Report commissioned by offshore drilling opponents disputes economic benefits for Atlantic Coast

(Courtesy Wikimedia Commons.)
(Courtesy Wikimedia Commons.)

VIRGINIA BEACH — The City Council will have another academic report to consider as it rethinks its stance on offshore oil and gas drilling. This one casts doubt on the petroleum industry’s claims.

The report, released today, rebuffs and “dissects” the so-called 2013 Quest report on offshore drilling’s economic benefits.

It says that report, commissioned and often cited by the oil industry, overestimates the practice’s benefits and is “based on an incomplete and misleading economic picture, which resulted in overstating the likely regional economic effects of offshore oil and gas exploration and development.”

For example, the new report says, “the industry projections are based on near record-high oil prices of more than $120 per barrel, which is more than triple current prices,” and that the scope of drilling estimated in it far exceeds the possibilities. It also says the benefits of drilling would be dwarfed by the current economic output of existing ocean-dependent industries in Virginia Beach, which drilling opponents say would be endangered by the practice.

Commissioned by the Southern Environmental Law Center, the new report was prepared by the Center for the Blue Economy, an ocean-focused program of the Middlebury Institute of International Studies.

The Quest report said offshore drilling could contribute $23.5 billion annually to the nation’s economy, the impact of which would be felt greatly in the Carolinas and coastal Virginia, including the Beach.

The project director for the Quest report, Sean Shafer, said Tuesday he hasn’t had time to dig into the CBE report, but he said many of the criticisms he read in it were “valid if taken out of context.”

He said many of the numbers that the CBE report scrutinizes were calculated on clearly stated assumptions and theoretical scenarios, and that the CBE report unfairly picks at them through more specific lenses. For example, he said his report predates many of the current proposals for offshore energy exploration that are now being discussed by the Obama administration — proposals that the CBE report uses as a foundation to criticize the Quest report. Shafer added that his report did not rely on the political climate and possibilities when making assumptions, while the CBE report did.

The CBE study comes at a time when a national debate on offshore drilling is heating up, and soon after anti-drilling yard signs have popped up around Virginia Beach.

Along the Atlantic coast, more than 80 local anti-drilling resolutions have been adopted this year after the U.S. Department of Interior announced a proposal to open the Southeast coast to offshore oil and gas drilling, according to the Southern Environmental Law Center.

In Virginia Beach, the City Council stopped short of opposing the practice but voted 10-1 last week to withdraw its support of drilling. Council members said they want to hear from experts for and against the practice before taking a stand. Other members condemned drilling.

The council is expected to take a position in 2016, though Mayor Will Sessoms said he believes the city’s stance will have a minimal impact on drilling’s future.

The CBE’s report’s unedited key findings are below:

• The existing ocean economy in Virginia, North Carolina, South Carolina, and Georgia accounted for 249,000 jobs in 2012 and is thus larger than the Quest estimates for oil and gas employment in 2035, which as noted appear to be exaggerated.
• Employment in sectors that have been vulnerable to disruption from oil and gas development is significant in the region.
• The Quest report was prepared before the Department of the Interior released its leasing proposal in 2015, and is therefore based on scenarios that assume significantly more leasing in the near term than will actually be undertaken in the Department of Interior’s still preliminary plans.
– The report assumes that lease sales will be held annually beginning in 2018, but the Department of the Interior has proposed only one lease sale, to be held in 2021.
– The report assumes that production will begin in 2026, but production would likely not begin until at least 2029 under the actual proposal.
– The report assumes that Atlantic drilling can take place in all federal waters, but the Department of the Interior is proposing to limit oil and gas activity to areas off the coasts of Virginia, North Carolina, South Carolina, and Georgia, and has proposed a 50-mile buffer from the coastline within which drilling would be prohibited.
• Employment estimates in the Quest report are likely exaggerated. It is unclear, for example, how much of the projected employment will be filled by residents outside the South Atlantic region.
• The Quest report fails to disclose key assumptions about the location of support activities such as equipment manufacturing and does not distinguish between oil- and gas-related economic activities taking place in the South Atlantic and those based outside the region.
• The Quest report examines the impacts if Atlantic coast states were to receive revenue sharing from the federal government, as Gulf of Mexico states do, but it fails to acknowledge the long history of difficulty of establishing revenue sharing in Congress.

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