When considering offshore oil exploration, N.C. leaders should analyze the coastline's future appearance if the industry strikes oil and locates here, and whether the state would get any money from it, said a lawyer involved in past negotiations with oil companies.
Clark Wright Jr., a New Bern lawyer who advised Gov. Jim Martin during negotiations with Mobil when it held a lease for drilling off the Outer Banks about 20 years ago, said state leaders should decide whether heavy industry could fit into the mix along a coast that relies on tourism and recreation.
“Somewhere in hurricane alley – Norfolk, or Charleston or Wilmington or Morehead City – there are going to be tank farms, refineries and thousands of miles of pipeline,” said Wright, speaking Wednesday at a conference on offshore oil and gas exploration at Carteret County Community College. “What is the Crystal Coast going to look like? Where would we put refineries?”
Wright said that when Mobil wanted to drill in the 1980s, the negotiations focused on piping oil or gas to the Norfolk, Va., area, which already had heavy industry in place.
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“The real issues are secondary impacts, positive and negative, from onshore development,” he said.
Recent polls suggest that most Americans favor more domestic energy production, with the numbers increasing as gas prices spiked earlier this year.
A congressional moratorium on offshore drilling expired Sept. 30. The U.S. Minerals Management Service recently took the first step to offer leases for oil and natural gas exploration offshore of Virginia in an area about 50 miles from the Outer Banks.
The federal agency, which manages leases for oil and gas on the outer continental shelf, is now drafting a plan for additional leases from 2010 to 2015 that will be released in January. It will be up to the Obama Administration to decide how to proceed.
Jon Hrobsky, deputy director of the Minerals Management Service, said oil companies had expressed an interest in exploration in the mid-Atlantic region, which includes North Carolina, Virginia and Maryland. He said the agency hasn't made a final decision on which areas to include.
The U.S. Energy Information Administration estimates that the mid-Atlantic sea floor holds the potential of 1.56 billion barrels of oil and 15 trillion cubic feet of natural gas. That would be the equivalent of 6 to 7 percent of the proven U.S. reserves of each.
Hrobsky said only 2 percent of the acreage on the nation's outer continental shelf is currently under lease – mostly in the Gulf of Mexico – and yet it supplies more than a quarter of the nation's domestic oil.
“The potential of the outer continental shelf is vast,” he said. “We need better information.”
The Virginia legislature passed a bill in 2006 welcoming exploration off its coast, with several conditions: that the drilling be for natural gas only, that it occur no closer than 50 miles from the coast, and that the state get a cut of the lease revenues.
Hrobsky said the Minerals Management Service was only able to accommodate one of those three requests at this time – to stay 50 miles offshore. But he said the topic of revenue sharing between states and the federal government on offshore leases is likely to get more attention.
“I don't know how many people would be willing to go into business with someone if told they would get nothing,” Hrobsky said.
Currently, states receive 50 percent of the revenue for mineral leases on land, but typically do not receive direct payments for offshore leases in federal waters – anything more than 3 miles from the coast.
Two years ago, Gulf states such as Louisiana, Mississippi and Texas secured a change of federal law that will entitle them to 37.5 percent of offshore revenues by 2017. They get only a fraction of that currently.
“If states like North Carolina decide to do this, make sure you're going to get revenue,” said Sidney Coffee, who was former coastal adviser to the Louisiana governor and now is with the Wetlands Foundation, a nonprofit.
Carteret County commissioners passed a resolution in August endorsing oil and gas exploration off the coast. That prompted local leaders to arrange the conference to get more information about what it would involve.
“These are scary things for most people to think about – putting a refinery on the coast of North Carolina,” said Dave Inscoe, executive director of Carteret County Economic Development Council.
Inscoe said the question arises what role would the state port at Morehead City have in offshore exploration. The reality, he said, is that the initial years of oil exploration would probably generate very few jobs locally.
“They're skills,” he said.