Critics challenge claim that offshore bill will create 1M+ jobs

A Republican plan to open new areas of the Atlantic, Pacific, Alaskan and Gulf coasts to oil and gas drilling is unlikely to create more than a million jobs as claimed by GOP party leaders, according to a comparison between the bill and the study on which the jobs number is based.

And critics of H.R. 3410 from Rep. Steve Stivers (R-Ohio) -- which is part of a three-bill energy package Republicans said will raise new revenue for highways -- say the jobs claims are based on speculative estimates of how much oil and gas is available off the nation's shores and the industry's willingness to retrieve it.

The uncertainty clouds the debate as House leaders bring the measure to the House floor this week for a vote, where many expect the measure to pass. It is bundled with proposals to allow drilling in the Arctic National Wildlife Refuge and revive a George W. Bush administration plan for oil shale in the West.

The debate comes as unemployment hovers around 8.5 percent and jobs remain a signature promise in the presidential campaign.

While there is little doubt that expanding offshore drilling would create significant new jobs and reduce the nation's dependence on foreign oil, critics have questioned claims by House Speaker John Boehner (R-Ohio) and Energy and Minerals Subcommittee Chairman Doug Lamborn (R-Colo.) that the proposal would create more than a million jobs.


The claim is based on a 2009 study funded by the pro-drilling American Energy Alliance that found opening all of the nation's waters to offshore drilling could create nearly 1.2 million jobs over the next three-and-a-half decades.

But while the study assumes that all of the nation's coasts will be opened to drilling, the Stivers bill would only open the north and mid-Atlantic, the southern Pacific, parts of Alaska's Bristol Bay and a small part of the eastern Gulf of Mexico. In all, the bill opens less than half of the planning areas currently closed to drilling under the Obama administration's five-year leasing plan.

More planning areas would be opened to leasing if resources estimates as old as the 1970s are revised upward. But the bill does not contain any provision to incentivize private companies to conduct costly surveys in uncharted waters.

Some economists have also questioned the assumptions on which the study was based, including that energy prices would average more than $110 per barrel of oil and nearly $7 per thousand cubic feet of natural gas over the next few decades. Natural gas is currently selling for roughly half that amount.

Philip Verleger, an economist, consultant and retired professor of management at the University of Calgary's business school, said the study also assumes incorrectly that firms would invest in more refining capacity if offshore resources were opened to drilling. "The assertion is patently ridiculous," he said. "U.S. refineries are being closed because demand is declining."

But Joseph Mason, a professor of finance at Louisiana State University who authored the jobs study, said since most U.S. refineries are currently operating at maximum capacity, additional crude production would likely spur investment in new plants. New production would spark more than $50 billion in new refinery investments within the first two-and-a-half years, the study said.

Mason in the past has criticized proposals to end oil industry tax breaks, impose a cap-and-trade system to reduce carbon dioxide emissions and lend government subsidies for green energy firms including the bankrupt solar manufacturer Solyndra.

He said his jobs numbers are conservative because they rely on decades-old resource surveys based mostly on shallow water drilling, but which did not consider horizontal drilling technologies and other modern exploration techniques that have allowed companies to venture much further off the shore.

"There would be a reasonable expectation that much more in the way of resources would be available than are used for the basis of my study," he said.

But most jobs would not be created until after several years of surveying and exploration, the study concludes. Overall, the vast majority of the 1.2 million jobs would be indirect positions, including 69,700 jobs in "administrative and waste management services," 31,700 in "educational services," 24,000 in "arts, entertainment, and recreation" and 18,300 in "agriculture, forestry, fishing and hunting."

Overall, opening the previously unavailable offshore areas to drilling would add $8 trillion to the nation's gross domestic product and more than $400 billion in royalty revenues, the study found.

But the Congressional Budget Office estimated the bill would generate a little less than $2 billion in government revenue over the next decade. The CBO report notes that leasing has not occurred in the Atlantic or Pacific oceans for decades, that the areas lack pipelines and onshore processing facilities and that past litigation has blocked lease sales.

Jim DiPeso, vice president for policy and communications at Republicans for Environmental Protection, said the jobs claim assumes industry will also face little resistance when it seeks to explore off states that have historically opposed offshore drilling, including the entire West Coast and states like New Jersey.

"If [New Jersey Gov.] Chris Christie wanted to make an oil company's life miserable, I'm sure he could find ways," he said. In addition, the jobs claim falls flat on its face if the available resources estimates prove to be untrue, he said.

Committee Chairman Doc Hastings (R-Wash.), who shepherded the bill through his committee late last month, said the proposal may, or may not, create a million jobs, but that it is important to give industry the chance to explore areas that have long been off limits to development.

"Start with this premise -- and this is very important -- you never know if you're going to strike oil until you drill," he said. "You don't know what the potential is."

He suggested revenue estimates for places like North Dakota's Bakken field would have been much lower than they are today if they did not account for recent advances in horizontal drilling and hydraulic fracturing.

In addition to spurring exploration in frontier waters, the bill would revive thousands of small businesses that provide food, housing and other services to offshore energy workers, Lamborn said at the committee markup last month.

"It does make sense in my mind to encourage production from known technology resources that are known to have a high degree of safety implemented in one of the most highly regulated drilling environments in the world," Mason said, "rather than pushing production to Libya or Brazil or super deep water projects on the edge."

Rep. Ed Markey (D-Mass.), the committee's ranking member, said the jobs estimates are based on wishful thinking.

"I believe in the miracle of the loaves and fishes, where you can take five loaves and two fishes and feed 5,000, but I do not believe you can create a million jobs with that drilling proposal," he said. "One is theology, and the other is geology."

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