Offshore Energy

BOEM's Hopper, API's Milito discuss future of offshore energy development

With offshore wind energy seeing an uptick in investments in 2015 and offshore oil and gas adjusting to the market pressures of low oil and gas prices, the United States' offshore energy portfolio is changing. During today's E&ETV Event Coverage of Capitol Hill Ocean Week 2016, panelists discuss the current and future financing, policy and planning dynamics of offshore energy. Panelists include Abigail Ross Hopper, director of the Bureau of Ocean Energy Management at the Department of the Interior; John Weber, executive director of the Northeast Regional Ocean Council; Erik Milito, group director of upstream and industry operations at the American Petroleum Institute; and Nancy Sopko, manager of advocacy and federal legislative affairs at the American Wind Energy Association. The panel is moderated by E&ETV Managing Editor and host Monica Trauzzi.

Transcript

Introducer: So, without further ado, I want to move on to this fabulous panel we have today, "A Changing Offshore Energy Portfolio," and we have Monica Trauzzi, who is the managing editor and host for E&ETV, who will lead our discussion today on the changing offshore energy portfolio. And we expect that we'll be looking to the future a bit with this crowd, looking at the portfolio and factors that affect the future oil and gas exploration and production, the growing momentum of the offshore wind industry, as well as the benefits of planning, coordination and community engagement for developing our nation's offshore energy resources. So, with that, Monica, thank you very much.

Monica Trauzzi: Thank you, and thank you to the National Marine Sanctuary Foundation for the invitation to moderate today's discussion. This is a critical topic as we consider the future energy policy landscape of the United States. Offshore energy sources have increasingly become a critical part of the discussion on energy security and energy economics and climate change. Traditional sources of offshore energy, namely oil and gas, have suffered recently due to market volatility, and as prices stay low, there are concerns and questions about how the industry will invest in future production and exploration.

At the same time, offshore wind energy has seen major investments, and 2015 proved to be a game-changing year for this energy source. With Deepwater Wind leading the way for the industry, there are some important policy and finance questions that need to be answered in order to sustain momentum.

So today's panel will hopefully answer these questions and, more broadly, look at the state of America's changing offshore energy portfolio. Additionally, we'll take a look at the factors affecting the future of oil and gas exploration as well as the increasingly dominant role of offshore wind. The National Marine Sanctuary Foundation has very clearly gathered a diverse and influential panel that will be able to speak to these issues, so joining me are Abigail Ross Hopper, director of the Bureau of Ocean Energy Management at the U.S. Department of Interior; John Weber, executive director of the Northeast Regional Ocean Council; Erik Milito, group director of upstream and industry operations at the American Petroleum Institute; and Nancy Sopko, manager of advocacy and federal legislative affairs at the American Wind Energy Association.

So thank you all for joining me today. Like we said, this is all Q&A, so we'll just jump right in. Director Hopper, I'll throw the first question to you. Can you talk a little bit about this administration's commitment to climate as it relates to BOEM and Interior?

Abigail Ross Hopper: Sure. So, thank you very much, and thank you very much for inviting me to be here today to be part of this important conversation. Obviously, President Obama and this administration have made an incredibly important commitment to addressing climate change, and that commitment is taken very seriously by the Bureau of Ocean Energy Management. I assume that most of you know what BOEM is, but I will just let you -- for those of you that might not know, we are the agency in the Department of Interior that is responsible for all energy development on the outer continental shelf. So there's 1.7 billion acres, and if you want to develop energy anywhere on that, in that area, you come chat with us, and so we have a really interesting portfolio because we do have those traditional sources of energy, which have been the backbone of our economy for many decades and, I think, many decades to come, and we also have -- responsible for renewable energy development.

And so as we, as our bureau look at how we sort of chart a path forward with all of the climate change commitments that we have in mind, that we have committed to, we do that in, I think, a very thoughtful way. We do that by, on the renewable energy side, making sure that we provide access to acreage for renewable energy and provide a very stable, reliable and consistent regulatory process, and we do that on the oil and gas side by continuing to make acreage available, but by having our decisions informed by the effects that oil and gas development have on climate change and really understanding what those are so that we can make decisions that are in line with the administration's commitments on climate change.

Monica Trauzzi: So, a question for all of the other panelists: How does this administration's commitment to climate change impact the changing offshore energy portfolio, and are you concerned or are you beginning to think about what might happen when we see a new administration come in that could potentially not have the same thinking on climate change?

Nancy Sopko: Well, I'll jump in here, Nancy Sopko with the American Wind Energy Association. I think the Obama administration has done exceptionally well in fostering an environment for renewable energy development on the outer continental shelf. You know, it's not mentioned a lot, but the Department of the Interior wasn't even given regulatory authority over renewable energy development on the OCS until 2005, and that kind of authority was largely -- nothing was done with it until President Obama came into office, and so I think the administration has a true and proven commitment to renewable energy development, offshore wind development. They've come so far in the past seven years to make sure that there's de-conflicted areas available for offshore wind, that areas are identified after much stakeholder engagement, public meetings, and then holding lease auctions on those areas. So I think that they are taking their commitment in a -- very seriously, and I think it benefits offshore wind development.

