A new leasing spree

Nov. 6, 2017
In three encouraging developments involving federal land last month, the US oil and gas industry should find both validation and challenge.

In three encouraging developments involving federal land last month, the US oil and gas industry should find both validation and challenge.

The Senate on Oct. 19 rejected an effort to remove from budget legislation a measure authorizing oil and leasing of the small part of the Arctic National Wildlife Refuge in Alaska not closed to drilling. Then, on Oct. 24, the Department of the Interior announced plans for history's largest offering of oil and gas leases on the Outer Continental Shelf: 77 million acres across the Gulf of Mexico. And the next day, the Interior Department invited bids for 900 tracts covering 10.3 million acres in the National Petroleum Reserve-Alaska in what will be the largest annual acreage offering ever for the 23-million-acre area.

Bold moves

The ANWR and OCS moves are especially bold. "Protection" of ANWR has long been a sacred mission of environmental pressure groups. Eternally lost in their appeals to save pristine, mountainous ANWR landscapes are tactically inconvenient conditions of the small leasable area, which is flat, forbidding, and long past unspoiled. Meanwhile, the offer of so much OCS area, some of it in areas sure to raise objections, evokes memories of the ill-fated attempt by James Watt, interior secretary in the administration of Ronald Reagan, to accelerate federal oil and gas leasing against strong environmental opposition. NPR-A leasing, an established practice, is less controversial. But offering record-high acreage in the reserve combines with the ANWR and OCS initiatives to make a clear statement: The government wants to lease federal land aggressively for oil and gas exploration and development

Obviously, the administration sees fiscal benefit in doing so. The government makes money from lease bonuses, rents, and royalties. It makes money from taxes on incomes of successful producers and their workers. It makes money from companies and workers in other industries now profiting from prices of oil products and natural gas lowered by a new era of hydrocarbon abundance. The administration wants to offer more federal land for oil and gas leasing because it wants the government to make more money.

This approach departs radically from that of the Obama administration, which restricted leasing and everything else related to resource development. The excuse was environmental prudence, but the reason was climate myopia. The Obama administration acted as though oil and gas exploration and production could be switched off as an environmental precaution at no cost to national financial accounts or the broader economy. The Trump understands how foolish that was. It's acting on that understanding.

For the oil and gas industry, this represents welcome reassertion of the importance of its work, an implicit call for restoration of lapsed balance in national decision-making about energy. It also demands that the industry make no big mistakes.

Leasing of ANWR and expanded offerings in NPR-A and on the OCS will be opposed by groups insisting that the industry cannot work safely. They'll point to past disasters that unfortunately blemish the industry's record. They'll demand public proof that accidents won't happen in the future, knowing the industry can't provide it.

What the industry can promise the public is to work so carefully and prepare so thoroughly that any accidents that do occur can be small and manageable with effects controllable and limited. Then it can insist internally that no accidents occur at all.

Exploiting mishaps

There can be no oil spill of any size on the Coastal Plain of ANWR, no blowout, no out-of-control fire. There can be no tragedy offshore-or any accident injurious at any level to workers or the environment. Industry opponents will be watching. Wanting above all to block production and use of oil and natural gas, they'll exploit any mishap that can be made to seem grounded in human carelessness, especially if it makes a visible mess.

Among the many opportunities Trump's support of federal leasing offers the industry, the most important is the chance to prove distractors wrong.