Virginia offshore drilling faces obstacles, but still offers economic promise
Just one month ago, Virginia was poised to become the first Atlantic state to be cleared to develop its offshore oil and natural gas reserves. A brief flurry of activity and excitement followed President Obama’s announcement in late April that the administration was opening up a vast swath of territory off the Atlantic Coast and Alaska to offshore oil and gas drilling.
Virginia’s Governor Bob McDonnell and both the state’s Senators, among several other prominent leaders, hailed the decision – particularly Virginia’s designation as the first in line – as a significant step in the direction of energy independence and revitalizing the region’s economy.
Yet, in the weeks since Virginia has encountered several new obstacles that could delay or even curtail the scope of Virginia offshore drilling.
In early May, shortly after the explosion of the Deepwater Horizon rig in the Gulf of Mexico, the Interior Department announced an indefinite halt to the process of selling drilling leases off Virginia’s coast.
The area proposed for development encompasses more than 2.9 million acres found 50 miles off Virginia’s shore and was slated for leasing to private drilling operators as early as 2012 following the completion of an Interior Department environmental impact study and a series of public comment meetings throughout the region. While the environmental impact study has not been interrupted and is still on track to reach completion in mid-2012, the actual sale of the leases could take longer than expected, possibly beyond 2012.
The Interior Department says it suspended the leasing process along the entire Atlantic Coast to focus on its exhaustive investigation into the causes of the Gulf spill. In May, President Obama ordered the Interior Secretary Ken Salazar to undertake a massive overhaul of his department, its regulatory mechanisms and disaster response preparedness and the Minerals Management Service that oversees all offshore drilling operations in the United States before allowing any new drilling to proceed.
While still affirming the economic promise of offshore drilling in Virginia, Governor McDonnell, along with other regional leaders like State Senator Frank Wagner and Mayor Will Sessoms, agree that the Interior Department should complete its review of the Gulf spill and determine if the proper regulations and preventative safety measures are in place before proceeding in Virginia. The Governor is also joined in his wait-and-see approach and his call for more scrutiny of the industry by drilling advocates Senators Mark Warner and Jim Webb.
McDonnell told the Virginian-Pilot that, “while I’m a strong supporter of the energy and the jobs that come with it, we certainly don’t want to go forward without a lot of questions answered from the Gulf. I think we’ve got to wait and find out how well they’re able to mitigate these spills and how well we can get assurances after the investigation that these can be mitigated in the future.”
Coming on the heels of the President’s May 6 announcement, the Pentagon released a report in mid-May recommending that the Interior Department leave roughly three-fourths of the proposed leasing site off-limits to drilling. The Defense Department report said drilling in these areas would interfere with Navy training exercises and other operations conducted from Norfolk’s naval base. Interior Secretary Ken Salazar has said that the administration will give greater weight to objections from the Pentagon than to the economic and energy benefits from drilling in those areas.
However, Governor McDonnell believes the Interior Department can preserve the original scope of the drilling without disturbing the Navy’s operations. He has proposed expanding the area under consideration to allow the same amount of development to occur while carving out areas designated by the Navy as off-limits. Interior’s environmental impact study will also incorporate an assessment of offshore drilling’s impact on Navy and shipping activities.
Despite these recent obstacles, one fact still remains certain: developing Virginia’s offshore oil and gas will bring large-scale economic development and job creation to the region. Estimates of the number of jobs Virginia offshore drilling would create range from 3,000 on the low end to as high as 15,000. Estimates also vary on how many of those jobs will be filled by Virginia residents and how many workers will come from outside the state. Most experts agree that while initially a portion of the skilled work force will come from out of state, hundreds and perhaps thousands of jobs will be created in Virginia within supporting industries such as catering, refining, warehousing and machine parts supply that will provide services to the rigs.
The amount of job creation in Virginia will also hinge on whether the oil and gas are refined in Virginia, or whether they are transported to other Atlantic Coast states like Delaware. Currently, the only refinery between Georgia and Philadelphia is located in York County; however, it would need to undergo significant expansion to accomodate the amount of oil and gas that will be flowing from the Atlantic. A large-scale expansion would obviously generate hundreds of additional jobs for the region.
A 2005 study by Old Dominion University claimed that natural gas development alone would generate roughly 2,500 jobs in Virginia within 10 years. A 2009 study coming out of the Thomas Jefferson Institute for Public Policy said that oil and gas development combined would create somewhere around 3,000 jobs, with anywhere from a quarter to half of the jobs coming from Virginia in the immediate term and even a larger share in the long-term. The largest estimate was offered by the American Energy Alliance, who’s 2009 study saw the potential for creating as many as 15,000 jobs in Virginia over the next thirty years.