Monica Trauzzi: Erik, do you want to --

Erik Milito: Yeah, I think when we look at the future of offshore energy, we need to look, really, at the foundation for what this country's gonna need when it comes to our energy sources, and I always go and look at energy information in the administration projections. So, today, we are an all-of-the-above country when it comes to energy development and energy consumption. Right now, more than 60 percent of our energy comes from oil and natural gas, and as you move out to 2040, we're gonna continue to rely on oil and natural gas for more than 60 percent of our energy. We're also gonna be using more wind. We're gonna be using more solar.

So we have this energy portfolio that we all rely upon in our everyday lives, and the offshore plays a role in that because we are, right now, about to reach an all-time high in oil production despite the low cost that we see from a business environment that we're in. And we've seen, through this energy renaissance we've gone through, with the U.S. becoming the largest producer of oil and natural gas in the world, that it's provided many benefits. It's given low-cost energy for consumers. It also has helped us on the climate side because one of the key drivers of our greenhouse gas emissions reductions over the past several years has been the influx of natural gas into the electricity generation sector.

So we know the offshore has major deposits of natural gas as well as oil; we see natural gas being developed in fields right off our northeast coast, in Canada. We see, around the world, oil and natural gas is being developed offshore. So this industry's be -- committed to continuing to do that. It is a global market for all these resources. So the question becomes, "Should we continue relying on the U.S. to be supplying those resources, or do we need to look for other areas around the world for offshore energy development?"

John Weber: I would just add that in Northeast, you mentioned Deepwater Wind, and Deepwater Wind is building. They are constructing. So, as you said, 2015 was very much a watershed year. There are multiple reasons why that project is first in the water, in this country. One of them is the work that was done with the planning effort, largely through the state of Rhode Island, which the draft New England Northeast Regional Ocean Plan very much builds upon, because what that planning effort does is it brings together all of these considerations in one place, in one conversation, all the other interests who are already out there in the water, to move forward to have a conversation and bring into the decisionmaking process science, data, people's opinions, etc. I think it is that reason, among others, why Deepwater Wind is building now. They are constructing, and it's interesting to talk to their CEO, Jeff Grybowski, who says that his opinion is that the process -- the planning process that they went through saved them years in terms of being able to move ahead at this point.

So I think there's -- to the extent that there is an urgency to address some of these issues, I think, by -- our introductory speaker said we want to be looking forward. We need to be looking forward, and that is exactly what this planning process is intended to do.

Monica Trauzzi: And do you think that that planning process provides a template for other regions?

John Weber: Yeah, I think so, and the reasons I think this are really two very broad reasons: One is, the details absolutely will differ from region to region, and they should, and we need to respect that. Our general approach is based on two foundations. One is that there's a lotta good information, data and science that we can get out there to bring into bear into the process. BOEM already does a great job of a lot of this. So we're building upon a really solid foundation. That's the -- at heart of what a lot of the ocean plan in the Northeast is about.

The second piece that I think is the foundation for the Northeast plan is that -- and there's always a lotta conversation about this, but there's real detail about how governmental agencies, particularly among the federal community, but also federal and states, who have the -- a very strong role in all of this, how they are going to work together moving forward. If we are going to continue this type of work -- and there's no reason to assume we won't -- that is how we're going to move forward, by folks working together. That's what the planning process in the Northeast has done: bring those folks together. There is no reason that can't occur elsewhere. And to be very fair, it already does in a lot of places.

Monica Trauzzi: Nancy, can you talk a bit about the most significant developments that we've seen and projects coming out of the offshore wind industry? Like we've said, 2015 was a very critical year. So what's happening?

Nancy Sopko: Yeah, absolutely. So we all know -- or hopefully we all know -- that Deepwater Wind is constructing the Block Island Wind Farm right now off the coast of Block Island, Rhode Island, five turbines for 30 megawatts. First U.S. offshore wind farm, so we are very excited to get those turbines spinning out there. But there's a lot going on elsewhere, too, so all up and down the Atlantic Coast, there's wind energy areas that have been identified, lease auctions -- I think we've had, what, 11 lease auctions at this point? So that's a great number to build on. I think the most recent was -- forgive me if I'm wrong -- New Jersey in November, actually, in 2015, and those were two lease areas.

So we have -- our membership is comprised of developers like U.S. Wind, Deepwater Wind, DONG Energy, the global leader in offshore wind development; they hold leases off the coast of Massachusetts and New Jersey. U.S. Wind holds a lease -- rights off the coast of Maryland. We are looking up and down the Atlantic Coast for great development very soon, and also looking to the West Coast for -- to get those floating wind turbines out there and really capture the incredible potential of offshore wind out there. But let's not forget about the Great Lakes, either. So we have a company called LEEDCo, a Lake Erie economic development corporation, and so they're moving forward on a small project in Lake Erie, and were just awarded some funds from the Department of Energy as well as the University of Maine with their floating wind project, and then, also, with Fishermen's Energy, which is developing a pilot project off the coast of Atlantic City. So those three are looking forward to getting some funds from the Department of Energy and progressing through the process.

So there -- I think there's about 13 projects in various stages of development in 10 states, totaling about 6,000 megawatts of offshore wind development. So we are very excited about moving those projects along, hopefully as quickly as possible, and seeing other interests from other developers, foreign or domestic, to develop offshore wind here.

Monica Trauzzi: But cost remains a key challenge, right?

Nancy Sopko: Cost remains a key challenge, that's right. So -- [laughs]

Monica Trauzzi: So is it being adequately addressed, and what do you think sort of the next policy and finance steps are to help with cost?

