White House rethinks plans for offshore oil expansion

The Trump administration says it is re-evaluating its controversial plan to sharply expand offshore drilling.

The Trump administration has had a tough time overcoming Obama-era bans on further offshore resources exploration. Picture: Getty Images.

The Trump administration’s proposal to vastly expand offshore oil and gas drilling has been sidelined indefinitely as the US Interior Department grapples with a recent court decision that blocks Arctic drilling, according to Interior Secretary David Bernhardt.

The ruling by a federal judge in Alaska last month may force Interior Department officials to wait until the case goes through potentially lengthy appeals beforethey can make a final decision on what offshore areas to open up for the oil and gas industry, Mr Bernhardt said.

“By the time the court rules, that may be discombobulating to our plan,” Mr. Bernhardt told The Wall Street Journal in his first interview since his confirmation as interior secretary April 11.

Mr Bernhardt didn’t speculate on the length of the delay, but highlighted the court case in Alaska and said the appeals process is “going to take a while.” “What I can definitely say is, I’m not at a point now where it’s an imminent thing,” he added.

In the ruling last month, a federal judge said that an Obama-era ban on drilling in the Arctic Ocean off Alaska must remain in place unless Congress passes legislation to end it.

Environmental groups cheered news of further delay Thursday and urged for the proposal to be eliminated completely. Oceana ,an environmental group focused on the world’s oceans and an opponent of expanded coastal drilling, noted the bipartisan opposition to offshore drilling from all 17 governors of coastal states in the continental US that could see new drilling under the plan.

“Anything short of all new areas being protected would be a major problem for the communities and coastal economies who havethe most to lose from dirty and dangerous offshore drilling,” said Diane Hoskins, the group’s climate and energy campaign director Commercial interest in offshore drilling has waned in recent years during the shale-drilling boom. New techniques for tapping deep oil deposits in the middle of the country have led to record US production, drawing investment away fromthe more-complex drilling offshore and in Alaska.

That hasn’t stopped industry trade groups in Washington from supporting the plan in hopes of increasing their options.

Dan Naatz, senior vice president of government relations and political affairs at the Independent Petroleum Association of America, said a court decision shouldn’t bring the government’s work to a halt. “We’re hopeful that the Interior Department will remain committed to the regulatory process,” he said.

The industry’s hopes had coalesced around a more limited expansion in Alaska, the eastern Gulf of Mexico near Florida and parts of the Atlantic.

Offshore Florida, in particular, had wide interest from oil companies big and small because of how familiar they are with Gulf of Mexico operations, and its proximity to pipelines and refineries. But parts of the Alaska and the Atlantic largely would be expensive frontiers, limited perhaps to about a dozen major companies such as BP, Chevron and Exxon Mobil, said Dan Pickering, chief investment officer of TPH Investment Management in Houston.

“The opportunity to evaluate those areas, everyone believes they’re important,” said Mr Pickering, whose firm manages about $1.5 billion in assets. “But the number of companies that would be actively involved in exploiting those areas has shrunka lot in the last decade.” President Trump had directed the Interior Department to consider expanding offshore oil drilling,part of his signature energy policy of expanding U.S. production. The agency responded a year ago with a proposal to openoffshore drilling around nearly the entire country.

The plan would have offered the largest number of oil and gas leases in U.S. history starting late this year, opening up 90 per centof offshore areas for drilling as part of a five-year proposal.

The Interior Department said at the time its proposal could shrink, but it still drew swift opposition from governors of coastalstates, including some Republicans, who worried about the risk of oil spills from drilling accidents in tourism-dependenteconomies.

Then-Interior Secretary Ryan Zinke started backtracking in less than a week, promising that Florida’s coast would be off limits to drilling.

Mr Bernhardt’s comments are the latest sign that the administration is scaling back its offshore plan, which many had expectedwould move to its final stages several months ago. During his Senate confirmation hearing, Mr Bernhardt repeated that theproposal could be winnowed down, and he said the planning process was still at “step one, not step seven.” Friction with coastalstates remains an issue, Mr Bernhardt said in the interview. Federal law requires his department to consider input from localelected leaders in the five-year plans it sets to manage the waters of the outer continental shelf, which typically startclose enough to the coast for rigs to be visible from shore and reach more than 200 miles out to sea. Mr Bernhardt said heis still in the process of finding common ground with coastal governors.

“Certainly that is a very important component and I made that assurance to a lot of senators,” he said.

Many supporters and critics have been skeptical the administration could do the work within two years. Every delay raisesthe chance the administration won’t finish its overhaul and be able to defend court challenges against it in time to ensureit takes effect if Mr Trump doesn’t win a second term.

Alaska is the one state where leaders have been clamoring for new drilling, making an expansion there seem most plausible.

Instead, US District Judge Sharon Gleason put 125 million acres of the US Arctic Ocean and 3.8 million acres of the Atlantic Ocean back off limits indefinitely under a ban Mr. Obama had set just weeks before leaving office. Mr Trump had tried to overturn the ban with an executive order, but Ms Gleason said nothing in the law gives a new president power to undo a ban set by a predecessor.

It was the latest setback for an administration that has repeatedly lost efforts to defend its deregulatory actions in court.It has lost roughly 95 per cent of its deregulatory cases, according to data compiled by the Institute for Policy Integrity at NewYork University School of Law. That is three times the rate of most executive-branch agencies in prior administrations forsimilar actions in the courts, according to an analysis from the Brookings Institution.

The Wall Street Journal