Sunday, August 17, 2008

Is “Drill here, Drill now” Just a Feel-good Slogan ?

George Bush knows something about oil.
In 1951, Bush #41 started Bush-Overby Oil Development Company and became a millionaire.
In 1977, Bush #43 started Arbusto Energy which under its own weight would have gone bust if not for the political connections of his father.
That’s the oil business … boom or bust (unless you get a bailout) !

So will drilling in the Outer Continental Shelf (OCS) be a boom or a bust … or just a stalling of the inevitable ?

Menzie Chinn writes Although a significant volume of undiscovered, technically recoverable oil and natural gas resources is added in the OCS access case, conversion of those resources to production would require both time and money. In addition, the average field size in the Pacific and Atlantic regions tends to be smaller than the average in the Gulf of Mexico, implying that a significant portion of the additional resource would not be economically attractive to develop at the reference case prices.” Chinn believes the impact of OCS drilling on the world’s oil prices to be minimal and production output years away.

But assuming that the US Government changes its regulations and industry acquires the production resources, will the oil be there ?
According to Sara Banaszak of the American Petroleum Institute (link) “Leases don't come with MapQuest directions that say "Drill here for 50 million barrels." It takes a process of exploration. Banaszak says developing an oil lease, especially offshore, can take up to 10 years and cost as much as a billion dollars ..
Banaszak is right. ExxonMobil took a year and a half to drill at cost up to a staggering $200 million going down over 30,000 feet at the Blackbeard West well before giving up.
Even if your Exxon or George Bush, there is no guarantee of success.

“Drill here, Drill now” is feel-good slogan that may garner some votes for Republican candidates this November, but what then ? Voters will quickly realize that we’ve been had. OCS drilling should be part of the solution … but even those wells will run dry. Mexico’s production has been diminishing.
Ultimately, the long term solution must be based on better consumption utilization, wind and solar.

And while Republican candidates like to chant “Drill here, Drill now”, voters need to read Tom Friedman’s column concluding “The fact that Congress has failed eight times to renew them [investment tax credits for installing solar energy and the production tax credits for building wind turbines and other energy-efficiency systems] is largely because of a hard core of Republican senators who either don’t want to give Democrats such a victory in an election year or simply don’t believe in renewable energy.”

This should be a stark reminder for voters in Minnesota’s Second and Sixth Districts that while John Kline and Michele Bachmann have spent time in Washington talking in the dark chanting “Drill here, Drill now”, voters need to be reminded that they opposed these tax credits putting Minnesota jobs at risk.

Slogans are not needed … embracing a comprehensive long-term solution is. Candidates should talk policy … not shout slogans.

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