Twelve Reasons Why Offshore Drilling for Natural Gas is Wrong for Virginia

 

1. Drilling now would have no effect on fuel prices until 2030 and provide little return on investment.  If natural gas production in the Atlantic region started in 2011 (as proposed), it would not have any impact on domestic crude oil and natural gas production or prices until 2030[1] – definitely not a timely source of revenue for solving Virginia's current transportation crisis or a source for heating our homes this winter. Prices for drill ships/ rigs are about $500 million each, and currently there is a 5-year waiting list for new rigs.[2] Weighed into the fact that starting in 2020, total natural gas production from the outer continental shelf (OCS) off the lower 48 states is projected to decline[3], and offshore drilling provides very little return on heavy investment. 

 

2.  Drilling for gas or oil off the coast of Virginia would be harmful to U.S. national security. Approximately seventy-two percent (72%) of Virginia's offshore drilling zone is within the U.S. Navy's Virginia Capes Operating Area, the principal training area for air, surface and submarine units as well as a testing area for new vessels, aircraft and weapon systems.[4] Vital to accomplishing their mission of national defense and used heavily for training Navy and Air Force combat units for the war in Iraq and the broader War on Terror, the Navy is strongly opposed to the restrictions and hazards that would be presented by the presence of drilling rigs and related structures.[5]

 

3. The little benefit from drilling isn’t worth risks to national security, economy and environment. In a failed bill, the Offshore Energy Revenue Fund (SB 6011), that State Senator Frank Wagner introduced in a June 2008 special session of Virginia’s General Assembly, the revenue he envisioned from offshore drilling came from drilling for oil as well as gas, which contradicts Virginia's mandate for exploration of natural gas alone as expressed in its Energy Plan of 2007. Wagner's plan also ignores the 72% of Virginia's offshore zone in which the Navy opposes drilling. Dr. James Koch of the Center for Regional Studies has estimated that under the revenue sharing scheme (for both oil and natural gas) contained in last year's DOER Act, Virginia could gain $150 million in royalties each year.[6] However, if Navy opposition to drilling is respected and there is no drilling within the critical Virginia Capes Operating Area, estimated royalties from gas and oil drilling would drop to about $42 million a year - a drop in the bucket that does not justify the negative national security and environmental consequences of drilling, along with losses to its tourism industry which Sen. Wagner’s revenue projections also fail to consider.

 

4.  We could drill everywhere in the US and not meet our energy needs or reduce prices. The U.S. contains only 3 or 4% of the world’s proven oil and gas reserves.[7] As the U.S. Department of Interior has indicated, at the most, only 4 billion barrels of oil reserves lie off the entire Atlantic coast[8]--about a 200 day supply based on current U.S. consumption on 20 million barrels a day.[9]  In a July 2006 addendum to its 2006 Federal Outer Continental Shelf (OCS) assessment, the Minerals Management Service (MMS) assigned mean undiscovered technically recoverable resources of 1.5 billion barrels of oil and 15.13 trillion cubic feet of gas to the MMS Mid-Atlantic Planning Area (located off Delaware, Maryland, Virginia, and North Carolina) portion of the Atlantic OCS.[10]  In other words, the undiscovered oil and natural gas off Virginia's coast constitutes a small-to-tiny percentage of a small percentage (U.S. reserves) of total world oil and gas reserves. Even then, the oil would amount to a drop in the bucket on the world market and would have a negligible effect on gas prices.  That’s hardly worth the tremendous risk to our environment, our local economy and our national defense.

 

5. We do not need to open new areas for drilling.  Four times more natural gas is available in areas already open to drilling than in waters protected by the moratorium, and the industry is using only a fraction (18-20%) of what it already has access to. These unused areas could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day, nearly double current domestic oil production.[11]  Efforts to open new areas for drilling is a "drilling decoy" as Rep. Maurice Hinchey puts it.  "When Big Oil already has tens of millions of acres available to them right now, it's cynical of them to come to Congress and ask for more drilling territory," he said.[12]  His bill (H.R. 6251) thus compels oil companies to utilize the 68 million acres onshore and offshore that are being leased by big oil companies, but not used to produce energy. "Oil corporations are trying to take control of as much land now during the oil-friendly Bush administration years," said Hinchey.  "The federal government has made tens of millions of acres available for oil and gas development.  It's the energy companies that are refusing to produce and now we will make them pay if they continue to refuse to increase our domestic supply."  

 

6. There is no leasing scenario or regulatory framework that would allow development of natural gas and not simultaneously promote the development of offshore oil. Historically, there have been no instances where the industry has not removed both gas and oil before capping a productive well.  “[I]f you take out the natural gas, you don’t cap the well and then go back for the oil,” said Jeff Eshelman, spokesman for the Independent Petroleum Association of America.[13] 

 

7. The energy infrastructure supporting offshore drilling is ugly, smelly and spewing pollutants.  The heavy industrial infrastructure needed to support offshore drilling must be located nearby offshore drilling rigs. As a result, our beaches and coastal zones will be cluttered with miles of pipelines, refineries, smokestacks, terminals, tankers, storage facilities, ports, helipads and dorms - hardly the attractive infrastructure greeting tourists to Hampton Roads, where they spent over $890 million last year alone.[14]  The two industries, offshore drilling and tourism, are mutually exclusive thus forcing communities such as Virginia Beach to choose between being an oil and gas producing city or being a tourist destination. 

