New report says big economic impact would flow from offshore drilling in Virginia

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Print this page by Paula C. Squires

If Virginia is permitted to drill for oil and gas off its coastline, a new report shows a substantial economic impact both in jobs and revenue. Offshore exploration and production would create about 1,900 jobs, generate nearly $19.5 billion in government revenues (federal, state and local) and add $365 million annually to the state’s gross domestic product, according to Michael D. Whatley, executive director of the Southeastern Energy Alliance.

The nonpartisan alliance, which includes businesses, trade associations and nonprofits, also said in the report that Virginia could receive up to $250 million annually if federal laws were amended to allow the state to get the same royalty-sharing revenue currently granted to Gulf Coast states.

Whatley released the report Thursday, on the last day of the Governor’s Conference on Energy in Richmond. Gov. Bob McDonnell supports offshore drilling and, along with other Virginia politicians, lobbied strongly for the coastal waters off Virginia’s Outer Continental Shelf to be considered during the federal government’s next lease sale. Those efforts appeared to be moot this spring when Interior Secretary Ken Salazar imposed a moratorium on all deepwater drilling following an explosion aboard the Deepwater Horizon rig in the Gulf of Mexico that caused 11 fatalities and a huge oil spill.

Salazar lifted the moratorium earlier this week. That opens the door to new efforts to include a lease sale for Virginia in the next five-year (2012-2017), plan. If Virginia is not awarded a lease in this plan, it would have to wait until 2017 to reapply, according to Jon Hrobsky, director of policy and government affairs for the National Ocean Industries Association.
Hrobsky, along with Whatley, spoke on a panel that looked at the potential for developing Virginia’s offshore energy resources.  “Keeping this in the plan is critical,” he said, if Virginia wants to ramp up offshore exploration. If a lease sale for Virginia gets scheduled, the federal government would then conduct a formal environmental assessment that would play a big role in whether the project goes forward.

To come up with estimates on how much gas and oil might be available, Whatley said the Minerals Management Service did a 2006 study of the entire U.S. Outer Continental Shelf, including the Atlantic region. Based on that analysis and on current MMS maps, he said Virginia’s waters — which make up about 10 percent of the Atlantic region — are estimated to contain as much as 750 million barrels of oil and 6.65 trillion cubic feet of natural gas.

Panelist Joseph R. Mason of Louisiana State University lamented what he called the federal government’s “policy muddle.” There seems to be a reluctance to move forward with offshore drilling so soon after the oil spill, he said, for fear of criticism.  If the government waits too long, U.S. energy companies will move operations overseas, he said.

On the final day of the conference, natural gas was another hot topic. Several speakers noted its affordability and called for using more of it to replace oil, particularly for gas-guzzling vehicles such as heavy-duty trucks, school buses and refuse vehicles. New estimates that include major shale deposits in the U.S. indicate that the country has a 115-year supply of natural gas, noted Jeffrey L. Clarke, general counsel and director for regulatory affairs for NGV America, a trade association in Washington, D.C. “Going forward, natural gas is the most economic fuel compared to gasoline or diesel,” Clarke said.

Between panel discussions, conference participants checked out a wide-ranging display of energy exhibits, including a wind turbine simulator, made by SpectraQuest Inc. in Richmond. Surendra Ganeriwala, the company’s vice president of sales and marketing, said sales are up for the simulator, which is used as a training tool for wind energy technology.

The conference’s lunchtime speaker was Scott A. Angelle, the lieutenant governor of Louisiana.  He said many lessons can be learned from Louisiana’s model for an energy industry. Although 26 percent of the country’s natural gas is either produced or transported through Louisiana and the state has 300,000 wells off its coastline, Louisiana also is known as a sportsman’s paradise.  “We are proud to be America’s Energy State and to do it in such a manner that allows us to enjoy … world-class hunting, fishing, camping, trailing, and bird watching … Our nation must finally recognize that a robust energy industry and a sustainable environment can co-exist,” he said.

The conference brought together about 1,000 people from the business, education and government sectors. “We’ve all got some great ideas,” said Clarke of NGV America.  “The question is, ‘What’s next?’” We need to create a regulatory environment that allows the energy industry to grow and thrive. Investment won’t follow if people don’t know what the rules are.” 




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