Virginia Off-Shore Oil and Gas ~ Fact and Fiction

forestsaintregisOil and Offshore

Nov 8, 2013 (3 years and 9 months ago)

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Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

Virginia Off
-
Shore Oil and Gas ~
Fact and Fiction






April 2009

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy


Governor Kaine (D) and all three Democrat gubernatorial
candidates oppose or seek to delay exploration off the
Virginia coast.


Attorney General Bob McDonnell and Lieutenant
Governor Bolling, in separate letters to Interior
Secretary Salazar explained why it is in the interest of
Virginia and the United States to maintain the current
exploration schedule.


Sixty
-
three percent (63%) of adults now say finding new
sources of energy is more important than reducing the
amount of energy Americans currently consume.


Just one
-
out
-
of
-
three voters (34%) now believe global
warming is caused by human activity.

Off
-
shore development is both a
political and scientific issue

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

As of March, 2009:



Over 70 percent of all citizens endorse offshore drilling



74% Men





76% of White voters



77% Women





66% of African
-
American voters









60% of Hispanic voters



Support for off
-
shore drilling is constant among all
income groups:



74% of those earning under $40,000/year


67% of those earning $40
-
80,000/year


72% of those earning $80
-
100,000/year


65% of those earning over $100,000/year

All Sectors of the Public Support

Off
-
shore Development

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy


The U.S. imports about one
-
third of its petroleum
-
based
energy.



Virginia imports virtually all petroleum products with
nearly half (49%) coming from non
-
U.S. sources.



The majority of petroleum
-
related consumption (61% by
volume) is as gasoline.



To meet 2007 requirements, Virginia could be self
-
sufficient if it produced approximately 206 milllion
barrels of crude oil each year, or the equivalent from coal
resources.



Virginia coal or off
-
shore reserves can meet this need for
over 100 years for $50 per barrel (coal) or less (crude oil).

Virginia’s Petroleum Needs

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

Estimates of Crude Oil Reserves vary Widely

The Federal Estimate



The Federal government has estimated that Lease
Sale 220 could contain 130 million barrels of oil.



This would supply Virginia’s needs for 7.5 months.



They caveat this estimate as based on 1970’s data
and
badly out of date
.

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

Estimates of Crude Oil Reserves vary Widely

Oil company Estimates



Oil companies have made their own estimates which
they have
not made public
.



Their representatives have, however, suggested that
the recent reestimation of reserves done on Georges
Bank and on the Scotian Shelf east of Nova Scotia
provides a
metric for a better estimate

of the
reserves in the Sale 220 area.

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

A more likely estimate


Updating the U.S. Federal estimates, using the
Canadian metric, the reserves off the Virginia coast
may likely be 924 million barrels, perhaps as much
as 7 billion barrels.


7 billion barrels would supply Virginia’s needs for
more than 50 years.


A 7 billion barrel estimate is no more certain than
the Federal estimate based on 1970
-
era data and
represents a likely upper bound.

Estimates of Crude Oil Reserves vary Widely

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy


The potential oil productivity from Lease Sale 220
will be best measured by gauging the level of
interest oil drilling companies show in purchasing
the leases.



Until there is additional test drilling, the expected
oil and gas reserves off Virginia’s shores is
simply
unknown
.



Using current offshore drilling technology,
producers would need approximately
three oil
platforms

to produce 206 million barrels per year,
the current Virginia crude oil consumption.

The
Reality

of Estimating


Off
-
Shore Oil Reserves

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

Virginia’s Natural Gas Needs and Reserves


The U.S. imports slightly more than one
-
quarter of its
natural gas energy.



Virginia imports 66 percent of its natural gas production.




The Federal government has estimated that Lease Sale
220 could contain 1.14 trillion cubic feet of natural gas.




This reserve, alone, would supply Virginia’s needs for 3.6
years. They caveat this estimate as based on 1970’s data
and badly out of date.


Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy


Two alternative estimates on natural gas reserves place
the productive capacity of off
-
shore resources at much
higher levels.



Applying the Canadian metric, the reserves off the entire
Virginia coast may likely be 36 trillion cf, nearly 32 times
greater than the federal estimate for Sale 220 and equal
to Virginia’s needs over 100 years. The Center for
Environmental Stewardship believes this is a
high
-
end
estimate
.



Although we estimate 36 trillion cubic feet as a high
-
end
estimate, others have suggested that the reserves may be
only as large as 30 trillion cubic feet.

Virginia’s Natural Gas Needs and Reserves

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

Time to Production


The Department of Interior announced in July, 2008, a new
5 year plan that will allow leasing to start in 2010, implying
production from currently unleased areas
could begin as
early as 2015
.



The Department has indicated it will complete the bidding
process but it remains to be seen whether the new
Administration will allow actual sales.



The Department of Interior would like to develop a
“comprehensive” strategy for the eastern coastal waters
and
may delay actual production

on this basis.



Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy


The current MMS Lease Sale 220 includes a request for
comment on environmental risks. Additional
environmental studies would have to be made prior to
construction of drilling rigs.



An Independent Scientific Review of offshore oil
production in Australia found that environmental
impacts from offshore exploration and production are
negligible.



The U.S. National Academy of Science reports:





New estimates indicate that the overall amount of petroleum released to
the marine environment may be

lower than earlier thought . . .
.
Spillage
from vessels in North American waters from 1990 to 1999 was less than
one
-
third of the spillage during the prior decade, and, despite increased
production, reductions in releases during oil and gas exploration and
production have been dramatic as well
.”

Environmental Implications

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

State Revenue Potential


States receive 27 percent of the revenue collected from
offshore oil and gas activity within a band that is 3 to 6
miles off their shore, as specified in section 8(g) of the
OCS Lands Act.


In 2008, states received a national total of about $64
million in royalties for off
-
shore production.


Assuming maximum off
-
shore production (highest high
-
end estimates of 36 trillion cf over 50 years), Virginia
would receive $66.7 million/year.


Some individuals have suggested a 30 trillion cf level of
production would generate $200 million/year. This royalty
estimate does not seem credible.

Center for Environmental Stewardship

Thomas Jefferson Institute for Public Policy

Conclusions


Virginia has considerable off
-
shore energy resources.


They constitute an important part of an “energy
independence” policy that would result in lower energy
costs, more Virginia jobs and less reliance on foreign
powers.


Estimates of potential revenue to the Commonwealth are
likely over
-
estimated by a significant amount.


Development of off
-
shore resources is environmentally
safe and is supported by a very large majority of voters.