I.H.T. Special Report | Oil & Money: Virginia Tries to Circumvent Obama to Allow Energy Drilling

Jason Hirschfeld/Associated Press

Hurricane Sandy pounding the coastline last month in Virginia Beach, Va. The state is the new epicenter of efforts by energy companies to get a toehold in the potentially vast resources hidden beneath the Atlantic.

WASHINGTON ? When Doug Domenech looks out at the Atlantic Ocean, he sees oil and natural gas and jobs and revenue. Standing between him and those prizes are President Obama, the Navy and whales.

Mr. Domenech, Virginia?s secretary of natural resources, is undeterred. He and the state?s Republican governor, Bob McDonnell, have teamed up with Virginia?s two Democratic senators to try to do an end run around the president and put Virginia?s coast on the energy map through an act of Congress.

The state is trying to restore a lease sale for energy exploration that was canceled in 2010 after the BP oil spill in the Gulf of Mexico. Its efforts have made Virginia the new epicenter of a campaign by energy companies to gain a toehold in the potentially vast resources hidden beneath the Atlantic.

?The administration not only took away our sale, but they didn?t reinstate it into the next five-year plan. They booted us off to 2017,? Mr. Domenech said. ?That?s what made us start pursuing other avenues in Congress.?

Oil companies and government officials think there is oil and natural gas off the East Coast. Exploration, however, has been blocked for more than 30 years after a devastating spill off the coast of California turned public opinion against offshore drilling.

That political environment changed over the last decade as oil prices soared and the American public and politicians weighed their fears of offshore drilling against the geopolitical threat of being dependent on oil from hostile nations or unstable regions.

Now seven companies, including Global Geo Services of Houston and WesternGeco, a subsidiary of Schlumberger, have applied for permission to conduct seismic studies along the East Coast from New Jersey all the way to Florida. Efforts are focusing on Virginia because the public, politicians in both parties and energy companies all favor opening the waters to drilling.

To proceed, the would-be explorers will need to bypass the vocal opposition of those who say that even the preliminary survey work would harm endangered whales, and of the Navy, which uses the waters off Virginia as training grounds for its base in Norfolk.

?It?s an important frontier, and it?s right next to a large market,? said Joe Gagliardi, vice president for marine programs at Ion Geophysical, a company in Houston that has applied to spend six months conducting two-dimensional seismic surveys from New Jersey to Florida. ?The Eastern Seaboard market is huge.?

The Bureau of Ocean Energy Management estimates that there are 3.3 billion barrels of recoverable oil on the Atlantic?s outer continental shelf and 31.3 trillion cubic feet, or 886.3 million cubic meters, of natural gas. The estimates are based on two-dimensional seismic surveys that were done in the early 1980s.

While they are careful to say that they have no idea what energy resources might be hidden beneath the Atlantic, energy executives say they believe that the bureau?s estimates are low, noting the industry?s history in the gulf.

?Initial estimates in the gulf were five billion barrels of oil,? said Andy Radford, senior policy adviser at the American Petroleum Institute. ?We?ve already produced over 20 billion, and current estimates are that there are 48 billion more.?

There are other indicators that drilling there could lead to big discoveries.

?We know there are oil seeps all along the East Coast of the U.S.,? Mr. Gagliardi said. ?Naturally the earth is leaking oil on a daily basis. There?s a natural petroleum system out there.?

The Eastern Seaboard of the United States was once connected to the coast of West Africa before the continent split in two and the pieces drifted apart, creating the Atlantic Ocean. Nigeria alone has more than 37 billion barrels of proven reserves, much of it off the coast in deep water.

Tullow Oil, a company working on the same theory, struck oil last year off the coast of French Guiana. The company, which is based in London, said it had begun exploring in the area because it thought the geology mirrored its earlier successful discoveries across the ocean off the coast of West Africa.

?I personally believe that the East Coast of the U.S. does have the ability to be the prolific economic basin,? Mr. Gagliardi said. ?However, there?s such a huge data gap that even the government doesn?t know the potential of the East Coast.?

Source: http://www.nytimes.com/2012/11/14/business/energy-environment/after-years-of-waiting-virginia-wants-to-make-its-name-in-oil.html?partner=rss&emc=rss

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