July 1, 2006 | Commentary on Energy and Environment

Lift harmful limits on offshore drilling

Why would the most powerful economy in the world leave so much of its own energy sources untapped?

Alone among countries, the United States has placed a substantial amount of its oil and natural gas potential off limits. Other countries drill just off our shores. But U.S. firms face restrictions on drilling in most offshore areas, even as American drivers face sharply higher prices at the gas pump.

Congress seems poised to do something about this policy by taking up the Deep Ocean Energy Resources (DOER) Act of 2006. And it's about time.

Domestic oil and gas production has failed to keep pace with growing demand, but it's not because we're lacking for domestic energy. Since the 1990s, the federal government has placed severe restrictions on new energy development, particularly in some of our most promising areas.

But back then, oil and natural gas were cheap, and the need for additional energy wasn't considered significant. Also, the 1989 Exxon Valdez oil tanker spill led to heightened environmental concerns about offshore energy production.

Environmental concerns took precedence over future economic considerations. Soon, access to 85 percent of federally controlled offshore areas had been restricted, including the Pacific and Atlantic coasts, and portions of the areas off the shores of Alaska and the eastern Gulf of Mexico. No one knows how much energy lies in these areas. But many agree there's enough to bring stability to energy markets and make a real difference in oil and natural gas prices for years to come.

According to a recent Interior Department study, restricted offshore areas contain an estimated 19 billion barrels of oil and 84 trillion cubic feet of gas - several years' worth of total U.S. consumption. It may be even higher given that most of the off-limits areas haven't been thoroughly explored.

Moreover, the central and western Gulf of Mexico - the only offshore areas where drilling is permitted - were dealt severe blows last year by Hurricanes Katrina and Rita. At the peak of damage, one-fourth of America's domestic oil and gas production was off-line. No offshore wells suffered significant spills resulting from the storms.

Politics, not geology, is the reason America has put so many energy eggs in this one hurricane-prone basket. Those storms should teach us that allowing drilling elsewhere (and related refining and pipeline infrastructure) would give us greater supplies, lower prices and less vulnerability should disaster strike any one area.

Our policies need to catch up with the times. Oil and natural gas prices have tripled since the 1990s. Demand continues to increase, by a steady 1.5 percent per year. Imports have increased. Political stability in oil-producing nations has decreased. Domestic production has flattened, even as our ability to extract resources without environmental damage has increased dramatically.

Today, scientists estimate that merely 1 percent of the oil found in U.S. waters results from oil production spills.

Cuba wants to let the Chinese drill in some of the very parts of the gulf that American producers are forbidden to touch, some as close as 45 miles off the Florida coast. Do we truly believe the environmental safeguards of Chinese energy firms are better than ours?

It's time we stop assuming that all energy exploration is bad. Most takes place too far from the coast to be seen, and we haven't had a spill from offshore drilling in nearly 40 years. Neither has Canada, which permits drilling off its Atlantic and Pacific coasts and in the Great Lakes, where some rigs are closer to U.S. shores than American producers are permitted to drill.

The DOER Act is intended to overcome state opposition to offshore energy production. It would empower the governments of coastal states to decide whether to permit offshore oil and natural gas production. States that want to keep the federal restrictions could do so; those that want to permit drilling could also do so. Only drilling in waters more than 100 miles from the coast would be outside state control.

States that permit drilling would receive a share of the leasing and royalty revenues. Currently, all revenues from offshore drilling go the federal government, even though states and the federal government split the royalty proceeds from onshore energy production.

America's energy problems are partially self-imposed, and that needs to end. Congress overreacted in the 1990s, and it needs to undo its damage. Our need for affordable energy will not decrease, and the time has come to lift the restrictions on offshore energy production and let U.S. producers do what they can to meet our growing energy needs.

Ben Lieberman is a senior policy analyst at The Heritage Foundation (heritage.org), a Washington-based public policy research institute.

About the Author

Ben Lieberman Senior Policy Analyst, Energy and Environment
Thomas A. Roe Institute for Economic Policy Studies

Related Issues: Energy and Environment

First appeared in the Baltimore Sun