Recapturing America’s Competitive Advantage on the Outer Continental Shelf

After eight years of retreat, it’s time for America to charge back into the energy-rich waters of the outer continental shelf and secure once and for all its rightful place as an energy superpower.

With his ambition to return America to its glory days and reassert the nation’s influence on the world stage, President Donald Trump would do well to start with energy security and a bottoms-up review of the energy policies put in place by his predecessor.

To do that, the president needs a full team of experienced and knowledgeable staff at the U.S. Department of the Interior and its agencies.

The Senate’s confirmation of Secretary Ryan Zinke to head Interior earlier this month was an excellent start, but hundreds of positions remain unfilled, many critical to restoring access to our nation’s vast offshore wealth.

Responsible development of our offshore resources has long been a major contributor to the economic health and security of our country. Taxes, royalties, and rents from offshore production are the treasury’s second highest source of revenue – right after the annual contributions of the millions of Americans who pay income taxes.

Revenue from offshore production took a nosedive under the Obama administration, though. The U.S. government made just $2.8 billion from offshore leases in 2016 – a fraction of the $18 billion earned in the final year of President George W. Bush’s time in the White House.

The U.S. offshore holds an estimated 90 billion barrels of oil and 327 trillion cubic feet of natural gas. Of the nation’s 1.7 billion offshore acres, though, less than 1 percent – or 17 million acres – are currently under lease.

That small portion still delivers nearly one-fifth of all of the oil produced in the country. The vast majority of which – 99 percent – is produced in the Gulf of Mexico off the coasts of just four states: Alabama, Louisiana, Texas, and Mississippi.

California and Alaska are the only other states with offshore production – and the entirety of California’s federal waters have been off-limits to new leasing for decades.

Soon after coming into office, President Barack Obama began to reverse progress made during the Bush administration, including reducing the frequency and number of lease sales, blocking exploration along the Atlantic and Pacific coasts, and curtailing lease terms.

Nearly 8 million acres of federal waters were leased in 2008. That number dropped below 3 million acres in 2009 and has stayed below that level ever since.

By the time Obama left the White House in January, he’d succeeded in barring oil and gas activity in almost every corner of the OCS, including nearly all waters off the coast of Alaska. Today, roughly 90 percent of federal offshore areas are off-limits.

Obama’s efforts, including an avalanche of new regulations, have been effective in restricting our ability to capture the full economic and competitive potential of America’s collective offshore wealth.

Thanks to investments made by private industry a decade ago, oil production in the Gulf of Mexico is expected to reach 1.9 million barrels a day by the end of this year, providing roughly 20 percent of total U.S. production. Still, that represents a substantial reduction from 2010, when federal waters accounted for nearly 30 percent of domestic production.

The share of U.S. natural gas production from the federal offshore experienced an even greater decline, dropping from 16 percent of total U.S. production to 4 percent between 2006 and 2015.
Luckily for the U.S. economy, while oil and gas production from federal areas was steadily declining, production on private and state-owned lands increased dramatically – doubling between 2006 and 2015 – helping limit the fallout.

While states and private landowners have continued to keep domestic production strong, sustaining U.S. dominance will require the discovery of new deposits to keep ahead of consumption as American living standards rise.

We cannot forget the states, off whose coastlines new production would occur. Congress should make sure coastal states from Maine to Alaska have a stake in helping to meet the nation’s energy needs by expanding the federal program that currently provides four Gulf of Mexico states 37.5 percent of all revenues from oil and gas activities off their shores.

Offshore energy development is a vital part of the U.S. economy, providing jobs, energy security, and much-needed government revenue. With that in mind, it is imperative that offshore leasing remains a robust part of the federal government’s mission.

So far, the new administration appears to be preceding cautiously. This week’s auction of 73 million acres in the Gulf of Mexico is a start, but more needs to be done – and quickly – to make sure the United States remains competitive.

Achieving our energy goals before another election swings the pendulum back the other way will require the president to tap good people to serve at the critical agencies within Interior. Reviewing and replacing backward-looking policies can take 18 months or longer. There is little time to waste.

After years of falling production and government neglect, our strategic offshore resources are ready for the kind of renaissance that has made our onshore oil and gas activity the envy of the world.

Robert Dillon is Vice President of Communications for the American Council for Capital Formation, a pro-growth economic think tank based in Washington, D.C., and the former communications director of the U.S. Senate Energy and Natural Resources Committee.

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