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Trump, reversing Obama, pushes to expand drilling in Arctic, Atlantic oceans

  • Author: Juliet Eilperin, Brady Dennis, The Washington Post
  • Updated: December 2, 2017
  • Published April 28, 2017

President Donald Trump took a major step Friday to expand oil and gas drilling off U.S. shores, directing the Interior Department to lift restrictions that President Barack Obama imposed in the Arctic and Atlantic oceans. But local political considerations and the global energy market are likely to influence future exploration far more than an executive order in Washington.

The "America-First Offshore Energy Strategy," an executive order signed Friday by Trump, will make millions of acres of federal waters eligible for oil and gas leasing, just four months after former president Barack Obama withdrew these areas from possible development. In late December, Obama used a little-known provision in the Outer Continental Shelf Lands Act to bar energy exploration in large portions of the Chukchi and Beaufort Seas, and a string of canyons in the Atlantic stretching from Massachusetts to Virginia.

Several industry officials and experts predict that oil and gas firms will bid on areas the administration plans to open to drilling, including those off the East Coast. But the targeted Arctic areas are much less attractive to investors right now, and even potential drilling in the Atlantic could be complicated by long-standing resistance from coastal communities.

Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former Obama energy and environment adviser, said that while the Trump administration can rescind the former president's efforts to end exploration in the two regions, that process would be complex and involve at least two years of revamping the government's long-term drilling plans.

"The question then is, does anybody show up, and does anybody want these [leases]?" Bordoff said. "It depends quite a bit on what the oil market looks like in two years."

If it looks anything like it does today, with low oil prices and most industry growth taking place onshore, Trump's new policy might have little practical effect.

National Ocean Industries Association President Randall Luthi, who headed the Minerals Management Service under President George W. Bush, said what matters most is that there has been "just a complete change of attitude" toward offshore development since Trump took office.

The hope with the executive order is "that once the economics fall into place, the federal and regulatory regime will be right for increased leasing off the Outer Continental Shelf," Luthi said.

The Kulluk conical drilling unit works in the Beaufort Sea at a Shell Alaska prospect in 2012. (Courtesy Shell Alaska)

Interior Secretary Ryan Zinke has made clear he wants to boost drilling in federal waters to generate more royalties. While this money goes directly to the U.S. treasury, Zinke suggested in a speech Tuesday that the royalties should be spent on a maintenance backlog within the national parks system.

"If you go back to 2008, the department made $15.5 billion more a year, just in offshore, than we do today," Zinke said. "That's enough to pay for infrastructure."

But even with the new administration's support for offshore drilling, opposition remains intense among politicians of both parties in the Southeast.

According to the advocacy group Oceana, 90 percent of coastal municipalities from Cape May, N.J., to Cape Canaveral, Fla., have formally opposed drilling or seismic testing off their coasts. Prominent South Carolina Republicans, including Gov. Henry McMaster and U.S. Rep. Mark Sanford, have come out against drilling there.

"It's not the environmentalists and the dolphin huggers," said Jacqueline Savitz, Oceana's senior vice president for oceans. "It's the business community. What you've got is a different fight now."

In Beaufort, S.C., Mayor Billy Keyserling said he is ready to again fight the prospect of offshore drilling – just as he did during the Obama administration – because of concerns over environmental threats, the potential impact on tourism and concern that more local jobs could be destroyed than created.

"We will fight it harder than we did in the past," Keyserling said. "We all feel very, very strongly."

In other states, elected officials remain split on the issue. Virginia Gov. Terry McAuliffe, D, opposes any drilling in federal waters off his state's coast. But Rep. Barbara Comstock, R-Va., has introduced legislation calling for a lease sale off Virginia Beach within the next year, along with two additional lease sales off Virginia's coast during each subsequent five-year period. These lease sales would be exempt from review under the National Environmental Policy Act, according to the bill, which would accelerate the process.

Despite the drilling restrictions Obama put in place for Alaska's Arctic, activity continues there. The Italian oil giant Eni wants to reach reserves in a federal area of the Beaufort Sea off Alaska by doing directional drilling from an artificial island it is using in state waters. Hilcorp has taken over a project formerly owned by BP. And Shell, after deciding to drop further exploration plans, gave its offshore acreage to the Arctic Slope Regional Corp., an Alaska Native entity.

Christy Goldfuss, who headed the White House Council on Environmental Quality at the end of Obama's second term, said that the executive order he issued in December specifically allowed exploration in 2.8 million acres in the near-shore Beaufort Sea where commercial interest is greatest.

"The idea that people are breaking down the administration's door to get access to the Arctic is just false," said Goldfuss, who now serves as vice president for energy and environment policy at the Center for American Progress, a liberal think tank.

Several industry officials said that even with a change in leasing policy, additional regulatory changes would be needed to make drilling in the Arctic more economically viable. Just last July, the Interior Department finalized stricter rules for exploratory drilling there.

Luthi said that the rules add "another two or three layers of difficulty to drilling" and that he was "fairly optimistic" the new administration would look at revising them as part of its broader regulatory overhaul effort.

Yet the bipartisan National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling is urging Congress to preserve the Arctic drilling rule. "We believe that these exploratory drilling regulations are necessary to prevent or reduce the severity or duration of a catastrophic oil spill in the Arctic Ocean," the commission wrote to lawmakers last month.

Still, broader energy trends are likely to shape the future more than any regulatory decision.

"If the last 10 to 15 years teaches us anything at all, it's that we should be humble about our ability to forecast oil prices," said Bob McNally, a former Bush administration energy official and president of the Rapidan Group consulting firm.

Over the past decade, he noted, those prices have fluctuated between $26 and $140 a barrel. They now hover around $50, but should that start to creep up, interest in offshore exploration and drilling could rise, too. McNally pointed to the recent five-year oil market forecast from the International Energy Agency, which found that demand is expected to "grow strongly" through 2022 and that "the need for more production capacity becomes apparent by the end of the decade, even if supply appears plentiful today."

"At $100 a barrel, the economics and the politics change," he said. "You'd see more industry interest and political calls for offshore development."

No matter what the future brings, the current administration is lifting restrictions that the industry sees as unnecessary and unwise.

"Trump is concluding that what Obama put in place was unreasonable," McNally said. Policy "should set reasonable standards and let market forces and technology – and geology in the case of oil and gas – dictate what activity takes place."

The Washington Post's Steven Mufson contributed to this report.

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