What's in Store for Offshore Energy After the 2012 Election
President Obama describes his energy policy as an "All of the Above" approach that encourages production of traditional fossil fuels while supporting the growth of renewables. Despite an increase in overall U.S. energy production over the past four years, output in federal waters of the Gulf of Mexico has dropped well below recent government projections and onshore energy production from federal lands remains minuscule. Under a second Obama term, will federal waters and lands play a leading role in U.S. energy production, or will they continue to lag behind their potential?
How federal lands policy - and related energy policy - develops under the President's second term will reflect the dueling instincts within the Administration: the desire to push an active, even aggressive regulatory-reform program, and the desire to create a more bipartisan legacy on issues such as energy independence. We suspect we'll see elements of both as the administration continues a reformist Executive Branch regulatory agenda while exploring more common ground among Democrats and Republicans in Congress and the caucuses.
Other changes we see on the horizon:
Leadership
Aside from responding to the Macondo blowout, delaying the decision on the Keystone pipeline and dealing with the fallout from the bankruptcy of Solyndra, energy issues have rarely appeared at the forefront of the Administration's political agenda. Low-key leaders such as Interior Secretary Ken Salazar and Energy Secretary Steven Chu have contributed to the backseat posture of the Administration's energy policy. In a next term, look for the following changes:
- DOI Secretary Salazar likely to be replaced by someone with environmental and public-lands credibility (a la David Hayes);
- DOE Secretary Chu likely to be replaced: look for someone with technology credibility, like Secretary Chu, but with more experience dealing with the energy industry and Congress.
- Stay the course on the current Five-Year Program;
- Hold tight on the development of offshore Alaska pending more science on impacts, sensitive receptors, and technology;
- Push out consideration of mid-Atlantic O&G development until more offshore renewable energy projects get under way;
- Develop the next Five-Year Program shaped strongly by the latest scientific impact studies; since the next Program will be developed during Obama's second term but implemented during the succeeding administration, it's a chance for Obama to leave a ten-year legacy of offshore leasing.
- Promulgate additional regulations governing offshore equipment (e.g., BOPs), offshore safety management systems (e.g., SEMS), and leading/lagging performance indicators of process safety;
- "Set" the current permitting regime as the new normal;
- Initiate possible major initiatives around claims for natural resource damages (NRDs) from Macondo;
- Migrate regulatory concepts from onshore to offshore, and vice versa (e.g., disclosure, safety-case);
- Move increasingly toward performance standards, while also ratcheting up existing prescriptive standards;
- Continue to advance ocean zoning as a new gating function.
- Complete the development of the Investigations and Review Unit (IRU), the enforcement arm of the Interior Department's Bureau of Safety and Environmental Enforcement;
- Continue to back-fill justifications for the current position on contractor liability;
- Seek expanded Congressional authority for offshore penalties;
- Spotlight the Macondo litigation.
- Approve new, large renewable energy projects on federal lands;
- Finalize BLM's rules governing hydraulic fracturing on federal and Indian lands, followed by progress in shale gas development premised on increased regulatory requirements;
- Explore ways to streamline opportunities for energy corridors (transmission lines, pipelines) across federal lands.
- Create new National Monuments under the Antiquities Act;
- Complete the President's Great Outdoors initiative with a flagship effort of conservation or public access to the nation's natural heritage.