 

8. Investment in dirty offshore drilling is investment not made in clean energy solutions.  Imagine the same dollars being invested in offshore wind, for instance. A wind farm with a footprint the size of Virginia Beach -- about three percent of Virginia's continental shelf -- could supply the equivalent of 20% of the Commonwealth's current electricity needs.[15] These are farms that do not require the extensive infrastructure onshore – just a compact, clean electrical connection that would have no negative impact on scenic beauty and tourism.  According to the Virginia Coastal Energy Research Consortium, offshore wind and wind-wave hybrid technologies could meet 20% of present US electricity demand using 8% of the Outer Continental Shelf (OCS) area between 5 and 20 nautical miles offshore and 17% of the OCS area between 20 and 50 nautical miles offshore.[16]  Thus, other mid-Atlantic coastal states also facing issues of limited budgets and a need to provide energy to its citizens have chosen wisely and have invested in offshore wind resources.  Delaware’s largest power company, Delmarva Power, recently signed a contract with Bluewater Wind to provide energy to over 50,000 homes in Delaware for the next 25 years, and have built in the capacity to increase that number in the near future.[17]  New Jersey and Rhode Island are also close to signing similar deals.  Meanwhile, Virginia has done very little to promote efficiency or renewable energy development.  A report commissioned by labor and conservation groups found that in Virginia, there are more than 336,000 existing jobs in employment fields that could see job growth or wage increases by putting global warming solutions to work[18]

 

9. There is a huge environmental cost to even just exploring for natural gas. Once exploratory drilling commences, the toxic drilling discharges and other routine drilling impacts are similar for either oil or gas exploration and eventual oil or gas development. Normal drilling operations generate an average of 180,000 gallons per well of waste mud containing toxic metals such as mercury and lead with most being dumped into surrounding waters. Each drilling platform also normally discharges hundreds of thousands of gallons of toxic "produced" water every day containing benzene, arsenic, lead and other pollutants.[19]  The eventual development of natural gas also carries tremendous risk as tankers transport gas in liquid form to port terminals where it’s converted back to gas.  A University of Houston study counted 170 deaths from 25 spills, explosions and other big incidents at natural gas ports and tankers from 1944 to 2002. [20]  Virginia is also prone to hurricanes and nor’easters which pose great risk to siting any offshore drilling infrastructure here.  According to the Coast Guard, more than 7.1 million gallons of crude oil were spilled in at least nine major incidents and 35 smaller incidents as a direct result of Hurricane Katrina alone.[21]

 

10. The risk associated with offshore exploration/drilling would affect not just Virginia. Any environmental damage would spread far beyond Virginia's coast. It would affect Maryland, New Jersey and North Carolina. These coastal states remain adamantly opposed to offshore drilling. North Carolina Governor Mike Easley, Maryland Governor Martin O'Malley and New Jersey Governor Jon Corzine have each continued to oppose lifting the moratorium.  Virginia should respect the objections of neighboring states and not ignore their concerns.

 

11.  Virginia is viewed as the “weakest link” by the oil and gas industries.  Virginia is being targeted for offshore drilling because we are viewed as the “weakest link” on the East Coast – the state most likely to cave in to industry lobbying and enable the eventual lifting of the moratorium off the entire Atlantic coast.   The oil industry views Virginia as a “loss leader” to get to the big profits off North Carolina, industry’s real target.  Ten to twenty years ago, both Mobil Oil and Chevron held leases on offshore fields in the areas of Hatteras and the Outer Banks, and continue to contend it holds one of the largest offshore East Coast deposits of natural gas.[22]

 

12. Virginia needs to accept responsibility for global warming pollution that we generate.  Drilling off our coast only prolongs and expands our dependence on fossil fuels increasing global warming pollution and sea level rise.  With sea level rise projected at as much as a meter or more over the next century and the significant costs associated with addressing expected flooding and inundation of our low lying coastal areas, Virginia needs to explore how we will meet our energy needs while decreasing our reliance on fossil fuels.  The U.S. is home to five of the top 10 global cities (Virginia Beach ranking #10 in the world) in terms of assets exposed to coastal flooding and vulnerability to climate extremes.[23] According to an Ernst & Young survey of global leaders on strategic business risk, the top insurance risk in 2008 is climate change.  Already over 55% of private insurance market in the mid-Atlantic region have stopped writing new policies.  Allstate, for instance, has completely stopped writing new policies in all 19 of Virginia's coastal communities.[24]


 

[4] “Impact of Offshore Gas Drilling on the Virginia Capes Operating Area”, Oct. 8, 2007 by Captain Joseph F. Bouchard, U.S. Navy Retired, a former Commanding Officer of Naval Station Norfolk who was responsible for protecting vital Navy training areas against encroachment during his three years at the National Security Council.

