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Offshore Energy In NC Sees Movement

By Neil Cotiaux, posted Oct 1, 2014
(Photo by Chris Brehmer)
Around coastal Carolina, the Obama administration’s invitation to the oil and gas industry to map potential deposits off the Mid- and South Atlantic coasts has spurred fresh predictions of financial windfalls and environmental impacts.

It’s also prompting calls for more hard facts.

The U.S. Bureau of Ocean Energy Management’s decision opening the Atlantic to seismic testing sets the stage for possible leases for drilling sometime after 2017.

But it also comes with a condition: Offshore surveys must adhere to new requirements to avoid harm to whales, turtles and other marine life. 

Separately, the agency has established three zones for wind turbines off the North Carolina coast – one off Kitty Hawk and two below the mouth of the Cape Fear River near Wilmington. The zones take into account fish densities, ship traffic and visual impact.

Supporters of offshore drilling are pleased with the green light given to ocean mapping and cite new jobs and economic development as eventual benefits.

Wary opponents warn of damage to the environment and tourism and pin their hopes on years of multiple permitting and lease reviews.

Despite the recent incremental steps forward in pursuing potential oil, natural gas and wind energy projects in the coastal waters, there are still a number of questions about what the future might look like.

“I think it’s a guessing game for anybody to see what the economic impact or economic potential is,” said Steve Yost, president of North Carolina’s Southeast, an economic development group.

Regional planners will need to know how much product is coming ashore before arrangements can be made to refine and transport it, he said.

Among those watching closely are members of the local tourism industry whose business depends on beach conditions to draw visitors.

“Our coastline is way too fragile to have any potential spill disrupting our waters,” said Bill Baggett, co-owner and operator of Wrightsville Beach’s Blockade Runner Beach Resort, who once worked at a New Orleans law firm that defended a drilling company.

“There’s always human error in drilling offshore,” Baggett said.

“It’s a tremendous leap into the unknown.”

But the American Petroleum Institute (API) points to this year’s statement from the National Oil Spill Commission – established following the Deepwater Horizon blowout – that industry and government have pursued its recommendations to improve the safety of offshore oil drilling and the capacity to respond to spills.

“Offshore drilling is safer than it was four years ago,” the commission said.

“Best practices” in offshore procedures and equipment, well control and containment, and spill preparedness and response are being shared across the industry, API officials added in a statement.

Others remain neutral.

Jerry Schill, president of the N.C. Fisheries Association, said his group has never opposed drilling but “neither have we jumped up and down and endorsed it.”

“We use diesel fuel – lots and lots and lots of diesel fuel,” Schill said. “If we are going to oppose it, it’ll be for the right reasons.”

As for wind farming, “It’s a different risk profile and a different technology,” said Brian O’Hara, president of the Southeastern Coastal Wind Coalition, who believes it will be at least five years before turbines rev up.

But, despite contrasting viewpoints, stakeholders agree that reliable information about the
economic, environmental and political dimensions of offshore energy is essential.

With seismic testing, “We can finally begin to assess the amount of oil or gas that could be beneath the ocean floor after decades of waiting on the sidelines,” Gov. Pat McCrory said.

Estimates of the payoff vary.

A 2013 study by Quest Offshore, an industry consultant, predicts 55,000 new jobs and a $4 billion boost to North Carolina’s gross state product by 2035.

But another study by Michael Walden, a professor of economics at N.C. State University, tells a somewhat different story.

Walden reviewed federal estimates of ocean-floor deposits, energy price forecasts and reports of environmental damage.

The quantity of recoverable resources and market pricing “are the most uncertain factors,” he said.

Over a seven-year ramp-up, he estimates, offshore drilling would generate $181 million in annual income and 1,122 jobs and after that, $1.9 billion in annual income over 30 years and nearly 17,000 jobs.

As impressive as that may sound, drilling advocates who claim “We’re going to be like the Dakotas” may want to lower their expectations, Walden said.

“All the estimates of what might be out there are wild guesses,” said Lawrence Cahoon, a biological oceanographer at the University of North Carolina Wilmington. “Maybe one out of 10 wells is a hit.”

Like its economic impact, the environmental costs of drilling also involve educated guesses.

“Exposure to seismic testing is a complicated modeling problem,” said Cahoon about the use of air guns that emit loud, compressed air during surveying. “Many of the effects that they’ve tabulated are sub-lethal. … We wish we knew more.”

Without preventive measures, air guns place 138,000 marine mammals at risk of disorientation, injury or death, asserts Sara Young, a marine scientist at the conservation group Oceana, citing federal data.

She also cites potential harm to “commercially important fish species” off the Carolina coast.
Due to limited data, “It’s hard to say” how much damage to fisheries might occur, she said.
Assessing the dollar impact of any environmental damage remains a high priority.

Walden estimates the average annual cost of an offshore oil spill at $83 million.

“This loss is 2.7 percent of the total annual spending ($3.1 billion) related to tourism and fishing in the affected coastal counties,” he writes, an area that includes Brunswick, New Hanover and Pender counties.

State law provides that any offshore royalties shared by Washington be placed in an account dedicated to environmental mitigation and remain there until the fund reaches $250 million.

But revenue sharing remains stalled in Congress.

Currently, “We don’t get a dime,” Cahoon said.

“Every state that hosts oil and natural gas development off its shores should get a fair share of the revenue collected by the federal government,” said Brian Straessle, a spokesman for API. “The clock is running down.”

Similarly, proponents of wind farming say Washington must reauthorize a production tax
credit before new turbines can start spinning.

Construction of the state’s first commercial-scale wind farm on land outside Elizabeth City is on hold due to the lack of a power purchase agreement and inaction on the credit, said Paul Copleman, a spokesman for Iberdrola Renewables, with 150 turbines yet to be erected.

But big businesses and large environmental groups continue to support wind power, O’Hara said.

As talk of offshore energy escalates, coastal communities need to know as much as possible about how such projects might affect them, said Dan Wilcox, mayor of Carolina Beach.

“We on the local level have a hard time comprehending how, financially, [they] may help us,” he said.

While his community needs and welcomes more information about offshore energy, Wilcox said, “There’s just got to be someone who can present the information more objectively.”

Latest Developments

This summer, the Obama administration approved the use of seismic exploration off much
of the Eastern Seaboard to look for oil and natural gas deposits, including off North Carolina.
The decision, announced in July, is ahead of the 2017-22 timeframe in which energy
companies may be able to apply for drilling licenses in the Atlantic outer continental shelf if current limits end.
Also this summer, federal officials outlined more than 300,000 acres off North Carolina’s coast that could be opened to commercial leases for offshore wind-energy projects. The areas identified in August included nearly 52,000 acres 10 miles from Wilmington and about 134,000 acres 15 miles from Bald Head Island. The third area was off Kitty Hawk. Environmental assessments still must be done before the federal government auctions any leases.

Coastal Energy Summit

Oct. 9, Wilmington Convention Center
The event includes talks about offshore oil and gas exploration and wind farms, as well as discussion on other projects from nuclear to solar. American Petroleum Institute president Jack Gerardand Gov. Pat McCroy are the keynote speakers.

To read about other movements on energy issues that would affect the region click here.
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