Study for NARUC lists ongoing OCS ban's adverse impacts

Continuing US offshore oil and gas leasing moratoriums from 2009 through 2030 would decrease US oil production by 9.9 billion bbl—or an average 15%/year—and natural gas production by 46 tcf—or 9%/year—a study commissioned by the National Association of Regulatory Commissioners concluded.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Feb. 16 -- Continuing US offshore oil and gas leasing moratoriums from 2009 through 2030 would decrease US oil production by 9.9 billion bbl—or an average 15%/year—and natural gas production by 46 tcf—or 9%/year—a study commissioned by the National Association of Regulatory Commissioners concluded.

The study, which NARUC released on Feb. 15 during its 2010 winter meeting in Washington, DC, also predicted that US oil imports from members of the Organization of Petroleum Exporting Countries would climb by 4.1 billion bbl, or an average 19%/year, during 2009-30 if US offshore leasing bans continue. This would result in $607 billion more in payments to OPEC producers, or $295 billion on a net present value basis, it said.

NARUC added that total net gas imports (by pipeline or as LNG) would increase by 15.7 tcf, or nearly 75%/year; energy-intensive industries would lose 13 million jobs, or an average 0.36%/year; and housing starts would drop by nearly 200,000, or 0.46%/year.

The study also projected average annual prices increases of 17% for gas, 5% for electricity, and 3% for motor gasoline without more domestic OCS oil and gas activity. It estimated that real energy costs to consumers would climb by $2.35 trillion ($1.15 trillion NPV or $3,700/capita), or an average 5%/year; and import costs for crude, products, and gas would increase cumulatively by $1.6 trillion ($769 billion), or more than 38%/year.

“Higher energy prices, greater volatility, expanded foreign dependence, and $2.3 trillion less for everyday Americans to spend—and that’s just the tip of the iceberg,” said Consumer Energy Alliance Pres. David Holt, who spoke at the NARUC gas committee meeting where the report was presented.

‘Inertia of inaction’
“The good news is that this report describes a scenario for the future that we don’t have to accept, and mustn’t,” Holt said. “The bad news is that, despite overwhelming support for new energy exploration among the American people, the inertia of inaction that has defined this debate will be difficult to overcome.”

“This landmark study attests that a drilling ban along the OCS and some restricted onshore lands carries an estimated adverse effect on [US gross domestic product] of more than $2 trillion between now and 2030,” observed Natural Gas Supply Association Pres. R. Skip Horvath. “By not allowing drilling in the OCS and many restricted onshore areas, the study estimates that 285 tcf of gas will remain off-limits to the American people, enough to meet our needs for more than 12 years at current levels of consumption.”

American Gas Association Pres. David N. Parker said, “It’s clear from this report that the status quo on energy production simply won’t suffice. We encourage lawmakers to heed the results of this study and take a closer look at the energy-rich areas in our country that are currently off-limits.”

NARUC directors adopted a resolution in 2007, supported by the Interstate Oil & Gas Compact Commission, which instituted the study, guided by a large and diverse study group of private and public sector energy experts. Science Applications International Corp. provided energy expertise and market modeling capabilities, with the Gas Technology Institute as a subcontractor providing oil and resource and development expertise, NARUC said.

“The previous administration and Congress removed oil and gas moratoriums on offshore public lands over a year ago, but required actions to access the energy resources there have not been taken,” said O’Neal Hamilton, former chairman of the South Carolina Public Service Commission and current chairman of NARUC's committee on gas.

Study’s purpose
Hamilton said, “Whether additional federal lands should be leased for energy development, and under what conditions leasing should occur, is a matter for national energy policy decision makers. Our research allows policymakers to know the extent of the resource base and the effects that maintaining the restrictions would have on the country.”

GTI’s domestic resource assessment for the study suggested that US gas resources would climb by 132 tcf onshore and 154 tcf offshore, excluding parts of Alaska, from 2009 to 2030. It estimated that domestic crude resources could grow by 36 billion bbl offshore and by 6 billion bbl, all within the Arctic National Wildlife Refuge. It projected no increase for onshore crude resources in the Lower 48 states.

“With these additions, GTI estimates the current resource base [will] increase from 1,748 tcf to 2,034 tcf for gas and from 186 billion bbl to 229 bbl for oil,” the study’s executive summary said. “The increases are driven by two primary factors: the increased shale gas activity and development successes, and an increase in resource estimates for the currently restricted offshore areas to better reflect the impact of new technology and successes in the currently available and developed offshore areas.”

The study noted that if resources in areas which previously were covered by congressional moratoriums or presidential withdrawals are not developed, there would be no new environmental effects attributable to their development.

“However, as a nonmodeled item, the study observes that there could be environmental effects on domestic and international waters as a result of increased tanker transport of oil and gas imports and unknown environmental effects in countries from which the US would import the resources,” it added.

Contact Nick Snow at nicks@pennwell.com.

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