States Respond to Trump’s New Oil & Gas Plan. Shell, Statoil Interested in New Areas

As the Trump Administration issued the draft proposal for the 2019-2024 National Outer Continental Shelf (OCS) Oil and Gas Leasing Program on 4 January, the move to make more than 90% of OCS available for oil and gas exploration and production saw opposition from several U.S. coastal states, including those that want more renewable energy in their future.

Only two days after calling for a procurement of at least 800MW of offshore wind power between two solicitations to be issued in 2018 and 2019, New York Governor Andrew Cuomo found himself stressing the juxtaposition of the two offshore energy stances. “While Washington strong arms offshore drilling, New York is adding another 800 megawatts of offshore wind power,” Cuomo tweeted.

Upon releasing the Draft Proposed Program (DPP) for 26 new areas and announcing the public comment period, U.S. Secretary of the Interior Ryan Zinke said: “Just like with mining, not all areas are appropriate for offshore drilling, and we will take that into consideration in the coming weeks. The important thing is we strike the right balance to protect our coasts and people while still powering America and achieving American Energy Dominance.”

The 380-page DPP comprises, among other things, responses to the Request for Information and Comments (RFI) issued by the U.S. Bureau of Ocean Energy Management (BOEM), which reveal positions of the U.S. states affected by the new proposal and expressions of interest from oil and gas companies.

Twelve states oppose new oil and gas leasing

Of the 23 coastal states affected, BOEM received 30 comment letters in response to the RFI from governors and/or state agencies of 20 states. New Hampshire, Rhode Island and South Carolina’s inputs were covered in the section on comments provided by local governments and other organisations. The letters from state officials identified laws, goals, and/or policies that a state deemed relevant for the U.S. Interior Secretary to consider.

Twelve of the 20 states requested exclusion and expressed their clear opposition to any new oil & gas leasing either off their coasts, in their region, respective continental shelf, or in the U.S. in general. These include: Massachusetts, Connecticut, New York, New Jersey, Delaware, Maryland, Virginia, North Carolina, Washington, Oregon, California and Hawaii.

Louisiana, Maine, Alabama, Mississippi, Texas, and Alaska have voted for the new leasing program. The OCS Governors Coalition (Maine, Alabama, Mississippi, Texas, and Alaska) stated that it supports all new oil and gas leasing options laid out in the DPP, understanding that circumstances affecting leasing decisions could change during the course of the National OCS Program’s development and implementation.

Although Georgia is also in favour of the new National OCS Program, it is asking for all relevant environmental and societal issues to be fully addressed. The state’s Department of Natural Resources, on behalf of Governor Dial, said that Georgia supports an effective state and federal partnership that explores options for new energy resources, given the current need for greater energy security in the United States.

The Florida Department of Environmental Protection coordinated a review by several state agencies and stated that it remains concerned about the effects of OCS oil and gas activities on marine and coastal environments, sensitive biological resources and critical habitats associated with them, as well as on the military activities critical to the U.S. security. The state argues that as BOEM proceeds with the development of the proposed plan for oil and gas activities, the long-term protection of Florida’s sensitive coastal and marine resources should be of paramount concern, withholding from expressing its definite stance on the new plan.

Shell and Statoil among oil and gas players interested in new areas

Meanwhile, the oil and gas industry has shown interest in having more areas off the U.S. coast to explore and exploit.

In response to the RFI, BOEM received 10 comment letters from exploration and development companies and oil and gas industry associations. Of those responses, most supported including all 26 OCS planning areas for further analysis.

The industry associations include: American Petroleum institute, National Ocean Industries Association, Independent Petroleum Association of America, U.S. Oil and Gas Association, American Exploration and Production Council, International Association of Drilling Contractors, International Association of Geophysical Contractors, Petroleum Equipment Suppliers Association, and Alaska Oil and Gas Association.

The companies that have reported their interest are Chevron, Anadarko Petroleum Corporation, Arctic Slope Regional Corporation Exploration, BP, Cobalt International Energy, Diamond Offshore, Enven Energy Ventures, Shell and Statoil.

Aside from being major oil and gas players, the latter two have entered the offshore wind sector as well and already participated in U.S. offshore wind energy lease sales.

In a federal auction in December 2016, Statoil won the lease rights to build an offshore wind farm off New York with a record price of USD 42.5 million. Shell made it to BOEM’s list of nine eligible bidders for the offshore wind auction held in North Carolina in March 2017, however the company later decided not to bid for the lease.

In Europe, both companies have made headlines with their offshore wind businesses. Shell won at the second Dutch Borssele offshore wind tender as part of a consortium offering a price of 5.45 Eurocents per kilowatt hour, thus breaking the price record after the first tender, won by Ørsted.

Statoil, along with being behind several offshore wind farms in Europe, is also the company that built the world’s first operational floating wind farm. The 30MW Hywind Scotland Pilot Park, featuring five floating wind turbines off Peterhead in Scotland, started producing electricity in October 2017.

Currently, BOEM is working under the approved 2017–2022 National OCS Program, while it is initiating a process to develop a new National OCS Program for 2019–2024. If approved, the new program will supersede the current one. The Draft Proposed Program, released on 4 January 2018, is the first of three proposals for 2019–2024.

The development of a new National OCS Program at this time is a key aspect of the implementation of President Donald Trump’s America-First Offshore Energy Strategy, as outlined in the President’s Executive Order from April 2017.

Corrected to state that twelve states requested exclusion, including North Carolina.