Big Spill's Bad Timing Puts Oil Drilling at Risk

It was only last year--not a millennium ago, as it seems--that the argument over oil exploration off the U.S. coast was a key issue in a presidential election. Republicans wanted to drill here, and drill now, and scored significant political points with voters who were angry over high gasoline prices.

While the U.S. has been raging over health care, an environmental disaster that would have been headline news last year has gone unnoticed. Its impact on U.S. policy will be enduring and profound.

On Aug. 21, oil began gushing from a well into the Timor Sea a couple hundred miles north of Australia. One estimate suggests that the leak has been dumping about 3,000 barrels of oil a day into a pristine ocean wilderness area heavily populated with whales, turtles and other sea life. The spill comes at a particularly deadly time for sea turtles that recently hatched. There is little or no hope for a small turtle that finds itself floating in the slick.

Given the advances in offshore drilling technologies, it was supposed to be the case that an accident like this couldn't happen.

The work crew with the skills and equipment to stop the spill arrived only late last week, and the complicated work of stopping the catastrophe may yet last a month or more. If it takes, as many estimates suggest, 50 days to stop the spill, the total amount of oil that reaches the sea could top 150,000 barrels. By comparison, the infamous Exxon Valdez spilled about 260,000 barrels of oil in Prince William Sound in 1989.

How big a spill is 150,000 barrels? The environmental blog Skytruth assembled a series of satellite images that suggest the oil may be spread out over 5,800 square miles, or about the combined land area of Connecticut and Rhode Island, according to U.S. Census Bureau measurements.

Palin's Argument

Given the advances in offshore drilling technologies, it was supposed to be the case that an accident like this couldn't happen. Policy makers who relied on such assurances include former Alaska Governor Sarah Palin, who argued for allowing exploration even in pristine wilderness areas. After all, if the odds of an accident occurring are miniscule, then opposition to exploration is fringe behavior.

Those low odds were, it turns out, about as reliable as a subprime mortgage.

Even if the investigation into the Timor Sea accident helps prevent future occurrences, the fact remains that this spill came at the worst possible time for those who would seek to expand oil exploration in U.S. waters.

As a candidate, President Barack Obama staked out a pragmatic position on drilling. He supported a compromise designed by the so-called Gang of 10--five Republican and five Democratic senators--that would have allowed increased offshore oil production.

That pragmatism was evident again this year. On June 12, Obama announced the formation of an Interagency Ocean Policy Task Force. The announcement was a big deal.

Pro-Ocean President

As one might expect from a man who grew up in Hawaii, the president seems far more committed to creating an oceans policy than his predecessors. His order stated, "Within 180 days from the date of this memorandum, the task force shall develop, with appropriate public input, a recommended framework for effective coastal and marine spatial planning."

Figuring out what to do with the oceans is an almost impossibly difficult task. Each square mile of ocean has many potential uses. It might be a good place to fish or place a windmill, or a promising spot to drill or establish a highway for migrating sea birds. Potential uses often conflict. A windmill in the wrong spot can kill thousands of birds. An oil spill can wipe out a fishery.

The task force's job is to assess how best to employ America's ocean resources. Ideally, its work will lead to something resembling offshore zoning, establishing the places that are so environmentally precious that exploration is unwise while identifying locations that prudently should be opened up for oil exploration.

Poor Timing

So just as Obama's appointees are gathering to set forth the plan, an environmental catastrophe has occurred. You can bet that the satellite photos documenting the extent of the Timor spill are on the desks of the task force members. And if a spill that would swallow up a good chunk of New England is possible, exactly where will the task force decide it is safe to expand drilling? If it can happen near Australia, it could surely happen in the Arctic, or off the beaches of Florida.

There are thousands of offshore wells around the world, and the chances of a serious accident are small. It seems unlikely that a careful cost-benefit analysis would suggest that it is optimal for the U.S. to stop developing new offshore oil resources.

But that is very likely what we are about to do.

Kevin A. Hassett is a senior fellow and the director of economic policy studies at AEI.

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About the Author

 

Kevin A.
Hassett
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.



    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

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    Email: khassett@aei.org
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