Energy & Entrepreneurs

Offshore Resources Out of Touch

by Raymond J. Keating

Last month, President Obama placed a vast amount of our nation's offshore energy resources off limits for at least seven years.

He declared that the Interior Department's next offshore drilling ban would cover the eastern Gulf of Mexico and off the Atlantic coast. Of course, it was only a few months prior that the President had opened up these areas to exploration.

A Rasmussen Reports survey released in early December found that solid majorities of American voters see this ban as a clear negative. For example:

• 54% see the ban as increasing gas prices, with 25% saying no effect and 11% declaring that prices would decline. At the very least, that 11% desperately need to read up on their Economics 101.

• Similarly, 54% view this ban as being bad for the economy, and 20% no effect and 15% say the ban would be good for the economy. (Again, some economics study needed for that 15%.)

This is an important time to be reminded about the amount of resources we are talking about here. According to September 2009 report from API:

• "A new ICF International study, Strengthening Our Economy: The Untapped U.S. Oil and Gas Resources, found that opening up these areas could lift domestic crude production by nearly 1 million barrels a day and natural gas production by 3 billion cubic feet per day."

• "According to the U.S. Minerals Management Service, areas of the Atlantic and Pacific Oceans that had been off limits to drilling contain an estimated 14.3 billion barrels of oil and 55 trillion cubic feet of natural gas."

• "14.3 billion barrels of oil is enough to fuel 237 million cars on the road for more than 2 years and heat 8.9 million households that use heating oil for more than 21/2 years."

• "55 trillion cubic feet of natural gas is enough to heat 60 million households - or every home that heats with natural gas in the United States -- for the next 13 years."

• "74 percent of the undiscovered oil resources and 48 percent of the natural gas resources in the Atlantic and Pacific Oceans are located within 50 miles of the shore. This is particularly important in the Pacific, where more than 90 percent of the resources are located within 50 miles of the shores."

• In the Eastern Gulf of Mexico ... "the Destin Dome, a discovery located 25 miles from shore off Pensacola, Florida, could produce anywhere from 110 to 165 billion cubic feet of natural gas a year for the next 20 years, according to exploration plans filed with the agency."

In 2008, then-Secretaries of the Interior and Energy - Dirk Kempthorne and Samuel Bodman, respectively - noted the following in a letter to House Speaker Nancy Pelosi: "According to the Department of the Interior, of the 31 billion barrels of oil on Federal onshore lands, 92 percent is subject to some restriction with 62 percent not accessible at all. In addition, 85 percent of the Outer Continental Shelf in the lower 48 States, which is likely to be energy rich, is off limits to exploration and production. Providing more access to Outer Continental Shelf resources, opening a small portion of the Arctic National Wildlife Refuge, and streamlining the siting and expansion of oil refineries, would each help to relieve Americans from further upward pressure on the prices they pay for fuel."

It's also important to note that with actual exploration and improved technology, the actual amount of energy resources available always turns out to be much more than originally assumed or estimated.

Again, this is Economics 101, and what Kempthorne and Bodman noted two years ago still holds true today, and will hold true into the future. If policymakers are serious about making energy more affordable, then Americans must have expanded access to our own energy resources. The President's action, unfortunately, moves in the exact opposite direction.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.