Andy Kerr

Conservationist, Writer, Analyst, Operative, Agitator, Strategist, Tactitian, Schmoozer, Raconteur

New US Outer Continental Shelf Oil and Gas Exploitation: Costly and Short Lived (Part 1)

This is the first part of a two-part series on the threat of new oil and gas exploitation off the coasts of the United States. This first part outlines the Trump administration’s draft proposal and answers five key questions about what the impacts of the proposed development might be. The second part will examine the broad and deep political opposition to exploiting new areas of our precious coasts and make recommendations for permanent protection. These posts are excerpted from a new Larch Occasional Paper of the same title, which fully cites sources.

The Trump administration is proposing to open up vast areas of the United States Outer Continental Shelf (OCS) to leasing for oil and gas, far larger than the area made available under the Obama administration. Such exploitation would threaten numerous economically, ecologically, and socially important oceanscapes and adjacent coasts and would have other significant environmental and social costs.

At the current market price for oil (~$60/barrel) and its equivalent price for natural gas, the economically exploitable oil and gas in the OCS would fuel the United States for ~eight and ~four years respectively.

The amount of carbon dioxide pollution released into the atmosphere by burning that oil and gas would be ~31 billion tonnes. As a result, atmospheric carbon dioxide levels would increase ~4.0 parts per million.

The minimum cost to society as a whole of exploiting that oil and gas would be ~$1.3 trillion.

 Figure 1.  Coming soon to an ocean near you? The Deepwater Horizon oil spill disaster started April 20, 2010. BP did not declare the well sealed until September 19, 2010.  Source :  Wikipedia

Figure 1. Coming soon to an ocean near you? The Deepwater Horizon oil spill disaster started April 20, 2010. BP did not declare the well sealed until September 19, 2010. SourceWikipedia

The Trump Administration’s Draft Proposal

The Outer Continental Shelf Lands Act of 1953 requires the administration to offer leasing plans every five years. The Trump administration has proposed a draft plan for 2019–2024, which would replace the Obama administration plan for 2017–2022. The draft Trump administration plan (Figure 2) would “make more than 98 percent of the OCS available to consider for oil and gas leasing during the 2019–2024 period,” consisting of

47 lease sales in all four OCS regions . . . : 19 lease sales in the Alaska Region (3 in the Chukchi Sea, 3 in the Beaufort Sea, 2 in Cook Inlet, and 1 sale each in the 11 other available planning areas in Alaska), 7 lease sales in the Pacific Region (2 each for Northern California, Central California, and Southern California, and 1 for Washington/Oregon), 12 lease sales in the Gulf of Mexico (GOM) Region (10 regionwide lease sales for the portions of the Central, Western, and Eastern GOM planning areas that are not currently under moratorium, and 2 sales for the portions of the Central and Eastern GOM planning areas that will no longer be under moratorium in 2022), and 9 lease sales in the Atlantic Region (3 sales each for the Mid- and South Atlantic, 2 for the North Atlantic, and 1 for the Straits of Florida).

In contrast, the Obama plan would authorize eleven lease sales, one in Alaska next to state waters already leased, and ten more in the Gulf of Mexico.

 Figure 2.  Areas of the Outer Continental Shelf (OCS) open to new oil and gas drilling under three presidents.   The Trump administration proposes opening most of the OCS to oil and gas exploitation.  Source:   New York Times

Figure 2. Areas of the Outer Continental Shelf (OCS) open to new oil and gas drilling under three presidents. The Trump administration proposes opening most of the OCS to oil and gas exploitation. Source: New York Times

Extent and Possible Location of “Undiscovered” Offshore Oil and Gas

The US Department of the Interior’s Bureau of Ocean Energy Management (BOEM) estimates offshore oil and gas (O&G) potential by massaging existing geological information. It has created estimates for each of the twenty-six planning areas in the US OCS. Four planning areas offshore Alaska are estimated to have “negligible” petroleum potential (though a reasonable interpretation of the BOEM price and volume data suggests “negligible” could be applied to at least sixteen of the other twenty-two planning areas evaluated by BOEM). The only serious amounts of new oil and gas are in the Gulf of Mexico and offshore northern Alaska.