Nancy Sopko: Right. So that's a great question. Cost is the elephant in the room for offshore wind. It's, right now, one of the more costlier technologies for power. However, I think we can look at the land-based wind industry for some guidance on this. So land-based wind has been around in this country for decades. It's a very successful industry, and in the past six years, we see costs for land-based wind drop by two-thirds, and so, looking at that kinda trajectory, offshore wind is starting out at a better position than land-based wind did. With the success of land-based wind, we have a lot of manufacturing facilities in this country that are focused on building those domestic parts for wind energy projects, and that commitment to volume and building this wind energy is creating a lot of jobs. So 88,000 jobs in 2015 were in the wind energy industry. And so we think that there's a lot of room for growth on that, and when that growth happens and those manufacturing facilities in the United States can grow and expand on working on very similar parts for offshore wind projects.

Monica Trauzzi: Director Hopper, what do you believe the necessary ingredients are for offshore wind, and what role should BOEM be playing moving forward?

Abigail Ross Hopper: So I think there's three components that you need. You need a stable permitting process, you need a strong state policy and you need technology that works. I don't know if that's particularly unique, maybe, for offshore wind as other technologies, but certainly for offshore wind, you need those three things. And so BOEM plays the role of the regulator, right? And so we do have a, as Nancy said, a pretty predictable way in which we offer leases. We identify areas and offer leases. We have a regulatory construct to analyze plans that we get in from developers. Many of the states, both on the East Coast and the West Coast, are looking at -- some have already and others are in the process of -- creating state policy to sort of address some of those financing issues that you raised.

And then we know the technology works, right? The technology has been working in Europe for decades, and so I think when we get those three pieces of the puzzle together, as Nancy said, that the pipeline of projects will create the market and prices will continue to fall.

Nancy Sopko: If I may just build on that policy point, the federal government has an ITC, investment tax credit, currently in place for wind energy projects. Offshore wind really benefits from investment tax credit; land-based wind really benefits from a production tax credit. They're both available till the end of 2019 in a phase-down situation. You know, I think our offshore members are looking for more of that, because with the project's timeline, it's very hard to meet those requirements in the current availability of the investment tax credit.

But we are also looking to the states to be real leaders on this, and they have been. We really need to create demand for offshore wind, and so we look to renewable portfolio standards. New York is moving towards a 50 percent by 2030 RPS. California already has that in place. That's the goal they're moving towards. Oregon is -- I think it's 50 percent by 2040, and in Hawaii, it has a very ambitious goal of 100 percent clean energy by 2045. So offshore wind really needs to be part of the energy portfolios in those states if those goals are to be met.

And then, separate from renewable portfolio standards, I'll also mention carve-outs that are very beneficial to the offshore wind industry. So in Massachusetts, a bill is moving through the legislative process that I think the House bill, at this point, proposes a 1,200-megawatt carve-out for offshore wind. I think Rhode Island has a 150-megawatt carve-out for offshore wind. Maryland -- excuse me -- has a 250-megawatt carve-out for offshore wind. And so when you look at these kind of policies in the states and -- you know, those are the real drivers for offshore wind development and should continue to be in the future.

Monica Trauzzi: I know that you've looked to leverage the expertise from the offshore oil and gas sector. I'm curious what Erik thinks of that. What expertise do you think can carry over to offshore wind? What kind of communication can happen between the two industries?

Erik Milito: I think that's happening just through the market-based approach to technology development where you have companies that have the expertise in deploying the drilling rigs, developing the platforms for bringing production to market as well as the whole service sector that feeds into the offshore oil and gas industry. So, whether it's developing the materials and making sure you have the corrosion-resistant alloys and metals, whether it's fixing these structures, installing them at the seafloor, or floating structures, there's a lot of expertise within the oil and gas industry based upon our experience, and my assessment is that has been feeding into offshore wind to some degree. So it's just a matter of our fundamental market economy and American ingenuity -- I think we have probably some of the best engineers in the world, whether it's developing wind or developing offshore oil and gas -- coming together to kinda make these projects happen.

Abigail Ross Hopper: I'll tell you -- oh, sorry.

Monica Trauzzi: Now -- sorry, go.

Abigail Ross Hopper: Also, Nancy's organization had their conference in New Orleans two or three weeks ago, and I got an invitation from the Louisiana Offshore Wind Supply Chain Network, which I'd never heard of, to be honest, but I said, "OK, I'll go to your event." And I walked into the room and it was all of Erik's members. [Laughs] It was all the supply folks from the oil and gas industry that's, as you said, see a market opportunity, many of whom are employed on the Deepwater project, are contracting with some of the other offshore wind developers, and so I think there's an incredible opportunity for those two industries to learn.

Erik Milito: Yeah, the economics of oil and gas don't end with drilling oil and getting it to production. There's a vast network of businesses and employees, small businesses -- not just in the Gulf Coast but throughout the country -- that kind of feed into it, providing the controls and the materials and the servicing of the energy, and wind'll obviously require the same.

Nancy Sopko: And just on the Deepwater Wind project, a couple companies from the oil and gas industry have already been utilized -- Gulf Island Fabricators and Montco Offshore. So Gulf Island Fabricators fabricated the foundations for the turbines, and Montco Offshore are the vessels. You know, we -- the Jones Act is in effect. We can't use foreign-flagged ships for a good portion of offshore wind development, and so we really do need to look at the off -- oil and gas industry for not only the vessels and the infrastructure, but the skilled workers who know how to work on the open ocean on these energy projects.

