The Administration’s Misstep on Eastern Gulf, South Atlantic Offshore Policy

Mark Green
Posted September 14, 2020

A national policy that puts U.S. energy off-limits to development would have serious negative impacts for our nation’s security, jobs, the economy and household budgets. As argued in this post, proponents of policies that ban new natural gas and oil development on federal lands and waters have a lot of explaining to do.

This includes former Vice President Joe Biden and the Democratic Party Platform, which both pledge to effectively end new federal natural gas and oil development.

Unfortunately, it also includes the White House, which announced this week that there will be no offshore oil and natural gas development in the Eastern Gulf of Mexico and South Atlantic going forward, into the year 2032.

This is wrong for U.S. energy, wrong for American security, wrong for jobs and wrong for economic growth. More on these points below.

Most concerning is the abrupt about-face for U.S. energy policy embodied in the president’s executive order. Suddenly shelving the vast oil and natural gas potential of the Eastern Gulf and South Atlantic, which would be critically important to the nation’s strategic energy needs, is a 180-degree shift from the U.S. “energy dominance” theme heard so often from the administration the past few years.

Reliable, affordable U.S. energy, which our industry brings energy to Americans every day, needs consistent, forward-looking policies to foster safe, responsible development. This decision is neither consistent nor forward-looking. It’s a serious policy mistake. Lem Smith, API vice president of upstream policy:

“Offshore access is critical for growing U.S. energy leadership and providing affordable energy for American families for decades to come. A ban on responsible energy development in the Eastern Gulf and the South Atlantic puts at risk hundreds of thousands of new jobs, U.S. energy security advancements and billions of dollars in critical revenue for states. … Our industry has proven again and again that responsible development and environmental protection aren’t mutually exclusive, and we are deeply disappointed that the administration has taken this action.”

The magnitude of the misstep is seen in the specific energy and economic benefits that are lost by banning development in the Eastern Gulf and South Atlantic offshore.

The Eastern Gulf could reach production of 1 million barrels of oil equivalent per day within a couple of decades, according to a recent study.

Safe development in the Eastern Gulf could be responsible for 165,000 U.S. jobs within 20 years, of which 152,000 would be in the Gulf coast region. Total contributions to the U.S. economy could exceed $117 billion. Florida’s economy alone could see an additional $4.5 billion.

Revenues to government from royalties, bonus bids and rents on leases could total $41.5 billion over 20 years. With revenue-sharing legislation similar to the current arrangement in the Gulf of Mexico is enacted, coastal states could receive $16 billion.

Likewise, responsible South Atlantic offshore development (South Carolina and Georgia) could bring significant benefits to the nation and those coastal states. For South Carolina:

• 34,000 jobs within 20 years attributable to offshore development
• More than $2.5 billion contributed to the state economy
• Projected total of $3.8 billion over 20 years in revenue-sharing dollars (if legislation similar to the current Gulf arrangement is enacted)

For Georgia:

• 4,000 jobs within 20 years attributable to offshore development
• Contributions to the state economy due to spending by industry could reach nearly $350 million within 20 years
• Projected $60 million within 20 years in revenue-sharing dollars (if legislation similar to the current Gulf arrangement is enacted)

These projected benefits are significant. But again, as important is the administration’s swerve away from an energy policy that stakes America’s energy security on safely developing home-grown reserves, offshore and onshore. Due to the number of years needed to develop an offshore lease, this decision would have long-term ramifications.

For a country that long has worked toward increased energy self-sufficiency and decreased reliance on foreign suppliers, shelving the Eastern Gulf and South Atlantic is an error that might not be fully understood for decades.