Oil companies, US coastal states cool to Trump’s US offshore drilling plans

US offshore drilling
The Trump administration plans to broadly expand US offshore drilling, but is facing opposition from many coastal states and indifference from oil majors.  USCG Photo by Lt.j.g. Brian Moore

The Trump administration plans to broadly expand US offshore drilling, but is facing opposition from many coastal states and indifference from oil majors.  US Coast Guard photo.

Current US offshore drilling rules in place from Obama era until 2022

With a number of US coastal states opposed to the Trump administration’s plans to expand US offshore drilling and major oil companies saying they are currently focusing on other opportunities, the reception to the proposal has been cool.

Earlier this year, the US Department of the Interior Secretary Ryan Zinke proposed opening new acreage in the US outer continental shelf to oil drilling.  Comments on the proposal were accepted until March 9.

According to Reuters, Zinke says he has been in discussions with state governors, some of whom have voiced deep opposition and thrown up roadblocks to increasing offshore drilling.

California along with some other states that are opposed to the proposal say they would deny the necessary permits for onshore services or transport.

Most West Coast governors and a number of governors from East Coast states object to the plan and 12 states have sought exemptions from the proposed expanded drilling program.   Only officials from Alaska, Maine, Georgia and US Gulf Coast states other than Florida are in favour of the move.  Florida was granted an exemption by Zinke.

Discussions with the states could last until the end of 2018.

The Trump administration program proposes 47 new leases, including areas that have not been available since 1983.

“On the five-year plan we made everything available to look at,” Zinke told Reuters at the CERAWeek in Houston last week.

However, Zinke acknowledges “you can’t bring energy ashore unless you have access to state waters.”

Oil companies are more interested in the tried and true and are focusing on well-mapped basins in the Gulf of Mexico and deepwater drilling operations in other countries, including Brazil, Mexico and Guyana.

“We are constantly scouring the planet to really understand resource potential,” Steve Pastor, BHP Billiton’s president of petroleum operations told Reuters. The Gulf of Mexico has some of the best discovered potential, he added.

Oil companies interested in any new lease areas along the US Atlantic coast would have to do seismic mapping and develop infrastructure which would take time.

“I can’t put a fine point on whether we would pursue it,” Pastor said.

Meanwhile, Chevron says any new areas will have to stack up against existing projects, which “will have to compete with the other drilling we have in the world,” Robert Ryan, Chevron’s vice president of global exploration told Reuters. “We just don’t know, most of those areas haven’t been evaluated yet.”

Officials with Royal Dutch Shell are intrigued by the addition of acreage in the Gulf of Mexico, however, they say the recently announced 25 per cent tariff on imported steel would be an impediment to developing new deepwater fields.

“We know what we like here,” said Wael Sawan, Shell’s executive vice president of deepwater. “We’re encouraged by some of the elements but then some things like steel tariffs raise a question mark,” he said.

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