Erik Milito: From a safety standpoint, where a lotta this work involves heavy lifts and the type of activities that you gotta make sure you do right because these are risky activities and you wanna make sure you're protecting the workers in the environment.

Monica Trauzzi: John, you had talked about the planning process in Rhode Island. What have been the policy challenges in that process?

John Weber: So, setting aside the politics of all of this, because sometimes this is -- "plan" becomes a four-letter word in some circles, which it shouldn't, but I -- so I'll set that aside, but I think the policy challenges are associated with just getting to the point at which people understand that there are multiple agencies, entities who are responsible to ultimately move all of this forward, and we need to -- if we're going to move forward with this -- again, we're looking ahead. If we're going to move forward and address these challenges, which are not going away, there's a whole alphabet soup of people who need to work together, and that can be an enormous policy challenge. I think that -- and it's sometimes just the fact that the safety folks have a certain language that they speak. It very much relates to what the planning or siting folks, how they need to think and consider those issues, you need to bring them together.

So it's not rocket science; I just think it takes effort and a determination and a will to do that, and I think that's actually one of the largest policy challenges we have. It's one of the beauties of this process, is because we have brought together agencies who otherwise maybe wouldn't always talk to themselves in the same way that they've been asked to as apart of this process, and as a part of that, it's down to the nuts and bolts of, now, Agency X knows who they need to talk to with Agency Y when a particular conversation comes up.

Final point I'll make is that, often, in -- when we're thinking about government and policymaking, the whole metaphor of silos comes up, right? So I've got my silo, and I work over here, and your silo works over there. That does not work in the ocean. All of these things interact together. Fishing interacts with what's going on with marine transportation, which increasingly interacts with what will be going on in our neck of the woods in terms of energy production. We need to bring all of that together to move forward. That's what the planning process does.

Monica Trauzzi: I'm curious if stakeholder concerns are not as prevalent now, or have they subsided? What's happening there with stake -- I know with the New York lease proposal, there are stakeholder concerns. So where do things stand in terms of pushback on actually moving forward with these projects?

Nancy Sopko: I think there's always stakeholder concerns and there probably always will be 'cause we're asking people to think about the ocean in a different way, and so that's -- that can be uncomfortable. But I think -- I appreciate you saying that we do a good job, 'cause we work really hard at doing a good job, but our intergovernmental task force, which we use for citing renewable energy projects in the ocean, I think, are a really good example because we bring together the federal alphabet soup -- the federal agencies that have a role in it -- the state agencies, and the local agencies, as well as the tribes, and have a really, open, transparent public forum where we get data from the Coast Guard, from the Department of Defense, from NOAA, from fisheries, so from everyone that has a stake in that part of the ocean, put it all on these beautiful maps and figure out what's the appropriate place to do energy development and what's not -- renewable energy development and what's not. And so that doesn't allay all of the stakeholder concerns, but it certainly goes a long way to alleviating them.

And then we continue to have a very public process. So, as we put out our environmental documents and we go through a leasing process, there's lots of chance for public input, and we spend a lot of time in meetings in places like -- in all the fishing towns that you're probably thinking of that I am talking to fishermen in this particular instance about what their concerns are, where are they fishing, what time of the year are they fishing, how does their equipment work, how does it move around, and what kinda mitigation measures might work.

We also have a pretty active research part of our shop, and so, looking at where the data gaps are and sort of what questions do we need to answer as we're going through this planning process is important so we can fund some of that research to get those answers.

Monica Trauzzi: Nancy, can you talk a bit about how big of a stopping point those concerns are at this juncture for your members?

Nancy Sopko: Well, I actually haven't heard that it's a big stopping point. I mean, everyone wants to get all of the interested parties in the room and do what's best where it's best, and I think there are a lot of lessons learned through the years on bringing folks in early and often and hearing their concerns and trying to work with different stakeholder groups on moving things forward, and so I actually haven't heard that it's such a big concern. I think it's more of an opportunity to bring even more people into the fold and more people on board in favor of offshore wind development.

Monica Trauzzi: I want to switch gears and talk a bit about oil and gas. Director Hopper, if you can provide an update on the current and upcoming oil and gas leasing programs --

Abigail Ross Hopper: Sure. So, again, for those of you that aren't as familiar with our process, every five years, we put out the five-year plan, so it identifies the lease sales that BOEM will offer for oil and gas development in the coming five years. So we are in the midst of that process now, working on 2017 to 2022 program, and so it is a pretty iterative process. We put out in March the proposed program, which is the second of three steps -- the proposed program and the draft environmental impact statement, and that listed 13 lease sales during that five-year period -- 10 in the Gulf of Mexico and three offshore of Alaska. And so we are currently -- the comment period for the EIS closed a couple of weeks ago, so we're evaluating those comments; the comment period for the proposed program is still open, I believe, for a couple more days, and then we'll evaluate those comments. And we expect to get the final plan finished before the end of this calendar year.

Monica Trauzzi: Erik, BOEM's recent analysis of fracking's impacts is viewed as a potential way to restart offshore development in California. Do you see it as a gateway and is that a big market for your guys?

