According to news reports, the Speaker of the House has unveiled a new energy proposal.  It’s described as a compromise that would lead to more offshore energy production.  Based on the bill summary, however, the plans appears to be more of a “bait and switch” that won’t do much of anything to bring new energy supplies to market for a long, long time.

According to the summary released by the Speaker of the House, the new “compromise” would:

  • Institute a permanent ban out of 50 miles.
  • Permit leasing between 50 and 100 miles offshore if a State ‘opts-in’ to allow leasing off its coastline by enacting state law.
  • Continue the ban on energy production in the Eastern Gulf of Mexico.
  • Lift the ban on energy production beyond 100 miles.

To the casual observer, this certainly seems like a reasonable compromise.  Unfortunately, it’s not.  It’s a bait and switch.  Here’s why:

  • A permanent ban out to 50 miles locks-up the largest known offshore energy reserves, including those off the coast of California, that are close to existing infrastructure and be produced the fastest.
  • The plan permanently bans access to 97 percent of the 10.527 billion barrels off the coast of California.  It allows the State to decide whether to produce just 3 percent, or 287 million barrels, which is highly unlikely anyway.  The remainder…10.24 billion barrels…is off limits.
  • Keeping the Eastern Gulf of Mexico off limits also denies access to large reserves located close to existing pipeline infrastructure.  The plan keeps an estimated 3.65 barrels of oil and 22 trillion cubic feet of natural gas off limits
  • The offshore areas surrounding the State of Alaska are not currently subject to any bans.  This plan appears to institute a 50-mile ban around energy-rich Alaskan shore for the first time ever.  Energy exploration there is just beginning.
  • While the plan enables the states to “opt in” and produce energy between 50 and 100 miles, it lacks a revenue sharing mechanism, thereby making it highly unlikely that state would chose to do so.  In the case of energy production on federal lands – both onshore, and offshore in the Gulf of Mexico, states split production revenues with the federal government.  Denying the states this incentive effectively prevents new production.

Of the 18 billion barrels of oil locked-up by current bans, the new plan allows access to less than four, and perhaps as little as 2 billion barrels.  And without revenue sharing, even the four states most lilely to allow production – Virginia, North Carolina, South Carolina, and Georgia – would not do so.

For Comparison: The new plan may make available 2 billion barrels of oil available, beyond 100 miles of the shores on the East Coast.  Opening 2000 acres of ANWR’s northern coastal plain – onshore, 70 miles from an existing pipeline – would yield the United States at least an additional 10.4 billion barrels oil.

The Bottom Line: It appears as though the new plan would take the America from banning access to 85 percent of the OCS acreage surrounding the lower 48 states to banning access to roughly 90 percent of its most-promising and easy-to-produce offshore energy reserves.  By opening only the farthest reaches of the OCS where no infrastructure exists, denying the states a share in the revenues, and locking up the reserves that are closest (and largest), this proposal ensures that (1) new production would be sparse, at best, and (2) new supplies would not come online for a long, long time.  Combine these facts with the plan’s new taxes and government handouts, and the American consumer gets little more than an expensive energy bridge to nowhere.

Click here for charts which illustrate the points above.

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