Olson Discusses Offshore Drilling Prospects at OTC
Rep. Pete Olson (R-TX) today served as keynote speaker at an Offshore Technology Conference Luncheon. The focus of the speech is “Offshore US Drilling Coast to Coast: Where are we Heading?”
Olson discusses offshore drilling at OTC luncheon - NRG Park Houston, TX 05/05/15
Below are Olson's remarks as prepared for delivery:
First, thanks to Greg Carter for that kind introduction. Events like OTC are a source of pride that reinforce Houston's reputation as the energy capital of the world. When my party took control of the House in 2010, no Republican from Houston was on the Energy & Commerce Committee. That's why I fought to get on the committee - to be a strong advocate for policies that allow Houston/Texas/ AND America to lead in energy development, production and research. It's difficult to have a conference like this when prices have dropped so quickly. We all know the challenges we face with the current price of oil. But, I take small comfort in knowing that we've been here before. As we say in Texas, "This ain't our first rodeo". I take comfort knowing that in many ways, this fall in prices is largely because of an explosion of supply here in America. We all know energy production doesn't happen overnight. It takes years of investment, planning and jumping through federal hoops to have a five year plan for oil to reach the market. The energy industry has to think about today AND plan for the next decade too.
That's why the federal government—just like industry—needs to set the stage for the future, no matter today’s prices. We must act now to have wells pumping 10 years from now. This conversation is always timely. The current fall in prices doesn't change the fact that we are in a whole new world of energy development. Our world will never be the same. Right now, onshore gets most of the attention. With the massive shale boom underway, there is plenty of reason for that. But offshore - y'all are performing miracles too. You are entering deeper and deeper water -- working in higher and higher pressures -with currents that change dramatically from the surface to the seabed - and doing it with a sterling safety record. Of course, the media won't give you much credit for that.
The safety improvements in the past few years are amazing. More redundancy and more cooperation. Stronger BOPs. Safety and monitoring centers that look just like Mission Control at the Johnson Space Center. The old Hollywood image of men in the oil patch with lit cigarettes, pulling chains covered in grease and sweat is gone. Today's image is men—and women—from Rice University or University of Houston pouring over reams of data at a keyboard in an air-conditioned office drinking Starbucks coffee. It’s a brave new world, and OTC is starting to look like a Sci Fi convention.
As we move further into the 21st Century, it's clear that this will be the century of American energy leadership. Low prices or not, we are looking at many years of energy abundance. That's only if we can avoid shooting ourselves in the foot. This means restraining a White House agenda focused on politics to keep their base happy.
As prices rebound—and they will rebound—the heart of our energy success is the ability to safely tap our resources. In the onshore space, at least on private land in Texas, that’s not much of a problem. When huge checks start coming around or long lines form at the bank or Whataburger, landowners tend to forgive the truck traffic. But offshore, y'all are stuck relying on the federal government as a dance partner, a partner with no sense of rhythm and 2 left feet. Since this is very much a global industry, we need flexibility and common sense. Rigs can leave the Gulf - some have.
The White House and Congress have closed off much of our offshore for drilling for a very long time. Even in the Gulf—where this industry cut its teeth and thrives—costs have increased. Just last month, we saw yet another round of new rules. Many companies are still reviewing the new BOP rule, which is just the latest in a long line of costly rulemakings. More troubling, many Gulf areas remain no-drill-zones. The Eastern Gulf has been largely off the table by Congressional mandate. The reasons for that range from basic safety concerns to military training. However, that law—the Gulf of Mexico Energy Security Act—will expire in the coming years. As we prepare to enter these areas, there will be critical debates on revenue sharing and safety. This is an area more used to Spring Breakers than drillers. It will be a spirited debate, but one I think we can win because we've done it in Texas. Spring breakers sleep in Galveston beach hotels with the lights of drilling rigs beaming off shore.