Erik Milito: Well, if you look at the document, the document itself shows it's rarely being used, and I think sometimes we have to step back and understand what hydraulic fracturing is. In 1999, the Department of Energy put out its own report on advanced engineering technologies in the oil and gas sector that provide an environmental benefit. Hydraulic fracturing was identified as an advanced engineering technology that provides environmental benefits. The reason why is because you can develop oil and gas from a much smaller surface footprint and you can eliminate a lot of drilling activity because you're going from one spot and you're hitting a seam where you know the oil and gas is.

So we're talking about technology, on one hand, that we know provides these surface reductions, and also, it's been the key driver of the natural gas revolution, which has dropped the price of gas, increased the amount of natural gas that we have, and allowed us to push natural gas into electricity generation, thereby dropping our carbon emissions. So hydraulic fracturing is really the catalyst to the recent drops in CO2 emissions that we've had.

Now, what happens offshore is a much different scenario. It's generally referred to as frack packs or gravel packs, and it's not really like what we're doing onshore because what we're talking about offshore isn't really, for the most part, being used to stimulate production; it's being used to kinda manage the geology so you don't get all this sand mucking up the well; you want to make sure you allow the oil and gas to flow through your well; and you wanna also make sure that you're not having any safety issues surrounding your development. Long-term, there could be advances, which allow the industry to use it more like it's used onshore, but that's generally not what -- is not what is occurring today.

So, in some respects, it's much ado about nothing. It's permitted and it falls offshore under EPA's National Pollution Discharge emission permitting program. So, BESI, BOEM, they look at it from a EA standpoint, from a permitting standpoint. EPA permits it from a discharge standpoint, if there are gonna be any, so it's really highly regulated, it's been around for at least a couple decades. It's not happening all that much, but it is something that's being conducted very safely anywhere it's being conducted, and it's something that ultimately could help us secure our energy future and allow us to produce more oil and gas in places like the Gulf of Mexico. I'm not so sure about California. If you've seen California numbers of production, it continues to decline.

Monica Trauzzi: So, more broadly speaking, is this administration giving equal opportunities to all sources of offshore energy?

Erik Milito: Well, if you look at what we've seen in the Gulf of Mexico, we have production reaching near all-time highs on the oil side approaching 1.7 million barrels a day. That's huge for our country, and as we look at how we got there, it was because decisions were made 10 to 15 years ago to allow the industry to go and explore. At some point, that area will be mature -- it's relatively mature now -- and you'll see production declines because we're gonna run out of opportunities; there's gonna be less oil and gas there.

So what we've been hoping for is that there would be more exploration opportunities -- there was one proposed for the Mid- and South Atlantic, and we were hoping to be able to go out and just see what's there. There was a 50-mile buffer, so anything would have to occur outside the 50 miles; you'd have to be doing things compatibly with the military and al other uses, as the process allows; and unfortunately, that was taken off the table, so we'll have to wait till at least 2022 to at least even see if there's anything out there, and that would depend upon another administration to make that decision, all the while that Canada is developing major oil and gas fields. Right near the U.S., Cuba is drilling oils; the Bahamas are developing plants. All through the Atlantic, there is tremendous oil and gas development occurring, but we're sitting back idly and not allowing it to happen, which, from a first step standpoint, I would be -- I would hope that we would at least want to find out what's there so that we can inform ourselves toward the energy future we know we're gonna have.

Monica Trauzzi: And despite the low prices, you would still be able to go in and explore?

Erik Milito: Well, absolutely. The prices today are gonna be much different in 2021, when that lease sale is scheduled, and that's just a lease sale. Then you gotta go through the planning process and get your plans approved, get your permits approved. Generally, from leasing to production, it could be 10 years.

So that's just a step in terms of getting access and acreage so that you can explore, and like I said, the production we have today is 10 to 15 years old, and oil prices then, in some cases, were $25 to $30, much lower than what they are today.

Abigail Ross Hopper: I would just add in our -- in the proposed program that we put out, we do make about 72 percent of the resource available for leasing, and I would take issue with one thing that Erik said, where you said we're sitting idly by and not allowing for exploring in the Atlantic. I would say we -- we're not sitting idly by; we made a very conscious and thoughtful decision not to allow drilling in the Atlantic.

Monica Trauzzi: How -- beyond what we just discussed, how have low oil and gas prices affected investments and exploration?

Erik Milito: In a couple of different ways. One is, obviously, you're seeing it in the bottom line in the profits. The industry's having a bit of a rough time. But I read in The Economist about how when you see the price drop like this, that's when the industry excels in finding ways to be more innovative, apply the technologies, and be more efficient. So we've seen that, we've seen companies who have been able to move forward with these costly offshore projects. Bringing oil and gas to market offshore could be a $5 billion project, so it's a very capital-intensive process, but in the end, you have major oil and gas fields that supply the fuel we need every day for our economies. So it does have an impact; you see a lot of it in the onshore, where a lotta smaller companies are going through some tough times. Offshore, you have, generally, some bigger companies, and they have more capital on hand, but we're hopeful that we're gonna get out of this in a positive way, and I think it was Daniel Yergin who recently said that he is just amazed at how the U.S. oil and gas industry's been able to kinda withstand this price environment, and it shows just how resilient the U.S. oil and gas industry is when it comes to getting better -- getting more efficient and applying the technologies.

Monica Trauzzi: I want to include some questions from the audience. There's one for Erik. What are the chances of the oil and gas industry investing more in renewables in the future?

