Tag / Oil Industry

by Frank Maduri

The Next Proving Ground: Plans To Drill Off The Atlantic Coast

The U.S. Department of Interior over the past two weeks has advanced plans to drill for oil and natural gas reserves off the entire Atlantic coast from Maine to Florida. This plan has generated mostly negative reaction from residents along most of the coastal states effected, particularly in the Northeast and Mid-Atlantic regions.

The federal government plans to lease out areas off the coast of the entire Eastern seaboard for the planned exploration of these energy resources despite the potential risks to a massive population if there is an operational incident.

The actions of the Department of Interior have prompted the response from the state level governments which are effected by this potential new energy strategy. The most recent was in my home state of New Jersey, where Governor Chris Christie wrote a strong letter to the Department of Interior vigorously opposing any drilling or exploration efforts off the coast of the state.

Governor Christie cited the potential threat to the marine wildlife, the water, and other natural resources as well as natural habitats. The exploration for these energy sources can have a very damaging effect and the governor maintained that his position has always been against these types of exploratory methods in coastal waters.

My own view, as a resident, is that the Atlantic coast should be off limits to this type of drilling and exploration for a variety of reasons. The first of which is that the New Jersey coast line is a huge economic driver for our state; between the tourism at the beaches, to the fishing industry.
Second, the implementation of fracking (hydraulic fracturing) and other exploration methods on land have created a glut in the supply of oil and natural gas. The bigger issue now is what to do with the abundance of the supply of the resources and how to store it until the demand curve resets itself. The industry does not need more resources supplied from the Atlantic Coast, when the U.S. domestic oil and natural gas industry has other areas which currently provide supply.

Finally, I agree with the governors of the Atlantic coast states, the population density especially in the Mid-Atlantic and Northeast/ New England would create an environmental catastrophe in the event of an incident in an exploration operation. The sheer volume of people and the pollution potential for such a huge area is a high-risk scenario.

We have a responsibility to protect our natural resources and in this case, the Atlantic Ocean should not be explored for energy reserves in this manner. The risks far outweigh the return. It is my hope that the residents and the state governments can appeal to the federal government on this important matter.

I have grown up at the beach in New Jersey and I have seen the first-hand impact of pollution on the shore. I have also seen the impact of a storm like Hurricane Sandy, which a similar storm system in the future could have a disastrous impact on an off -shore drilling operation.

The Atlantic coast has been immune to exploration for this long a period of time, I do not understand what there is to gain by opening it up for oil and gas exploration at this point. I am hoping that the other side of this debate can make that argument in the coming months. I am hoping that the residents will band together and inform our representatives on both the state and federal level that we are not interested in this type of activity taking place on the Atlantic coast.

by Frank Maduri

Deep Freeze: Halt In Arctic Ocean Drilling

The recent announcement by the Department of Interior regarding the two year halt in Arctic Ocean oil drilling was not entirely unexpected but is a victory for environmental protection just the same. The decision effectively ends oil production in that region even though several companies still hold leases for exploration. I have followed this issue closely over the past few years and the decision by the Obama Administration last week indicates the cumulative effect of a confluence of factors which impacted the timing of this announcement.

 

The decision by the federal government to halt oil exploration in Alaska comes on the heels of the announcement by Shell Oil that they have cancelled their exploration efforts in the Arctic Ocean due to poor results from test wells and the steep costs for those projects in a marketplace where oil prices remain low. In fact, according to several mainstream news sources, Shell spent $7 billion on the Arctic region exploratory project and it yielded zero oil.

 

The elected representatives of Alaska are obviously unhappy with this decision but the handwriting was on the wall in this situation with several oil companies suspending exploration efforts there due to limited light hours as the Alaskan winter approaches and the harsh weather conditions. These factors combine to make drilling expensive and potentially dangerous for these companies to undertake.

 

However, it is yet another blow to the already struggling Alaskan state economy which has been impacted by a number of issues including the rise of fracking. The practice of hydraulic fracturing, or fracking, has changed the supplier side of the equation for oil production in the United States. The increase in fracking throughout the “lower 48” has decreased the strategic importance of Alaska to the oil producing companies. It has also created conditions were the U.S. has a bloated supply of oil amid a time of decreased demand for the resource, we are essentially overproducing oil and the market has not reset itself.

 

The Kayakers

 

The environmental groups and the “kayakers” as they are known in Alaska are thrilled at the announcement that oil production will be halted for the foreseeable future. The rationale is simple: the halt to drilling protects wildlife as well as protects against the release of carbon reserves from the excavation process which have been linked to climate change.

 

Some scientific studies already display an increase in the ocean temperatures without the excavation efforts going on in that region. This warming of the ocean has a direct impact on the rates of polar ice melt. Any disruption to the environment from external sources creates a domino effect on the rest of the ecosystem.

 

Environmental groups, both locally and nationally, have been working to raise the awareness of the potentially negative consequences to drilling in the Arctic and the direct correlation they would have on a number or natural resources.

 

Cost Benefit Analysis

 

Unfortunately, even the idealists and the environmentalists understand that the decision by Shell and other oil companies to suspend operations in Alaska was not made as a result of environmental stewardship. It was made out of a cost benefit analysis which also, very importantly, took into account employee safety amid difficult or dangerous conditions in that region of the world.

The decision was also driven by market conditions where the supply and demand curve for oil is unfavorable at this point for the supplier. Shell and the other big players in the energy industry could not justify the expenditure with oil prices being as stagnant as they are currently. These companies have the reverse problem, they have to determine strategies to cope with an abundance of supply of oil domestically at this point.

 

The decision to suspend operations in the Arctic Ocean may have been driven primarily by economic reasons but it invariably provides a benefit to environmental protection. The excavation of that region could have triggered negative consequences for our natural resources and our ecosystem which would have impacted us for generations to come.