Still, BOEM has categorized twenty-two of its twenty-six OCS planning areas as having “undiscovered technically recoverable reserves” (UTRR) of O&G, a subset of which are “undiscovered economically recoverable reserves” (UERR). Here are BOEM’s definitions:

·     UTRR is oil and gas that may be produced as a consequence of natural pressure, artificial lift, pressure maintenance, or other secondary recovery methods, but without any consideration of economic viability; primarily located outside of known fields.

·     UERR is the portion of undiscovered technically recoverable resources that is economically recoverable under imposed economic and technologic conditions.

For analysis, we assumed a UERR price of $60/barrel of oil and its equivalent price for gas. Oil is trading at ~$70/barrel in mid 2018. The higher the price of oil (and gas equivalent), the more that is exploited and the more pollution that results.

While one might think it impossible to quantify something that has not even been discovered yet (if ever), this is a common practice in the fossil fuel industry. It is, at best, a best guess. BOEM projects UTRR numbers for each planning area and national totals at three different probability levels: 95 percent, mean, and 5 percent. The lowest number for oil, gas, and barrels of oil equivalent (BOE, which includes both oil and gas, factoring in the energy content) has a 95-percent probability of actually being there, while the highest number has only a 5-percent probability. In between is the expected amount of oil and gas at the mean probability between 95 percent and 5 percent, effectively a 50-percent probability or a 50-50 chance.

BOEM gives a 50-50 chance (a mean probability) that UTRR of ~90 billion barrels of oil and ~327 trillion cubic feet of gas are waiting to be discovered in federal ocean waters. In terms of energy content, roughly one-half is in the Gulf of Mexico, one-third is offshore Alaska, one-thirteenth is off the Atlantic coast, and one-twelfth is off the Pacific coast (Figure 3).

 Figure 3.  Economically recoverable oil and gas.   Most of the $60/barrel oil (and gas equivalent) is located in the Gulf of Mexico and offshore northern Alaska.  Source:   New York Times

Figure 3. Economically recoverable oil and gas. Most of the $60/barrel oil (and gas equivalent) is located in the Gulf of Mexico and offshore northern Alaska. Source: New York Times

BOEM gives a 95-percent probability of there being UTRR of 127 billion barrels of oil equivalent (BOE), a 50-percent probability of there being UTRR of 148 billion BOE, and a 5-percent probability of there being UTRR of 171 billion BOE in the OCS. Eight planning areas have a 95-percent probability of having absolutely no fossil fuels.

Recall that UTRR assumes price is not a limit to extraction and the only limits are the presence of any oil and gas and the technology to exploit it. The amount of estimated UERR, on the other hand, varies with the expected price of oil and gas. The higher the market price of oil and gas, the more exploitable oil and gas there is.

The prices necessary to exploit every last barrel of oil and cubic foot of gas estimated to be discovered in the OCS are ~$390/barrel of oil and ~$22/Mcf of gas. The price of oil peaked at ~$120/barrel (2014 prices) during the American Civil War, which suggests that the UTRR numbers are mostly meaningless.

BOEM’s 2016 national assessment projects the amount of UERR of O&G at six different price points. At $60/barrel for oil (and $3.20/Mcf for gas), the UERR in the OCS total ~59 billion barrels of oil and 101 trillion cubic feet of gas.

Key Question #1: How long could US offshore oil and gas fuel the nation?

At 2017 total US consumption levels for oil and gas, if every last UTRR barrel of oil and cubic foot of gas were extracted from the OCS, assuming the most optimistic case (which has only a 5-percent probability), the oil and gas would fuel the nation for about seventeen years. Assuming the mean scenario (50-percent probability), this would decrease to approximately fifteen years, and assuming the most conservative scenario (95-percent probability), to about twelve years.

But economics do come into play. Based on an oil price of $60/barrel (and an equivalent gas price), the “economically recoverable” OCS O&G would fuel the nation for approximately eight and less than four years for oil and gas respectively.

Key Question #2: What amount of atmospheric carbon pollution would result from burning the oil and gas in the OCS?

Total carbon dioxide pollution: If all possible UTRR OCS oil and gas were exploited, burning it would result in the emission into the atmosphere of ~66 billion tonnes of CO2. If all the $60/barrel oil (and equivalently priced gas) were exploited, burning it would result in the emission of ~31 billion tonnes of CO2into the atmosphere.

As a fraction of US emissions: If all $60/barrel UERR of oil (and equivalently priced gas) in the OCS were burned, the emissions would equate to nearly five years of total 2015 US emissions from all sources. If all UTRR of oil and gas were burned, the emissions would equate to more than ten years of such total 2015 US emissions.