Erik Milito: What's happening, we've had some studies done by T2 & Associates -- you can go on our website and look at them -- and out of all the industries, the oil and gas industry, over the past eight to ten years, has been the leading investor in zero carbon and low carbon-emitting technologies. If you look at some of the largest geothermal wind and solar companies, they've been -- oil and natural gas companies have made those investments. And also, if you look at the approach that this economy has taken absent government regulation, natural gas has been a gateway to lower carbon emissions, and that's our bread and butter. We are companies that focus and oil and gas -- that's been our history -- but at the same time, they've been sure to make investments in renewables as well. So they haven't not done it; it just hasn't gotten much attention because they're fundamentally oil and gas companies.

Abigail Ross Hopper: I do think, though, that if you look at other markets, many of the European oil and gas companies, the historic -- the big oil and gas companies in Europe have -- are evolving and are changing their business models and looking at how to both continue to develop oil and gas and continue to play a really active role in renewable energy. So, DONG, that Nancy mentioned earlier, Statoil, Vattenfall, some of those companies are taking a different look at how to integrate those markets, and so I think it's -- I agree that many of the U.S. companies are doing the same thing, but I think there's a great opportunity to continue that evolution.

Monica Trauzzi: What do you think the future of offshore production in the Arctic is?

Abigail Ross Hopper: Offshore production in the Arctic -- well, as you know -- let me think. Currently, we have one development and construction plan under consideration for the Beaufort, and so we're actively working on that plan now. I think we have -- it will be interesting -- you know, you've talked about the market forces. We have a lot of lease relinquishments in the Chukchi in the last few months, even, so the world has changed up there very recently. And so I think our job is to continue to make Anchorage available, and companies will make decisions about whether or not they are going to invest. So, at the moment, we have Cook Inlet sale on the books for 2017; we have three sales in the proposed program, in the arc -- well, two in the Arctic, one in the Cook, and so we will continue to look at whether it's appropriate to keep those in.

Monica Trauzzi: Do you want to weigh in on the Arctic?

Erik Milito: Well, the industry has tremendous interest in the Arctic. You see development occurring in other -- outside of other countries; Russia continues to develop Arctic resources, Canada -- there's been hundreds of wells drilled in the Arctic around the world, many in U.S. waters, hundred -- more than a hundred in Canadian offshore waters. And then we just know that there are billions of barrels of oil in the offshore U.S. Alaskan region. I think what we're seeing now, though, is a difficult investment decision to make, given the lack of permitting and regulatory certainty, that companies are having a hard time making a commitment to a costly project without having the certainty that they're gonna be able to drill more than one well over the five years. So I think that is having an impact. It could make it untenable for investment to have that as your operating environment in the U.S.

Monica Trauzzi: So that's why companies are leaving -- or have left?

Erik Milito: It's a reason -- a key reason.

Monica Trauzzi: Just taking a look at -- there's a question on geothermal. What are the panelists' views on offshore geothermal energy as an alternative energy source for the United States? Does anyone have --

Erik Milito: I don't know a lot about it, but I will say that geothermal resources are often developed through the use of hydraulic fracturing, where you break up the rock and allow the steam to come through. So I'm gonna keep plugging hydraulic fracturing because I'm a big fan of it.

Nancy Sopko: [Laughs] You really like it.

Monica Trauzzi: Yes, OK.

[Laughter]

We got that.

Nancy Sopko: I did not get that. [Laughs]

Interviewee: I won't repeat myself.

[Laughter]

Monica Trauzzi: No, you can repeat it as much as you want. Director Hopper, in the final months of this administration, what would you consider to be the greatest achievements coming out of BOEM?

Abigail Ross Hopper: Well, I think -- I have always talked about -- and I will talk about the five-year program document as the -- it's the foundation of our bureau, and so, finishing -- finalizing that before the end of this administration is critically important. Tried certainty for where our lease sales will be. [Inaudible] several regulatory actions we're working on -- the Arctic rule, as Erik mentioned, should provide certainty in that region, provide a really clear guidepost to folks that are interested in doing exploration, drilling up there. We have recently put out an air quality rule, a draft rule, and so, making as much progress as we can before the end of the administration is really important.

We haven't talked about risk management and we don't need to, but that, for me, personally, is an important element to this to get out as we look at companies that are in financial distress, ensuring that our taxpayers are insulated from their liabilities is important. And then on the offshore side, I think we are on track to lease New York before the end of the year. We are making great progress in -- not in Alaska, wrong topic -- in Hawaii and California on offshore wind, and so I think you'll see some -- continue to see movement there. And then we did a great job of getting leases in the hand of leaseholders on the renewable side, and now they are coming to us with plans, and so, making sure we have an efficient process that brings in all of the stakeholders that have a role to play and evaluating those plans is important. And so that's another personal goal of mine, ensure that we have an efficient and operational permitting system.

Monica Trauzzi: And if you had to leave sort of a map for the person who takes your job next --

Abigail Ross Hopper: Someone's gonna take my job?

Monica Trauzzi: Well --

[Laughter]

Sorry to break it to you.

[Laughter]

It will happen.

[Laughter]

What would you sort of lay out for them?

