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The President's Permatorium on Offshore Drilling a Failed Energy Policy


Location: Washington, DC

In November of 2011, the Obama Administration released its offshore drilling plan for the Gulf of Mexico and the Outer Continental Shelf (OCS). The Minerals Management Service (MMS) estimates that the Outer Continental Shelf (OCS) has around 86 billion barrels of oil and offshore drilling has the potential to provide us with billions and billions of barrels of much needed crude oil.

And then he took it one step further. Not only were offshore drilling areas closed off by the president, but those companies trying to get drilling permits in areas where drilling was allowed began having a very difficult time. Offshore leasing permit approvals dropped to an historical low in the Gulf of Mexico. Since November of 2011, only 3 deepwater permits have been issued each month according to the Institute for Energy Research. That's a 57percent reduction from the historical average of 7 deepwater permits each month over the past three years. Also since November 2011, only 4.7 shallow water permits have been issued each month and is a 68 percent decrease from the historical average of 14.7 new shallow water well permits each month.

It wasn't that they were necessarily denying the permits. Rather, they were frequently slowing down the already lengthy permit process to a crawl, creating what became known as a "permatorium" on offshore drilling. This permatorium was the Obama Administration's secret way of essentially refusing to issue drilling permits without actually having to say no.

His actions had a deafening impact. For starters, the Energy Information Administration estimates production of oil in the Gulf Coast will decrease 200,000 barrels per day in 2012 compared with levels before the president took office. In addition, revenues from offshore lease sales has plummeted from nearly $9.5 billion in FY2008 to $36.7 million in FY2011 -- 258 times less in revenue. The governors from Alaska, Louisiana, Mississippi, Texas, and Virginia formed the Outer Continental Shelf Governors Coalition and sent a letter to President Obama imploring him to approve offshore drilling permits and open up more of the OCS for exploration and drilling.

Between the closures and the permatorium, the president's offshore drilling policy was an almost immediate job killer and caused a decline in tax revenue for many coastal states. Faced with strong opposition to his failed offshore drilling policies and his permatorium, in his State of the Union address this year the president announced "I'm directing my administration to open more than 75 percent of our potential offshore oil and gas resources."

Initially, this sounded like a positive step forward. But then you start to actually look at his new promise and discover that his two most recent predecessors President George W. Bush and President Bill Clinton opened up more than 75 percent of our potential offshore oil and gas resources. So his big promise wasn't really that great of a promise. And on top of all of that, he couldn't even keep this not-so-great promise.

For starters, the lease sales the Obama Administration has approved do not actually open up any new land for exploration. Instead, it only allows for exploration leases on lands that were already scheduled two years before the president took office. In Georgia, that's what we call smoke and mirrors.

He has, however, moved to permit testing for oil off Atlantic coast states. But that's just more smoke and mirrors because he hasn't made any move to end the permantorium on permitting. So even if the testing is permitted, companies are unlikely to begin that testing until the Obama Administration actually proposes to issue leases for the drilling. That's because testing companies won't invest money in tests without the assurance that the oil industry will buy their data -- which they won't do if they can't actually get permits to drill. And these oil companies have been shown time and again the Obama Administration's ability to deter the permitting process. In fact, the Shell Oil Company has spent over $4 billion in costs associated to the long permitting process and litigation in their attempt to drill in the Beaufort and Chukchi Sea since 2005 -- and it still hasn't received final approval.

This isn't rocket science. By opening up more offshore drilling, we would create American jobs, increase revenues for state and local governments, increase revenues for private companies directly and indirectly supplying the offshore drilling projects, increase American-made energy production, decrease energy costs, and decrease our country's reliance on foreign oil. Instead, the president would rather play obstructionist with his environmental buddies and block one of our greatest resources of oil and natural gas. If the president is truly in favor of an all-of-the-above energy plan, then he needs to end his permatorium on offshore drilling permits and open up all of our potential offshore resources.

Next week I will talk about the dramatic jump in gasoline prices from the time President Obama took office until now and what might be behind those jumps. I encourage you to visit my website each week to check out the latest edition of Power the Nation.

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