[5] Donald R. Schregardus, Deputy Assistant Secretary (Environment), Department of the Navy, letter to the Minerals Management Service, October 7, 2005.  Also see Dale Eisman, “Military opposes offshore Va. Drilling plan,” The Virginian-Pilot, April 27, 2006, http://hamptonroads.com/node/94681. 

[6] Dale Eisman, “U.S. House votes to lift ban on offshore drilling,” The Virginian-Pilot, June 30, 2006, http://home.hamptonroads.com/stories/print.cfm?story=106872&ran=173901.

[7] Oil & Gas Journal, Vol. 103, No. 47 (Dec. 19, 2005). From: U.S. Energy Information Administration. http://www.eia.doe.gov/emeu/international/petroleu.html.

[8] Mineral Management Service (MMS), “Planning Area Resources Addendum to Assessment of Undiscovered Technically Recoverable Oil and Gas Resources of the Nation’s Outer Continental Shelf, 2006” http://www.mms.gov/revaldiv/PDFs/NA2006BrochurePlanningAreaInsert.pdf

[9] Energy Information Administration, Department of Energy, “Petroleum Basic Statistics”. http://www.eia.doe.gov/basics/quickoil.html

[10] ibid

[11] Department of the Interior, unpublished table entitled “Total Number of Acres Leased, Data from FY 1994 through FY 2007” from Response to Questions for the Record from the House Appropriations Subcommittee on Interior, Environment, and Related Agencies, February 7, 2008; http://globalwarming.house.gov/tools/2q08materials/files/0053.pdf. Also see MMS, “Producing and Nonproducing OCS Oil, Gas, Slat, Sulphur Leases under Federal Supervision by Year Since 1960,” Region’s Quarterly Reports, as of April 2006 http://www.mms.gov/itd/pubs/1997/97-0007/fos95.htm

[12] U.S. House of Representatives Democratic Caucus, “Emanuel, Hinchey, Markey, Rahall to Introduce Legislation to Force Big Oil to Use Owned Leases”, Jun 13, 2008.

[13] John M.R. Bull and Dave Schleck, “Offshore drilling: Warner faces big choice”, Daily Press, June 2006. http://www.dailypress.com/news/shadplank-oil-0624,0,1273649.story

[15] Patrick G. Hatcher, VCERC Executive Director, Old Dominion University, “Virginia Coastal Energy Research Consortium: Offshore Wind Power and Coastal Algal Biofuels”, presentation to Senate Appropriations Committee, Feb. 5, 2008. http://sfc.state.va.us/pdf/education/2008%20Session/February%205%20meeting/Hatcher%20VCERC%20Senate%20ver%203.pdf

[16] ibid

[17] Aaron Nathans, “Offshore wind pact OK'd for Delaware: $800 million deal leaves room for more investors”, The News Journal, June 24, 2008.  http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20080624/NEWS/806240355&GID=P8WNhdDDswzN2bNWXCHSrlAEqCShq1ZLFylNEGv9DOQ%3D

[18] “Job Opportunities for the Green Economy: A State-by-State Picture of Occupations that Gain from Green Investments”, a report from the Political Economy Research Institute, University of Massachusetts, Amherst, June 2008.  http://www.bluegreenalliance.org/atf/cf/%7B3637E5F0-D0EA-46E7-BB32-74D973EFF334%7D/NRDC_report_May28.pdf

[19] Testimony of Athan Manuel, Lands Protection Program, Sierra Club before the Committee on Energy and Natural Resources, United States Senate, Jan. 25, 2007. http://www.energy.senate.gov/public/_files/January2007SenateENRtestimony.doc

[20] John M.R. Bull and Dave Schleck, “Offshore drilling: Warner faces big choice”, Daily Press, June 2006. http://www.dailypress.com/news/shadplank-oil-0624,0,1273649.story

[22] Catherine Kozak, “Years after failed push, offshore drilling finds some new champions”, Virginian-Pilot, June 29, 2008. http://hamptonroads.com/2008/06/years-after-failed-push-offshore-drilling-finds-some-new-champions

[23] Organization for Economic Co-operation and Development (OECD): “Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes: Exposure Estimates”, April 2008. http://www.rms.com/Publications/Cat_Risk_Management_April08_RMS.pdf

 [24] Testimony before the Governor’s Climate Change Commission by Skip Stiles, Executive Director of Wetlands Watch and Commission member, and Elizabeth Costle, former Vermont Commissioner of Banking, Insurance, Securities and Health Care Administration

 

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Prepared July 8, 2008

For more information, contact:

Eileen Levandoski

Hampton Roads Conservation Coordinator

Sierra Club, Virginia Chapter

757-277-8537 (cell)

Eileen.Levandoski@SierraClub.org

Virginia.SierraClub.org