Abigail Ross Hopper: A road map -- well, I would say, first and foremost, that stakeholder engagement is critically important and it's something that we all say all the time, but I think that's because it's so important. I think Erik and I might disagree about some things, but I think -- I hope you would agree that we're -- we have a good conversation going and that my bureau and myself, personally, spend a fair amount of time with oil and gas companies understanding what their concerns are, understanding what their interests are. I think, on the renewable side, same with that industry, and then all of the other stakeholders in the ocean, and so that would be my sort of first piece of advice to whomever sits in this seat after me, is to really never underestimate the importance of that engagement to getting -- whatever it is that's on your list of accomplishments done.

Monica Trauzzi: Question for all the panelists on technology advancements: How do advancements in technology continue to change the game for what our offshore energy portfolio looks like, and how rapidly does that change?

Nancy Sopko: Yeah, I mean, I am very excited about offshore wind development, but I -- in that, I'm also really excited about floating wind technology and deploying that technology to areas that haven't been developed before. So, I mean, that's just globally, too, so floating wind isn't a very common source of offshore wind technology right now, and I'm excited for that coming online more and more because it -- you know, you can put a bigger turbine on a floating structure than you can fix it into the ocean floor, and with that, you can generate much more power, and so -- much more clean energy, and so I'm excited about floating wind coming online.

Erik Milito: I think an example on the oil and gas side is what we can now do on the subsea surface where, in the past, you generally needed a platform at the water surface to bring the oil and natural gas to market, but now, you can really produce the oil and natural gas from a subsea system that brings it to one point, and the technology's advancing so that that point also might be on the subsea, so it just goes into the pipelines into market. So there's a lot of concerns you'll hear about, "Am I gonna see it?" You're seeing a lot less, and that's been happening in, you know, the Gulf of Mexico, where we've gone from 4,000 platforms down to 2,000, and so the technology's advancing from a kind of visual standpoint and allows us to do more in an efficient way so that we're bringing everything together to a central point, and some of these tie-backs can go 40 -- 50 -- 60 miles to that central point to get it to market.

And then, on the vessels themselves, if you look at what's happening off the coast of Newfoundland and Labrador in Canada, that production at that oil field is happening in Arctic conditions, so they designed platforms that could withstand an iceberg of six tons moving into it, so the technology, the vessels, the facilities are advancing to be able to handle whatever the operation requires, and a similar activity occurs with the production and the drilling we see in the Gulf, where these advanced drill ships can move in and out very quickly and not have to worry about hurricanes because they're not being towed at a slow pace; they're an actual ship that the drilling occurs from, and they can move in and out, and you're seeing more and more of that so that we can drill at depths of 10,000 -- maybe 11,000 feet, then go another 25,000 -- 30,000 feet below the sea floor to get to oil and gas. It's pretty amazing.

John Weber: I would just add that I think that the opportunity that technology advances will bring -- and they will continue to bring -- will only be tapped if we do some of the things that we've been talking about, really, at the end of the day. I think we've all seen and know examples of where good dreams have died because of government inefficiency or some other part of the process that, honestly, just drags things out for too far. So I think, again, the more that we are thinking about this upfront, early and often, engaging those people who need to be engaged, the better our chances will be to take advantage of that.

The other thing I would say along with that is, in New England, it's not only Deepwater where we've seen this come to play. There's a Tidal Energy project that would put turbines in the water and generate electricity way up and down East Maine, and they got to that point by a lot of the same principles we're talking about. So that's why, I think, I'm optimistic about it because we've learned these lessons and have shown the fruits of learning them.

Abigail Ross Hopper: I would say, as the regulator, ensuring that we have regulations that are flexible enough to accommodate emerging technologies is critically important. So I'm excited about what's coming on the oil and gas and the offshore wind side, but I wanna make sure that we can accommodate those developments.

Monica Trauzzi: Nancy, you had briefly talked about DONG Energy's arrival to the United States. What is the expertise that you think they can bring to the game that can help advance things here in the U.S.?

Nancy Sopko: Right. I mean, it's unparalleled. I mean, they are the first developer of offshore wind energy anywhere in the world and have been doing this for 25 years or so. So the lessons that they have to share with us and their expertise is invaluable to what the nascent offshore wind industry is going through now, but in addition to that, the Bureau of Ocean Energy Management just entered into a memorandum of understanding with the government of Denmark as well because -- just knowing and recognizing that there's so many experts in that country and elsewhere, but that that's kind of the direction that we're going. We -- wanting to learn as much as possible as we move forward through the process of developing offshore wind, and so DONG Energy, Renexia is another renewable energy development -- developer who is the parent company of US Wind here in America. You know, other -- Statoil and them moving forward on offshore wind. There's so many things that we can learn from these leaders, and I'm really excited about that.

Monica Trauzzi: And DONG Energy feels like they have certainty in Massachusetts and --

Nancy Sopko: Well, it's not certain yet. I mean, it's -- [laughs] -- there's a bill moving through the legislative process. I know that they're very hopeful and optimistic about it, but there needs to be federal and state policies as well as the -- a streamlined permitting process and other things -- demand for the market -- that are going to help facilitate development on those projects.

Monica Trauzzi: How much of a game-changer is the New York lease sale?

Nancy Sopko: New York's pretty big. New York is very exciting. That -- to have that area -- you know, when we talk about offshore wind, we talk about an abundant, clean energy resource that is so close to the largest population centers in the country, and that couldn't be truer than in New York. And so, to have that area available for offshore clean energy development is huge, and then, in addition to that, to have utilities like New York Power Authority, Long Island Power Authority, Con Edison in a collaborative saying, "We want to develop offshore wind here," you know, that's a -- you're taking out a big hurdle to getting those power purchaser agreements together for purchasers of this clean energy. So -- and then, in addition to that, NYSERDA has said that they want to bid on this area. So it is incredibly good news that BOEM is moving forward on a proposed sale notice and hopes to lease that area by the end of this year.

