United States: Finding Out What Lies Beneath

Last Updated: August 5 2014
Article by L. Preston Bryant, Jr.

The Obama administration has aggressively focused attention on assessing — and possibly unleashing — the Atlantic coast's energy resources. After several years of eyeing its wind energy potential, last week the White House turned to oil and gas.

Polls show a solid majority of Virginians support power generation from offshore wind, oil, and gas, believing it important to our nation's economy and energy independence. Most Virginia lawmakers — federal and state — also support offshore energy production, especially if resulting tax and royalty payments help fill state coffers.

Researchers and regulators estimate that nearly 3,000 megawatts of wind power could be harnessed off Virginia's coast, roughly equivalent to a half-dozen medium-size coal-fired power plants. It's also estimated that 165 million barrels of oil lie beneath Virginia's section of the Outer Continental Shelf, worth about $13 billion, and that 1.6 trillion cubic feet of gas is there, valued at $10 billion.

A recent industry study suggests oil and gas production could support 25,000 jobs and $400 million annually to the state budget by 2035.

Nearly all recent significant federal action to develop Atlantic energy resources has come in the last four years. Key federal agencies have formed tight partnerships with Virginia governors and private industry to coordinate federal-state energy policy and develop new initiatives.

In March 2010, the president moved to open the mid-Atlantic to oil and gas exploration 50 miles off Virginia's coast — welcome news to then-Gov. Bob McDonnell — only to have his plans upended weeks later when the Deepwater Horizon oil rig exploded in the Gulf of Mexico. Months later, President Obama put in place a temporary drilling moratorium, set to expire in 2017, though his agencies continued regulatory rulemaking for eventual drilling.

In 2012, the U.S. Department of Energy awarded a $4 million grant to a Dominion Virginia Power-led offshore wind research project, followed by a $47 million grant to the company this year to aid construction of two research wind turbines. In 2013, the federal Bureau of Ocean Energy Management awarded Dominion a lease to develop a wind farm over more than 112,000 acres 25 miles off Virginia Beach, subject to regulatory approvals and cost competitiveness. Such a wind farm could power 500,000 homes.

And just this month, BOEM moved to allow the Atlantic coast's ocean floor — from Delaware to Florida — to be sonically scanned for oil and gas reserves in preparation for potential drilling in a few years when the current ban ends. It's believed that some five billion barrels of oil and 38 trillion cubic feet of gas are beneath this mid- and south-Atlantic coastal stretch.

These recent federal actions are largely in sync with Virginia policy and law. Former Gov. Tim Kaine worked with the General Assembly in 2007 to fashion the state's first-ever statewide energy plan. It called for the development of offshore wind power and supported the exploration of Atlantic natural gas. Former Gov. McDonnell updated the energy plan, focusing significantly on offshore oil and gas exploration and production. And today, Gov. Terry McAuliffe, a long-time supporter of wind power, has continued the push for federal allowance of offshore oil and gas drilling.

Current Virginia law supports oil and gas drilling 50 miles off our coastline. It also requires all taxes and royalties from oil and gas exploration and production to be put into a special fund, reserving the first $50 million for environmental emergency planning, protection, and response related to offshore oil and gas operations. Revenues beyond the initial $50 million go to the state's general fund, which is used for education, transportation, public safety, and healthcare.

Last year, U.S. Sens. Mark Warner and Tim Kaine introduced legislation to bring an early end to Obama's drilling moratorium, citing the need to update offshore data so that wind, oil and gas energy production can be in place by the end of the decade. They also sought to evenly split federal taxes and royalties with the state, with Virginia's half going partly to environmental conservation programs but mostly to the state's general fund.

The vast majority of Virginia's 11-member congressional delegation support opening the mid-Atlantic to offshore oil and gas production. The few opposing it mostly cite a preference for renewable energy development and concern for a Deepwater Horizon-type disaster harming Virginia's coastal habitat and fisheries and tourism economy.

Few dispute the economic and job-creation benefits to Virginia should wind power be harvested and oil and gas produced off our coast. What remains debated is environmental risk.

It is rare these days that federal and state law — and federal and state lawmakers — align on nationally significant issues. Yet in recent years a consensus has been nearly reached on offshore energy production. It is likely in Virginia's future.

Previously published by The News & Advance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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