Bush lifts one ban on offshore drilling, but Congress' remains

McClatchy NewspapersJuly 14, 2008 

WASHINGTON — President Bush on Monday lifted the 18-year-old White House ban on offshore drilling, but his action is likely to have no impact on prices or supplies anytime soon, if ever.

The price of oil settled Monday above $145 a barrel for the third time this month, ending the day at $145.18 a barrel on the New York Mercantile Exchange — just over a dime short of the all-time settlement high.

Bush talked tough Monday, appearing in the Rose Garden and explaining that "With this action, the executive branch's restrictions on this exploration have been cleared away.

"This means that the only thing standing between the American people and these vast oil resources is action from the U.S. Congress."

There are two bars to offshore drilling, one first imposed by Congress in 1981 and another signed by Bush's father in 1990 and renewed in 1998 by President Clinton. The government bans exploration and drilling on the Pacific and Atlantic coasts and most of the eastern Gulf of Mexico, to protect U.S. beaches and fisheries from pollution.

There have been some signs recently that the political climate is changing, and Democratic leaders in Congress who oppose further drilling could face a tougher fight to keep the congressional moratorium in place.

Senate Majority Whip Richard Durbin, D-Ill., said last week that he was open to some drilling. A June 26-29 CNN-Opinion Research Corp. poll found that 73 percent of people surveyed favored more drilling.

Presumptive Republican presidential nominee John McCain has made drilling a major part of his energy plan. Democratic rival Barack Obama remains opposed; spokesman Bill Burton said Monday that drilling "would merely prolong the failed energy policies we have seen from Washington for 30 years."

Democratic leaders in the House of Representatives strongly oppose more drilling and called instead for releasing part of the Strategic Petroleum Reserve and expanding cleaner energy alternatives and greater efficiency. Speaker Nancy Pelosi, D-Calif., branded Bush's plan a "hoax," while House Democratic Caucus Chairman Rahm Emanuel, D-Ill., labeled it "a political stunt."

Republicans fired back, with Rep. John Peterson, R-Pa., saying that drilling foes acted "at the behest of radical environmental groups," and Sen. Pete Domenici, R-N.M., charging that Democrats were "inventing excuses and obscuring the issue."

However, even if Congress, which is scheduled to begin its summer recess Aug. 8, lifted its ban on expanded drilling, consumers wouldn't see much change in their energy bills.

The U.S. government's Energy Information Administration reported last year that crude oil production would be 7 percent higher by 2030 if the ban were lifted on the offshore areas.

Its report also said, "Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant."

The United States has only 2 percent of world oil reserves but uses 25 percent of the oil. And oil produced in the U.S. is sold on the international market, not reserved for domestic use.

"Opening up additional areas to offshore drilling, areas that are protected right now, will not do anything to solve the problem of high gas prices," said Jim Presswood, an energy analyst with the Natural Resources Defense Council, an environmental advocacy group.

"When you have China and India's demand exploding, with us having 2 percent (of the world's oil reserves), there's virtually nothing we can do to impact global prices."

For that reason, he said, the government should help consumers cut costs by pushing for greater fuel efficiency, mass transit and renewable energy.

Some industry analysts do see a potential short-term impact.

John Felmy, chief economist at the American Petroleum Institute, said that drilling "could make markets think there will be important changes in the future," and perhaps help prices stabilize.

Other controversies remain before offshore drilling is likely to be approved or to begin, notably that oil companies aren't using the capacity they have now.

Oil and gas companies have purchased leases to nearly 68 million acres of federal land and waters in the Lower 48. In addition, there are nearly 23 million acres available to lease in the National Petroleum Reserve-Alaska, and oil companies have leased 3 million of them.

"Once again, the oilman in the White House is echoing the demands of Big Oil," Pelosi said.

Bush's plan, she argued, "will neither reduce gas prices nor increase energy independence. It just gives millions more acres to the same companies that are sitting on nearly 68 million acres of public lands and coastal areas."

Felmy countered that oil companies aren't drilling because it often isn't economically viable. "Those leases are not idle," he said. "Companies are looking at the most promising projects."

Bruce Bullock, the director of the Maguire Energy Institute at Southern Methodist University, said the "truth probably lies somewhere in the middle," because the oil explorers frequently have been unable to find quantities sufficient to justify the cost.

There are also serious questions of how much oil is available offshore or whether it's economically feasible to try to get it.

"It depends what you do with the royalties (from leases)," said Ken Medlock, fellow in energy studies at Rice University. Drilling could be worthwhile, he said, "if you earmark funds for alternative sources of energy and research."

Experts agree that it would take at least seven and probably 10 years before any benefits from overturning the ban on offshore drilling were evident. Annual American oil production is about 1.8 billion barrels, and the Interior Department estimates that as much as 19 billion barrels — some even put it as high as 115 billion — remain untapped in coastal areas that now are off limits to drillers.

If the 19 billion barrels were available — a more likely prospect — the United States would have another 920 days, or two and a half years, of supplies at current consumption rates.

(Barbara Barrett and Lesley Clark contributed to this story.)

McClatchy Newspapers 2008

McClatchy Washington Bureau is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service