API's Felmy says Interior's delay could negatively affect economy

As President Obama prepares to sign the $787 billion stimulus bill passed by Congress last week, could the Interior Department help boost job growth by allowing for the expansion of offshore drilling exploration? During today's OnPoint, John Felmy, chief economist at the American Petroleum Institute, makes the case for allowing leasing to help create new jobs. Felmy also explains why some existing leases will not yield economic benefits.


Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With me today is John Felmy, chief economist at the American Petroleum Institute. John, it's nice to have you back on the show.

John Felmy: Good morning and thanks for having me.

Monica Trauzzi: John, coming off of a long debate on the stimulus in Congress, API is pushing for the expansion of offshore drilling on the platform that it will boost job growth and you're particularly concerned with Interior Secretary Salazar's moves this week to revisit the Bush administration's push to open access. What's your take on the administration's move?

John Felmy: Well, we're concerned, because at this point when we need more energy, we need more jobs and we need more revenue for the federal treasury it's not a time to be delaying something that has proven to do good things for the economy and for the consumers right now.

Monica Trauzzi: So, what kind of economic benefits could we see by opening access to the areas that the Bush administration had decided on?

John Felmy: Well, if you open access to all of the restricted areas in the United States, we have had a study done that says it could generate $1.7 trillion for the federal and state and local coffers. It could generate 160,000 new jobs, good paying jobs. So the time is now. Let's move forward in terms of developing these areas to help consumers.

Monica Trauzzi: How quickly could we see these jobs actually coming about? I mean the whole point of the discussion on the stimulus was or these shovel-ready jobs? Are these shovel-ready jobs that you're talking about?

John Felmy: Well, of course, if you delay things you can't quickly move forward and that's the practical affect of what's happened. If you start with lease sales the first thing you do is collect a lot of money in terms of the bonus bids. You know, last year the oil company industry paid the federal treasury $10 billion in bonus bids. That can have an immediate impact in terms of at least revenue. The jobs will take longer because you have the bonus bidding and then you have the whole process that you have to go through, but the time to start is now.

Monica Trauzzi: But the oil industry also has existing leases that they've not yet explored. Why not tackle those areas first and use those for job development?

John Felmy: Because there's no oil there. The fact of the matter is this argument about idle leases and so on was a pure political argument that was formulated when the American public shifted very strongly to support developing oil and gas on our OCS. The fact of the matter is that companies look at these leases. They basically pay for the lease in advance. It could be a complete pig in a poke, that they don't know whether or not there's any oil and gas there. So they prioritize their development where they think the most opportunities are.

Monica Trauzzi: And is there more certainty for the areas that we're talking about now?

John Felmy: Well, there's no certainty anywhere until you actually go out and start looking for it, but these are areas that have been off-limits for a very, very long time, 27 years. And so the time is now to get these out and get these areas leased, start doing the exploration, and maybe we can find something there.

Monica Trauzzi: In his announcement Interior Secretary Salazar said that the Bush administration's plan was tilted towards the usual energy players. He admits though that in certain areas drilling may be appropriate. So doesn't it sound like Salazar and the administration are sort of trying to find a midway point here? I mean it's not as bad as some expected in the oil and gas community.

John Felmy: Well, certainly it's not an absolute rejection or a return to the moratoria, which would be very bad for consumers. You know, we support a comprehensive plan, but they're not mutually exclusive. You can move forward with the alternative development that they talked about along with oil and gas development. They're not opposed to one another, so let's move forward on all fronts. We're going to need all the energy we can for the next several decades.

Monica Trauzzi: Secretary Salazar has also said that the oil and gas industries should not see the Obama administration as the enemy. Do you?

John Felmy: Absolutely not and we're going to take them at their word that they want comprehensive policy, that they want to develop these resources. So we look forward to working with them, but just at this point we don't see a reason to delay things.

Monica Trauzzi: Well, the expansion of offshore drilling, it doesn't really move forward with the Obama administration's push for clean energy, their clean energy platform. I mean where's the compromise there? Are these two opposing plans?

John Felmy: No, we have to move forward on alternatives and we have to move forward on oil and gas. Because, after all, while it's important to have more electricity from things like solar and wind and so on, we need petroleum to fuel the 250 million cars that are out there. You know, electricity will not fuel them until we have electric vehicles.

Monica Trauzzi: It sounds like Chairman Ray Hall of the House Natural Resources Committee is intent on finding a way to drill responsibly and in an environmentally sound way. It seems like there's a willingness to listen. Are you encouraged by the hearing that we saw this week on the Hill in the House Natural Resources Committee?

John Felmy: Well, we think we can move forward in an environmentally sound way and, in fact, we think we've been doing that for decades. So we look forward to working with the new administration, the new Congress to develop more energy for consumers because we're going to need it.

Monica Trauzzi: You had mentioned leasing and royalty revenues earlier. It's likely going to come up again in Congress this year. With the economy as the backdrop, do you think the discussion on those topics is going to have extra heat to it?

John Felmy: Well, we'll have to see what happens. You know, we've got, first of all, an issue with the economy, as you said. And that really should highlight that if we move forward in terms of oil and gas development we can help the economic situation in terms of generating revenue, generating jobs, reducing our trade deficit and improving our energy security.

Monica Trauzzi: I have a question here, more broadly, how greatly do you think the administration is going to be impacted by the economic situation when they're making decisions about offshore drilling?

John Felmy: Well, there's no question the economy is job one right now for everyone. We need to do things to be able to stimulate the economy and to move forward. And we think that oil and gas development can help in that way.

Monica Trauzzi: All right, we'll end it right there. Thanks for coming on the show.

John Felmy: My pleasure.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]



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