlighted by Rep. Jerry Carl (R-AL), who chided offshore opponents for their unwillingness to acknowledge industry improvements:
“You know, as someone who lives on the Gulf Coast, I’m astounded that we’re not talking about how we have benefited with knowledge from these disasters that we’ve had in the past…But what we learned from that, we have grown in leaps and bounds from an environmental standpoint. We’re so much better.”
Both/And, Not Either/Or
One of the key themes of Gulf Coast witnesses at both hearings was that offshore production and environmental preservation can co-exist and even benefit each other. Industry in the Gulf Coast region is committed to minimizing its environmental impact and to reinvesting in the health of the Gulf itself and the bayous and marshes surrounding it—all while providing critical preservation revenues and honest employment.
If the leasing moratorium becomes a permanent ban, as BOEM has hinted it might, it will grind the economic ecosystem to a halt and be detrimental to the region’s environment. As Boulet said to the House members:
“As stated, for many years I’ve advocated for resilient infrastructure along our coasts. Please don’t tell me that these dollars are going to be easily replaced with other federal funding. I already begged for that as part of my job. To not even let the region generate them ourselves is a double impact.” (emphasis added)