Offshore Energy Exploration: Myth vs. Fact

Myth: There’s not enough energy in the outer continental shelf (OCS) to make exploration worthwhile.

Fact: The Bureau of Ocean Energy Management (BOEM) estimates that the OCS contains 90.55 billion barrels of oil and 327.58 trillion cubic feet of natural gas. These estimates are likely very conservative, as bans on offshore leasing have made it illegal to explore and determine how much more energy is available. In other words, this is just the tip of the iceberg­—history has proven that when people are allowed to look for energy, they generally find it. The best way to stop them from finding it is to stop them from looking for it.

Myth: Offshore energy development would do nothing to lower prices because it would take too long for the energy resources to make it into the market.

Fact: Economists have long disputed the notion that offshore energy development would not affect consumer prices. Both economic theory and now empirical evidence demonstrate that government policies promising future oil production lead to immediate price relief. (Economist Robert Murphy made this point in an IER blog.)

Further, while there are areas along the Atlantic coast without the significant build-out of infrastructure needed to facilitate quick energy production, other currently unexplored areas do have that infrastructure in place, such as the eastern Gulf of Mexico. No serious observer has ever suggested that it would take anywhere close to ten years to access those energy resources and deliver them to American consumers. Furthermore, in places like California, where an infrastructure is already in place and the local community supports offshore exploration, those resources could be available in a significantly shorter period of time.

Lastly, for those areas lacking existing infrastructure, industry has responded with Floating Production and Storage Offloading (FPSO) vessel systems, which allow the production of oil to store on a ship that then offloads the oil to tankers. Brazil’s increasingly rich offshore areas have been using this approach, and they are becoming more common as discoveries can be monetized pending construction of longer-term infrastructure. Frontier areas in the Gulf of Mexico have several and more are being planned.

Myth: Offshore energy production is dangerous and harmful to the environment.

Fact: Offshore energy production is safe and environmentally sound. In the last 50 years, the oil and gas industry has developed innovative technologies and exploration methods that are efficient, pose little threat to the environment, and keep workers safe. The industry has taken additional precautions to prepare for any type of unwanted incident.

Some of those technologies include:

• Advanced 3-D seismic and 4-D time imaging technologies: enable offshore operators to locate oil and gas resources far more accurately to necessitate less drilling and allow greater resource recovery.
• Storm chokes: placed on all offshore wells to detect damage to surface valves and shut down production during an emergency.
• Blowout preventers: continuously monitor the subsurface and subsea-bed conditions to prepare for unexpected changes in well pressure.
• Waste product reuse technology: transforms drill cuttings, a waste product of rock pieces and drilling fluids produced when drilling a well, into raw material for bricks and roads, and they were used in rebuilding Louisiana’s wetlands.

These technologies and practices are yielding results:

• According to the U.S. Department of Interior data, offshore operators produced 14 billion barrels of oil from 1986 to 2015 with a spill rate of only .035 percent. (The data includes the spill caused by the Deep Water Horizon accident.)
• Hurricanes Cindy, Ike, Ivan, Katrina, Lili, and Rita all occurred during the 2000 decade. (Ivan occurred in 2004, Rita and Katrina occurred in 2005, and Ike occurred in 2008.) While these hurricanes destroyed platforms and damaged pipeline segments, there were no major oil spills attributed to these storms.

Myth: Offshore oil and gas production is the number one contributor to oil in our oceans.

Fact: About 1 percent of all oil found in the North American marine environment comes from offshore oil and gas development. According to the National Academy of Sciences, the majority—over 60 percent—is the result of natural seeps through the ocean floor. In many places it is higher. For example, all of the tar on the beaches of Santa Barbara is from natural seeps. Moreover, these seeps are reduced when the oil is produced and transported to shore, where it can be put to use as energy for America.

Oil seeps—underwater cracks in the Earth’s crust—release more than 60 percent of the petroleum entering North American waters and over 45 percent of the petroleum in waters around the globe. Natural seepage of crude oil from geologic formations below the seafloor is estimated to exceed 47,000,000 gallons in North American waters and 180,000,000 gallons globally every year.

Myth: Oil companies are sitting on 68 million acres of untapped leases and don’t need access to new areas.

Fact: Lease agreements already contain federal requirements that require oil companies to use leased land in a timely manner. The 1992 Comprehensive Energy Policy Act requires energy companies to comply with lease provisions and explore expeditiously or risk forfeiture of the lease. Energy companies cannot “stockpile” leases (even those found to contain no oil or gas) to drive prices up.

Companies are not “sitting” on the leases they now have. Technology has allowed companies to increase their production on leased acreage.

The Hard Facts:

• 98 percent of Federal offshore areas are not leased to oil and gas drilling.
• 97 percent of Federal onshore areas are not leased to oil and gas drilling.

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