July 15, 2010
By Bernard L. Weinstein
The Gulf oil spill couldn't have come at a more inopportune time. Several months ago, President Barack Obama actually proposed opening new areas to deep water drilling along the southern Atlantic coast, a portion of the eastern Gulf of Mexico, and some of the coast of Alaska. But in response to pressure from some key Democratic senators who are up for reelection this year, he has not only declared a moratorium on all new deepwater drilling but suspended bidding for leases on the outer continental shelf and as well as on-going drilling projects in the Arctic. Though a federal judge recently struck down the ban, Interior Secretary Ken Salazar is taking steps to ensure it remains in place.
While the moratorium may make for good politics, it constitutes bad economics. Less domestic drilling and production will mean greater reliance on imports that, in turn, could reverse our recent progress in reducing the trade deficit. In addition, thousands of high-paying domestic jobs in the oil and gas industry will be put at risk, at least temporarily.
The International Association of Drilling Contractors estimates up to 10,000 rig jobs could be lost by the end of June.
Obama's drilling ban has been imposed in response to the incorrect assumption that the oil disaster was about "systemic" failure when, in fact, it was about human failure.
In short, the April 20 catastrophe resulted from a failure to act on the safety standards that inform the work of each of the thousands of other facilities that operate safely in the Gulf. Now the entire industry is being tarred with the brush that should be reserved for BP.
Unfortunately, the spill in the Gulf of Mexico will reinforce the claims of the anti-drilling crowd that exploring for oil and gas, both offshore and onshore, is inherently dangerous, hazardous to the environment, and runs counter to the goal of developing sustainable energy sources.
True, the Gulf spill is the worst of its kind in the United States since 1969. But in the ensuing 41 years, the industry's safety and environmental record -- though not perfect -- has been exemplary.
No process of mineral extraction is completely risk-free, and the safety and environmental record of the offshore oil and gas industry certainly compares favorably with that of the coal industry.
The Gulf oil spill will also amplify those voices in Washington who want to hike taxes on the oil and gas industry by roughly $40 billion in order to provide additional subsidies to "safer" energy sources such as wind and solar.
According to the Independent Petroleum Association, these tax increases would fall disproportionately on small drilling companies and could potentially reduce domestic oil and gas production by 20 to 40 percent.
If America is serious about developing its domestic energy resources and reducing reliance on imports, offshore drilling must be part of that strategy.
Recent estimates indicate there could be as much as 3.8 billion barrels of oil and 21.5 trillion cubic feet of natural gas in the eastern Gulf and another 3.8 billion barrels of oil and 15.1 trillion cubic feet of natural gas on the Atlantic coastline between Delaware and Florida.
Despite the serious economic and environmental costs, the Gulf oil spill must not deflect us from the imperative of increasing all supplies of domestic energy and reducing our dependence on imports.
The drilling ban, along with the administration's proposals to hike taxes on America's primary energy industry, threatens both our economy and our national security.
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