Obama's New Take on Offshore Atlantic Drilling

Obama's New Take on Offshore Atlantic Drilling
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This week’s announcement by the Obama administration that it won’t proceed with planning for oil lease sales off the Atlantic Coast will draw some fire claiming it unduly impedes the development of American resources. But, on the whole, this change in policy can be defended as well suited to current conditions in oil markets.

Decisions to permit drilling in federal waters are often difficult, since they must weigh factors such as jobs, reliance on dangerous foreign sources of supply, and environmental protection. Even if the only considerations were economic, there are inevitable trade offs between oil extraction and other industries, such as tourism and fishing.

Some environmentalists have downplayed the complexities of dependence on foreign oil and will undoubtedly be upset with the current administration for continuing to allow the possibility of exploration off the Arctic Coast of Alaska. Some (including political notables Sens. Bernie Sanders and Elizabeth Warren) even want to end new lease sales in the Gulf of Mexico – the long-time powerhouse of offshore production.

Avid environmentalists have convinced a lot of college students (and a few members of Congress) that stopping domestic oil production will provide a major boost to slowing global warning, but their arguments are unconvincing. A drop in U.S. supplies would largely result in the substitution of foreign sources, and, thus, have little impact on carbon emissions. Still, there are many genuine threats to the environment from offshore drilling, as vividly illustration by the explosion of BP’s Macondo well – sometimes enough to outbalance other factors.

Some people on the other side of the debate, with their own myopia, want to drill anywhere, anytime. The world of oil, however, has changed dramatically since President Obama took office. The country is much less dependent on foreign oil; OPEC is in disarray; and onshore producers are poised to ramp up production when demand justifies it. Though they might be loathe to admit it, onshore drillers with rights to drill for currently underutilized shale resources on private property should rejoice that plans for federal lands are being expanded in only a limited way.

Local views should not be allowed to override federal policy, but when an administration confronts close calls, it is legitimate to assess what the Department of Interior calls “recognition of regional interests and concerns.” The East Coast has thriving tourist areas that would be seriously harmed even by minor oil spills. The BP accident demonstrated that the costs to tourism could be enormous, even in areas far from the actual spilt oil.

The BP accident gave the impression that those harmed could be made whole financially, but these payouts may not set a precedent for future disasters. BP was a company with deep cash pockets, extensive retail outlets dependent on public perceptions, and pressure from the administration to not delay compensation with lawyerly arguments. The approach of BP and the White House got little credit from the Gulf States, encouraging future major oil companies to revert to the Exxon model during its tanker spill that delayed outlays as long as an extended appeals process in the courts would allow. Moreover, companies with fewer resources than BP or Exxon might in future disasters simply declare bankruptcy, leaving those damaged in the lurch.

Local opinions on the Atlantic sales were mixed. Some elected officials favored lease sales, where their coastal communities appeared adamant in their opposition. But combined with other factors, like potential damages to natural resources and how little the federal government was likely to get for the leases, local opposition carried great weight, more than it would have if the United States was still importing 60 percent of its oil.

The Department of Interior’s Five-Year Plan did not cite climate concerns as the basis of its decisions. Instead, it carefully analyzed the factors truly at stake. It concluded that now was not the time to move forward in the Atlantic. It was a close call, but the logic makes sense.

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