As an increase in global atmospheric carbon dioxide levels: If all the $60/barrel UERR of oil (and equivalently priced gas) were burned, ~31 GtCO2would be released into the atmosphere, resulting in an increase of carbon in the atmosphere of ~4.0 ppm. If all the UTRR of oil and gas were burned, ~66 GtCO2would be released into the atmosphere, which would result in an increase in carbon in the atmosphere of ~8.4 ppm.

As a fraction of the remaining carbon budget for the United States: If all the $60/barrel UERR of oil (and equivalently priced gas) were burned, the amount of CO2added to the atmosphere would equal 36 percent, 14 percent, and 9 percent of the low, medium, and high scenarios respectively. If all the UTRR of oil and gas were burned, the amount of CO2added to the atmosphere would equal 77 percent, 30 percent, and 18 percent of the low, medium, and high scenarios respectively.

Effect on the oceans: Approximately one-quarter of the carbon dioxide dumped into the atmosphere eventually finds its way into the oceans. So far, the oceans are 30 percent more acidic than at the start of the Industrial Revolution. The biological impacts are intense and far ranging. Calcifying species (such as oysters, clams, sea urchins, shallow water corals, deep sea corals, and calcareous plankton) are at risk, thereby posing a risk to the entire ocean food web, an important source of protein for more than a billion people.

Key Question #3: What amount of chronic oceanic oil pollution would result from exploiting the oil and gas in the OCS?

For chronic spills, the Center for Biological Diversity estimates that the Trump OCS O&G plan could lead to 5,571 routine oil spills, dumping 34.4 million gallons of oil into the ocean. In contrast, it projects the Obama OCS O&G plan as producing 657 routine spills, dumping 4 million gallons of oil (Figures 4 and 5). The Center assumed production at $100/barrel and did not factor in any potential iconic spills, which are impossible to model but quite probable to occur.

ProjectedNumberOilSpills.png

Figure 4. Projected number of chronic oil spills: Obama’s versus Trump’s plan. Source: Center for Biological Diversity

ProjectedVolumeOilSpills.png

Figure 5. Projected volume of oil spilled (millions of barrels): Obama’s versus Trump’s plan. Source: Center for Biological Diversity

Key Question #4: What risk of catastrophic acute oceanic oil pollution would result from exploiting the oil and gas in the OCS?

A mere three data points is not a lot of data to average, but an unforgettable and acutely disastrous iconic oil spill has occurred in the United States on average once every two decades (Figure 6). Three iconic and devastating oil spill disasters are well known to the American people:

• Union Oil Santa Barbara (1969), California coast: 80,000 to 100,000 barrels of crude oil

• Exxon Valdez (1989), Alaska’s Prince William Sound: 260,000 barrels of crude oil

• BP Deepwater Horizon (2010), Gulf of Mexico: 4,900,000±10 percent barrels of crude oil

MajorUSAcuteSpills.png

Figure 6. The three largest US offshore oil spills (so far). Source: Wikipedia

Based on past experience and the facts that oil and gas exploitation is being done in increasingly harsh environments (including but not limited to several miles below the ocean surface and in ocean areas with chronically rough seas) and that humans are capable of error, it is reasonable to assume that the more drilling is done in the ocean, the more spills of catastrophic magnitude will occur.

Key Question #5: What financial costs to society from increased CO2emissions would result from exploiting the oil and gas in the OCS?

If all UTRR oil and gas were fully exploited, the social cost of CO2 emitted into the atmosphere would be ~$3.3 trillion. In comparison and (co-incidentally), the projected 2018 expenditures for the US government total ~$3.3 trillion.

If all $60/barrel UERR oil (and equivalently priced gas) in the OCS were fully exploited, the social cost of CO2emitted into the atmosphere would be ~$1.3 trillion.

The greenhouse gases methane and nitrous oxide are also produced during oil and gas exploitation. Factoring in their social costs would make the social cost of OCS oil and gas exploitation even higher.

For more information specific to the Northeast Pacific Ocean, also known as the Oregon and Washington coast, see my Public Lands Blogposts “US Pacific Northwest Oil and Gas: A Waste of Time, Ocean and Coast” and “Protecting the Pacific Northwest Offshore Ocean for This and Future Generations.”