Monica Trauzzi: And BOEM decided to hold one lease sale instead of two? Why was that?

Abigail Ross Hopper: Right. Well, as we've talked about, this is a particularly conflicted area, and so it -- as we moved through the process, we wanted to leave enough space so that we could make the appropriate mitigation and maybe the appropriate exclusions while still leaving enough room for a commercial-sized wind farm.

Monica Trauzzi: Final thoughts from the panelists before we close? If there's anything that we left out or any concluding thoughts that you wanted to leave the audience with on this topic?

Erik Milito: I'm glad I'm sitting next here to wind. I think we have a lot more in common than people think, and one aspect of it is when you have wind in place, sometimes you need a backup source, and natural gas can sometimes play that. And then, on the liquids side, if you look at where the world is going, we're at about 90 million barrels of demand today, and that's expected to rise to 115 or 120 million barrels of oil today, and that might even be on the high side. There could be greater gains in renewables, in nuclear, but fundamentally, we have a world that, according to our energy information administration, according to the international energy administration, they're all projecting that we're still gonna rely on a lot of oil moving forward, so I would just hope that our policies here in the United States understand or recognize that and look to see if that resource can be developed safely and responsibly here in the U.S. rather than in other parts of the world so we can get the leverage from that so our friends in a place like Lithuania can say, "Yeah, we don't need your gas, Russia, because we can get it elsewhere." So there's a -- it's really a game-changing moment that we're seeing out in the U.S., and I hope that we'll be able to continue to play that role.

Nancy Sopko: And I agree with Erik. I mean, there's so much to learn -- so much for the offshore wind industry to learn from the oil and gas industry and so much of those skills that are transferable, so I'm really excited about that collaboration, and I'm very hopeful for offshore wind development moving forward and just to see what the next -- you know, getting those turbines spinning in the ocean and see what kinda domino effect that has on the rest of the industry. So that's really exciting to me.

John Weber: I used to work for a person who would say, "If you're not moving forward, you're moving backward." And so if we're gonna keep moving forward -- and I think that there's ample reason -- as you have heard today and in all sorts of lots of conversations about these topics -- we have to keep pushing, pushing, pushing, pushing. And I think if we do that, then we will be able to get after some of the real issues that we've been talking about today, and to be able to do so in a way that we can all wrap our heads around and understand going forward. And I think that, for us in the Northeast, you know, we're parochial; we like to talk -- we like to talk a lot sometimes, but the issues that we're talking about are gonna require us to move forward more smartly, more quickly, and in a fashion that is altogether more than, I think, what we've been used to in the past, and I think we need -- and for that reason, we need to keep pushing this.

Abigail Ross Hopper: I would say -- I'm glad to hear Erik and Nancy say that because sometimes I think there is this false choice presented to us between a renewable energy future and a oil and gas future, and I believe strongly that the two are not mutually exclusive, but really do rely on each other and will continue, and so that's a perspective of BOEM, that both of these will continue to be important parts of our economy, important parts of our energy future, important parts of our energy security for years to come, and so that would be my parting word. The only other thing I would do is that I really do tweet from every event I go to, so I'm gonna take a picture of the audience. I hope you don't mind.

[Laughter]

So, smile and say hello. So just -- I'll tweet it out after I get off the stage. I won't do it from here.

Monica Trauzzi: That's awesome.

[Laughter]

I mean, you can if you want. I'm not gonna stop you.

[Laughter]

Abigail Ross Hopper: But I think there is -- America has a great appetite for energy, and so incur -- making sure that we are fully utilizing all the resources this amazing country has been given is critically important.

Monica Trauzzi: How are the two industries planning for January with all the uncertainty about which administration might be coming in and the wide differences between the two candidates?

Erik Milito: Oh, we actively educate policymaker, and we do the same thing with campaigns. We put out a platform, reports, send it to both the Republican and the Democratic platforms to let them know how important energy is and the role that the oil and gas industry has effectively played in helping to reduce climate change through -- reduce climate emissions through natural gas. So we're not picking sides; we're trying to educate so that this energy reality is understood and we're moving down a path to get toward it in a way that's secure for the country.

Nancy Sopko: And AWEA is pursing something very similar. I mean, education is key, and so getting those educational points into the different campaigns so that, whomever wins, we can be prepared and they can be prepared to know more about wind energy.

Monica Trauzzi: Well, that was fascinating. I moderated a similar panel two years ago and it is just eye-opening to see how different the discussion is now as opposed to two years ago, and I think that a lot of that has to do, obviously, with the advancements in offshore wind, but then, also, the market volatility that we've seen on the oil and gas side.

Nancy Sopko: What was it like two years ago?

Monica Trauzzi: Well --

Laughter]

It was just very different. There was actually a lot less of a discussion on offshore wind. So it is -- it's quite refreshing to see the change of the discussion. So I thank you. This was absolutely fascinating. Thank you to the panelists.

Female: Thank you.

Monica Trauzzi: Thank you to the audience. Really good questions.

[Applause]

[End of Audio]

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