Page 24: of Marine News Magazine (September 2018)

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COLUMN OP/ED

Smarter Energy Policy

Will Broaden Offshore Recovery

By Randall Luthi

For the past few years, depressed and would replace the Obama administration’s restrictive commodity prices, stricter regulatory 2017-2022 offshore leasing program, which needlessly requirements and competition from locks up 94% of the OCS. onshore development at home and The National Ocean Industries Association (NOIA) from other countries offering attractive has long advocated for expanded access to our nation’s off- offshore lease and royalty terms have shore resources. Having so much of our OCS closed to had severe impacts on new exploration oil and natural gas development is incredibly shortsighted in the U.S. Gulf of Mexico. Thankfully, and puts the U.S. at a strategic disadvantage, especially as the tide appears to ? nally be turning. other countries, like Russia, China, Norway, Canada and

Luthi

In August, Gulf of Mexico Lease Sale Mexico are developing energy projects off their shores to 251 drew increased competition for of- meet rising global energy demand. ferings and $178 million in high bids, $53 million more However, ? nding and producing oil and natural gas is only than previous sale held in March. The results of the August half the battle. In addition to increased access to the OCS sale reaf? rm the paradoxical state of an offshore energy and more lease sales, the U.S. needs a regulatory regime that industry in slow recovery mode; the future is bright, but encourages offshore energy development and companies shifting out of reverse takes time. need a clear and stable regulatory environment to turn raw

The operating environment in the Gulf shows tangible resources into the energy that powers our daily lives. signs of improvement pointing to an industry that is poised Aiming to encourage producers to increase investment to shift into high gear – oil prices are higher, rig rates and in the Gulf of Mexico, in 2017 the Trump Administration supply chain prices are more competitive, companies have lowered royalty rates in shallow water areas from 18.75% improved the ef? ciency of their operations and revisions to to 12.5%. The deep-water royalty rate remains at 18.75%. overly burdensome regulations are in the works. The lower shallow water royalty rate seems to be having

The Trump administration has introduced several major a positive impact toward revitalizing that segment of off- changes aimed at improving conditions offshore, a lower shore energy development. Bidding activity in the August shallow-water royalty rate, upcoming revisions to the well 2018 Gulf of Mexico lease sale showed renewed interest in control rule, pending updates to bonding and decommis- shallow water tracts. sioning requirements and a proposed expanded offshore Progress is also being made towards reversing onerous ad- leasing program. ditional ? nancial security, or bonding, requirements issued

In 2017, the Trump administration proposed expand- by the Obama Administration in 2016. Implementation of ing the offshore areas open to oil and gas exploration to the new requirements are currently on hold as the Bureau include 90% of the U.S. outer continental shelf (OCS). of Ocean Energy Management (BOEM) works on pro-

The proposal includes 47 lease sales between 2019-2022 posed revisions expected to focus attention on leases that

Credit: AdobeStock_DonVictoriO

September 2018

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