LORIS: As Gulf recovers, economy still suffers

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ANALYSIS/OPINION:

For almost two years now, microorganisms have been hard at work ridding the Gulf of Mexico of oil spilled from the Macondo well explosion. But that’s just about the only thing working there, thanks largely to the administration’s effective moratorium on drilling.

First, the good news. A federally funded study recently published by the National Academy of Sciences found that the Gulf’s growing population of microbes and bacteria has consumed most of the oil that did not evaporate or wash up onshore. That doesn’t mean the environmental restoration of the Gulf is complete, but it is unexpectedly positive news. Just last year, many scientists still forecast that the spilled oil would ravage the region’s water for years to come.

Now, the bad news. The economic losses wreaked by, first, the drilling moratorium, then the “permitorium” and now the frustratingly slow permitting process have been devastating. It has cost the region almost $20 billion in capital and operating expenditures since the April 2010 explosion — and an estimated 90,000 jobs last year alone.

There was some movement in the Gulf, however. Unfortunately, it was 11 drilling rigs picking up and leaving for places where they could actually drill.

Also lost was all that oil we could have pumped to ease price hikes and all the revenues from production royalties, leases and rent.

There has been some modest improvement in the Gulf. ODS-Petrodata Weekly Rig Count keeps tabs on the usage of offshore platform drilling rigs. The fleet utilization rate for the Gulf of Mexico (updated Jan. 13) was 60 percent, up from 48 percent a year ago.

Still, these rates are dramatically lower than other areas of the globe. South America’s rate is 81 percent; Europe/Mediterranean Sea — 91 percent; West Africa — 82 percent; Middle East — 82 percent, and Asia/Australia — 83 percent.

Of course, anemic U.S. drilling extends beyond the Gulf. The Atlantic and Pacific coasts, areas the Obama administration once considered opening, remain closed to more drilling. Arctic oil and gas drilling is extremely modest and could be much more aggressively pursued with minimal environmental impact.

The assault on drilling is onshore, too. Lease sales and onshore applications for drilling permits have dropped significantly in the western United States for several years. The silver lining has been energy production in North Dakota. Drilling at record pace, North Dakota led the nation last year in percentage increase in employment and is recovering from the recession faster than any other state.

North Dakota is the poster child for what can happen when we unleash free enterprise to develop and commercialize resources. It produces jobs, economic growth, lower prices and additional revenue for government, without raising taxes.

And you don’t even have to be in an oil patch. Improved exploration and production technologies, such as hydraulic fracturing for shale gas extraction, have increased proven reserves in Pennsylvania, New York, Texas, Oklahoma, Arkansas, West Virginia and Louisiana. There’s also a glut of coal beneath our American feet — 486 short tons of recoverable coal, to be exact, enough to generate almost 500 years worth of electricity at current consumption rates.

Energy production is not a silver bullet to stop our country’s economic woes, but it can be a driving force to turn this country around.

President Obama’s jobs council recognized as much in its latest report, calling for more access to coal, oil and natural gas on federal lands. We should open these areas to energy exploration and production and, if a commercial interest exists, the government should provide a timely permitting process, as well as environmental and judicial review to allow these projects to move forward.

It would be nice to have some more North Dakota-like economic success stories.

Nicolas Loris is a policy analyst specializing in energy and environmental issues at the Heritage Foundation (heritage.org).

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