What Trump's offshore drilling plan won't accomplish
Trump administration officials floated a plan earlier this month to open most of the U.S. coastline to oil exploration, a broadside that immediately drew jeers from coastal state officials and environmentalists.
But experts say those decrying the proposal probably need not fear: The laughably broad scope of the plan -- and its stumbling rollout, including an on-again, off-again exemption for all of Florida -- suggests a poorly considered proposal aimed more at grabbing headlines and ruffling political feathers than at enabling actual new drilling.
The development of shale mining in large part has stymied the appetite of oil companies for new offshore projects, and most of the coastline the Department of the Interior is offering up would be unlikely to generate much demand for leases, save for a few promising areas including parts of the Eastern Gulf of Mexico and off the coast of Alaska.
A tailored, well-researched proposal (the Trump administration plan is neither) would have had a better shot of surviving a lengthy and tenuous government approval process, let alone a chance to overcome opposition from local leaders wary of offshore drilling, said Sam Ori, executive director of the University of Chicago Energy Policy Institute.
"You can start with your big campaign idea, but if your process for getting it implemented doesn't adhere with the law and doesn't adhere with the regulatory system we have in place, eventually it's going to flame out, whether it happens at the agency itself or in the courts," Ori told CBS MoneyWatch. "They had their promise. They seem to have no real grip on the actual regulatory process and legal requirements for actually implementing what they want to do."
Ori described the plan's unveiling as "hamfisted," and it goes beyond the unrealistic notion of opening the entire U.S. coastline to drilling. Just five days after releasing the plan, Interior Secretary Ryan Zinke announced on Twitter he was removing Florida from offshore drilling consideration, citing the state's reliance on tourism. That raised questions whether exempting Florida was a political favor for Gov. Rick Scott, a Donald Trump loyalist who's a potential GOP candidate for U.S. Senate.
Either way, Zinke's decision was a slap in the face to a raft of other states -- many of them led by Democrats -- that also have expressed opposition to the plan, including California, Delaware, Maryland, New Jersey, New York, North Carolina, Oregon, South Carolina, Virginia and Washington.
"It opens the door for other states to justifiably say, for the same reasons as Florida, they want to be excluded," said Peter Bryant, a veteran oil-and-gas strategist who's a managing partner at consulting firm Clareo and a board member of the World Economic Forum's Mining 2050 initiative. "Many of the states will be able to demonstrate similar issues to what Florida raised. That'll be a very hard thing to ignore through this process. This whole thing might be dead on arrival."
There is logic, Bryant said, to opening up more of the coastline for drilling as a part of an overall strategy aimed at ensuring access to affordable, reliable energy. However, he said oil companies -- many of which are busy developing shale resources -- aren't clamoring for major new offshore projects, and any new leases are unlikely to lead to drilling in the near term.
"The appetite in the market for these big offshore developments is being lessened dramatically," Bryant told CBS MoneyWatch. "I'm not even sure -- unless you find a massive field somewhere -- even if it was opened up, that companies with the capital would even be willing to do the development."
Ori isn't so sure: The industry is always looking for new territory, particularly with lower political risks. Decline rates in the roughly 90 million-barrels-per-day global oil market necessitate the replacement of 2 million barrels per day in production, and shale can't meet the entire demand.
If the price is right, Ori said, oil companies might bid on leases off Alaska or in the eastern Gulf of Mexico near existing infrastructure, even if they don't drill right away. Those areas could be developed with U.S. benchmark crude prices in the $50 to $60 per barrel range, he said.
But the administration's move to treat the entire U.S. Outer Continental Shelf (OCS) as a monolith is a mistake. The reality is different areas have different characteristics and politics. A targeted plan in the Gulf of Mexico including coastal buffer zones, similar to ones proposed under Presidents George W. Bush and Barack Obama, might have launched a very different conversation, Ori said. Arbitrarily excluding Florida, yet suggesting drilling be open in areas on the West Coast and Northeast where local governments are strongly opposed to it, gives the move a political feel.
Ori noted that considering the oil industry doesn't even want to drill in some of these waters, it makes the Trump administration plan "more symbolic." He added: "It's just unattractive from [an oil company] perspective to have to deal with that level of political risk. And there are other resources they can invest in."