The Trump administration is opening up the East Coast of the United States to oil and gas drilling, but it’s not clear how much enthusiasm there is. A recent sale of drilling rights in the Gulf of Mexico has attracted only “moderate” interest, reports the Financial Times, an indication that the oil & gas industry is more focused on expanding production in the country’s vast shale basins.
Last year the Department of the Interior cut the royalty rate it had been charged on production from leases in shallow water (less than 200 meters deep) from 18.75% to 12.5% in the hope of stimulating greater interest. But drillers submitted bids for only 148 of 14,000 tracts offered.
If the Trump administration can’t gin up much excitement in the Gulf of Mexico, where a mature oil & gas exploration and drilling infrastructure exists, it’s unlikely to do any better in the southern Atlantic states where no such infrastructure is to be found. Also discouraging interest is the reality than any effort to start drilling would ignite a firestorm of opposition. Why bother when shale can be fracked elsewhere with minimal fuss and muss?
But that’s today. Who can say what economic conditions and public opinion will look like in three or four years? What if public opinion could be swayed to look upon offshore drilling as a pathway to developing a viable offshore wind industry?
Environmental groups and Virginia Beach civic interests oppose offshore drilling, raising the specter of another Deepwater Horizon disaster — even though (a) any drilling off the Virginia coast would be in shallow water, while Deepwater Horizon occurred in… you guessed it… deep water, and (b) most, if not all, of the drilling would be for natural gas. I’ve never heard of a natural gas spill, and neither have you.
Indeed, the Commonwealth’s official energy policy supports offshore oil and gas drilling, with the caveat that no drilling occur within 50 miles of the shore. A 2005 study by the Virginia Secretary of Commerce and Trade found that natural gas exploration was safe, although if oil is discovered that the Commonwealth must “carefully consider the risk of spills.”
Is it not possible to work out a compromise that could allow drilling to move forward when market conditions permit while providing tough environmental safeguards? Here’s how we can do it.
First, let’s just take oil drilling off the table. Let’s make it official Virginia policy to permit no oil drilling because we want zero risk of oil spills. Drilling and production should be limited to natural gas only. (Do some wells produce both oil and gas? Can the gas in such wells be extracted while the oil is kept in the ground? I concede that some technical questions may need to be answered.) The vast majority of the energy wealth off the Atlantic coast is natural gas, so imposing an anti-oil restriction should not cripple the economics of offshore energy production.
Second, Virginia should get the first-mover advantage of establishing an East Coast offshore drilling industry. As the largest metropolitan area on the Atlantic coast between Miami/Fort Lauderdale and New York — and one with a large ship repair industry, at that — Hampton Roads would be the logical location for offshore companies to set up and do business. Thus, Virginia could get a significant economic-development bonus from the opening up of offshore drilling.
Third, an offshore drilling industry was the precursor in Europe to developing an offshore wind industry, and it could be the precursor in Virginia, too. The two sectors share many skills, competencies, services and specialized equipment. If Hampton Roads can develop an offshore drilling industry, it can lower the costs and risks of getting offshore wind companies to locate here. The lack of an existing industry is perhaps the biggest barrier to developing Virginia’s offshore wind resources — a desiderata of environmentalists and economic developers alike.
The immediate hold-up to large-scale development of wind resources is the need to test the performance of wind turbines in the Atlantic Ocean, which has different seabed conditions and is subject to hurricanes. That won’t happen until the State Corporation Commission approves Dominion Energy’s proposed VOWTAP project, two costly test turbines that could never be justified on the basis of their electricity production alone.
But if the SCC approved VOWTAP, and if the turbines proved their efficacy in Virginia offshore conditions, and if a gas drilling business ecosystem had a toehold in Virginia, then the chances would improve immeasurably to persuade European wind companies to invest in Virginia for the purposes of building and maintaining a fleet of offshore wind turbines at an economical price. Virginia then could become the hub of offshore wind production for much of the entire Atlantic coast.
If we play our cards right, it should be possible to fulfill former Governor Bob McDonnell’s dream of making Hampton Roads the energy capital of the East Coast while not only protecting the environment but improving it.
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