The U.S. will need to rely on fossil energy to grow our economy while bridging to future alternative and renewable sources of energy. We need additional domestic supplies for security and to grow our economy. Despite this, the U.S. is the only country in the world sitting on known reserves of oil and gas that it has chosen not to develop.
According to the Department of the Interior, there are 86 billion barrels of oil and 420 trillion cubic feet of natural gas offshore on our nation’s Outer Continental Shelf — equivalent to 35 years of the oil we import from OPEC and an 18-year supply of natural gas. These are domestic supplies that can be produced with state-of-the-art technologies that assure environmentally friendly production.
Congress has allowed the 26 year moratorium on drilling in parts of the OCS to expire. The President and Congress must now take affirmative action to encourage additional production, decide the proximity of offshore drilling to U.S. coasts and determine whether and how to share royalties with the states.
By developing the Outer Continental Shelf for oil and natural gas exploration and production, royalty revenues can be shared with coastal states while the federal share could help fund research and development around areas such as energy efficiency, clean coal technology, nuclear waste handling technology and renewable energy deployment.
Although shale gas represents an exciting development for U.S. natural gas supplies, we believe the natural gas pricing cycle will continue and runs the risk of becoming even more volatile. Despite new technology, the lags between price signals and drilling response which have led to five price spikes since 1997 still exist. Policies meant to reduce greenhouse gas emissions and promote greater energy security through use of domestically produced natural gas have the potential to increase inelastic demand for natural gas and diminish the ability of the natural gas market to absorb weather induced volatility. Such policies, unless accompanied by increased supply will actually increase pricing volatility felt by residential, commercial and industrial users of natural gas.
We call for:
- A new political consensus on offshore oil and gas production that is both environmentally responsible and accesses significant resources. Royalty revenues should be shared with participating states, as was done in the 2005 Gulf of Mexico Energy Security Act, which provides 37.5% to states.
