TipSheet: Tracking Potential Trouble Ahead over Offshore Drilling
One controversy sure to come early in the Trump administration is over offshore drilling, at least if President-elect Donald Trump’s public vows to expand the practice, raising protests from environmentalists, are any indicator.
Outer continental shelf sea-bottom beyond the three-mile state limit is federal land that can be leased for oil and gas drilling. The broad rules for leasing, administered by the Interior Department’s Bureau of Ocean Energy Management
, are dictated by the OCS Lands Act of 1953
and later legislation. The law requires Interior to draw up five-year plans, scheduling which tracts are to be offered for lease, and to consider a range of factors in devising the plan, including both energy needs and the sensitivity of the environment.
For decades, controversy has raged over particular offshore areas — especially Arctic waters like the Chukchi and Beaufort Seas and the Atlantic coast. After resisting calls to put these off-limits for leasing during most of his administration, on Nov. 18, 2016, President Obama finally did just that. Environmentalists applauded the action on the belief that it put these areas out of reach of the incoming Trump administration, which had vowed to go full-speed ahead on drilling. The oil industry complained, although many companies had already given up interest in Arctic leases.
Obama’s new five-year plan covers 2017-2022. Of the 11 sales it proposes, 10 are in the Gulf of Mexico, where bordering states have strong oil and gas industries and are politically supportive. Read the plan here.
Now the question arises: How easy would it be for the Trump administration to change the new five-year plan and how long would it take?
The quick answer: It’s hard to do and takes years. But it might go more quickly with a determined president, a cooperative Congress and a supportive oil and gas industry.
There are lots of legal and regulatory requirements for developing a new program, including public notice, hearings and environmental impact statements, all of which take time (President Obama’s BOEM began working up the latest plan back in June 2014). Since the procedures are legally required, any Trump effort to short-circuit them would be grounds for legal challenge. Then, any eventual Trump plan would still be subject to legal challenge — and that could take years more.
Finally, once a plan passes legal muster, the offshore tracts are not leased all at once, but over the five-year period. And once a tract is leased, it is likely to be years more before oil or gas is produced (if any is found at all).
But wait: Obama’s five-year plan was issued so late that Trump and the GOP might be able to thwart it using the Congressional Review Act
. That law allows Congress to overturn some executive branch rulemakings during a period of 60 legislative days after they are finalized. Note that legislative days are not calendar days. How do you count legislative days after Nov. 18? Better ask a parliamentarian or a judge. But it’s clear that Congress would have to act quickly to beat any deadline.
The Congressional Review Act wasn’t a factor during the Obama administration, because the law allows a presidential veto, effectively blocking congressional reversals. But with the same party soon controlling both Congress and White House, the veto factor would likely vanish. Further snags, however, could come from unique procedural requirements that could make a disapproval more vulnerable to delay by Democrats.
Here’s the thing: The price of oil
is now so low, and the cost of drilling in the Arctic so high, that the interest of oil companies in actually buying offshore leases has waned. As OPEC struggles to prop up the price of oil, go-go U.S. oil production would just undermine the price.
Oil companies may want to acquire leases cheaply and hold them as assets as long as possible without producing. But new concerns from regulators and shareholders about how to evaluate potentially stranded assets (and greenhouse risks) could keep leases from propping up share prices.