Obama Announces Expanded Offshore Oil Exploration (Update1)
By Nicholas Johnston and Kim Chipman
March 31 (Bloomberg) -- President Barack Obama said today he will allow oil and natural-gas drilling off the U.S. East Coast and cancel development in Bristol Bay, Alaska.
The president proposed permitting exploration in the Atlantic Ocean from Delaware south and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida.
“Given our energy needs, in order to sustain economic growth and produce jobs, and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources,” Obama said at an event at Andrews Air Force Base in Maryland.
Obama’s comments are his most detailed to date on coastal exploration, a topic that has divided lawmakers and now threatens to derail efforts to reach a compromise on climate- change legislation. Democratic senators such as Bill Nelson of Florida have said they won’t support a bill providing for unlimited exploration, while U.S. oil companies press to increase domestic exploration.
The expanded exploration will help reduce the nation’s reliance on foreign sources of oil while it begins to transition to new energy sources, the president said.
‘Broader Strategy’
“This announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy,” Obama said. “The answer is not drilling everywhere all the time.”
The decision to scrap leasing in Bristol Bay overturns former President George W. Bush’s action lifting a long-time ban on drilling in the region.
“It’s about protecting places that are special as well as looking at additional places that should be opened up for oil and gas development,” Interior Secretary Ken Salazar said earlier in an interview on Bloomberg Television.
In the Atlantic Ocean, Obama is proposing immediate exploration 50 miles off the coast of Virginia and further study elsewhere for new oil and natural gas fields.
“It’s absolutely a big change in policy because these areas have been closed for years,” said Stuart Traver, principal adviser at consultant Gaffney, Cline & Associates Ltd. in Singapore. “We’re really talking probably years before we see an impact in terms of new production.”
Oil Prices
Oil prices have swung from less than $20 a barrel in 2001 to a record $147.27 a barrel in July 2008 as investors bet demand growth would outstrip new findings. Crude oil rose 0.2 percent to $82.55 a barrel at 11:23 a.m. in New York trading, paring a rally of as much as 1.7 percent.
“Our member companies are very interested in access and want to see areas opened up,” said Randall Luthi, president of the National Ocean Industries Association. The Washington-based trade group represents companies in the offshore energy industry, such as Irving, Texas-based Exxon Mobil Corp.
A federal ban on drilling off the East and West Coasts and in parts of Alaska expired in 2008. Virginia Governor Bob McDonnell, a Republican, supports drilling off the coast of his state and this month signed legislation on how to distribute royalty revenue from energy production.
Under Obama’s proposal, the Interior Department will allow the drilling off Virginia’s coast and open up the rest of the outer continental shelf in the south- and mid-Atlantic to oil exploration.
Alaska Study
In Alaska, along with proposing to cancel leases in Bristol Bay, sales in the Chukchi and Beaufort seas would be scrapped to allow further scientific study.
“We will not be moving forward with respect to leasing in those areas until we develop information,” Salazar said.
A sale in Alaska’s Cook Inlet will proceed.
Obama said he expected to be criticized for his decision by critics on the right and left. To soften the blow, he spoke from an Air Force hanger at Andrews Air Force Base, highlighting and F-18 fighter and the light armored vehicle parked behind him.
The Army and Marine Corps have been using a mixture of biofuels in the vehicle, and the Navy fighter jet, called a Green Hornet, will be flown for the first time on Earth Day in a few weeks, using a mix of biofuels.
The Air Force had the first successful biofuel-powered test flight just last week, the president said.
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