The bigger fight is up north. -- As you know, I’m a former Navy pilot, a Naval Aviator. Twenty years ago, I flew sub-hunters up in the Northern Pacific. The weather is terrible. Clouds from the sea to 30,000 feet. Winds blowing like a hurricane. Sea spray covering the plane at 1,000 feet. Arctic security is critical when you are looking for Russian doomsday submarines in those conditions around the Aleutian Islands. We have a brave new world of opportunity to our north. An old saying goes “Nature abhors a vacuum”. Empty spaces don’t stay empty for long. The Arctic is the final frontier - a huge challenge. And we Texans LOVE a challenge. The story of energy exploration has always been one of going further. Good ole’ boys from Odessa to Beaumont have ventured into some stark, difficult places— cold places like the brutal North Sea or the frigid oil sands of Alberta. Or UNIQUE California.
New fields - onshore and off - need new technologies. Directional drilling. Mud, casing, and bits that can tackle incredible pressure and temperatures. Drilling rigs that can survive—and stay on well—in rough seas. Technologies started in the Gulf allow us to tackle energy development inside the Arctic Circle. That's critical, because the resources up there are remarkable. According to a report by the National Petroleum Council, the Alaskan Arctic has the potential for about 34 billion barrels of oil. That’s too much energy to leave on the table, especially with the TransAlaska Pipeline running on empty. But before any area can be developed, two things must happen. First, industry must prove it can operate safely. Second, government needs to open the doors wide for industry to operate. Safety was, is, and always will be the top priority. In the Gulf, we know how to handle a spill. We have decades of industry experience in place. Macondo has made the Gulf safer. Post-Macondo, we have response plans that are choreographed like a ballet. But the Arctic is...different. Oil doesn't break down as easily in frigid waters. Dispersants don't work well. Fewer people mean fewer Coast Guard stations. Industry is responsible and the margin for error is small. We know drilling in the cold can be done. Just ask those operating off Norway’s coast. Industry has stepped up to the challenge. Shell Oil, for example, is proving the Arctic drilling can be done safely by investing billions of dollars to explore off the northern edges of Alaska. They will bring an entire armada of ships to the Arctic. They invented containment systems. They know if there’s an incident, there's no calvary riding to the rescue. They must rely on themselves, even when attacked and boarded by environmental zealots looking for a fight. Any company that wants to take on the challenge of drilling in the Arctic will shoulder the responsibility.
That brings us to my second point—government should make sure that tough rules are also common sense rules. As you all know, Interior has proposed new regulations for the Arctic. You won’t be surprised when I say - they are tough. Under these new rules, BOPs have to be pulled up and inspected constantly. When it comes to stopping a runaway well, the rules are focused on process and not outcomes. My understanding is that some of the timelines aren’t reasonable. How Interior addresses these issues in the months ahead will tell us how seriously they take America’s ability to develop emerging offshore regions like the Arctic - AND the Atlantic. The Atlantic Coast is the next American Energy frontier. Estimates vary on how much energy is off the East Coast, but we know it's there. Some states don't want energy development. No surprise, that's their choice. But many states are rolling out the welcome mat. They want the jobs and infrastructure you create.
I'm happy to see a lease sale being proposed for the Atlantic in the new Five Year Plan. However, its value depends on how reasonable the requirements are. Just like in the Arctic, the headline of “Open for Business!” can get bogged down by a mountain of paperwork -- and lawsuits. We must remember this lease sale in the Atlantic is only a proposed lease sale. It might not even make it in the final rule. Let alone actually become reality in 2021. We've seen this White House pull back an Atlantic sale before -- they could do it again. If it moves forward, my bet is the rules will be onerous. We could see everything from buffer zones to far more stringent testing. As usual, the devil is in the details. The new Chairman of the Natural Resources Committee—my friend Rob Bishop from Utah—is reviewing those details with a fine tooth comb. His Committee oversees DOI. They have developed several bills that we've passed in the House in recent months. That work will continue, and I support it.
One last word on permitting - for those looking to see new leases in the Pacific - I have one wish and one curse for you: The wish - GOOD LUCK! The curse - FAT CHANCE!
Permitting at DOI is not the only critical aspect for helping the offshore to thrive. We need to get that energy to market and make sure those global markets are open! We've been busy in the Energy and Power Subcommittee - working to slash the red tape that prevents new pipelines from being built. Keystone XL gets the headlines, but pipelines like the first Keystone are what make our energy economy thrive. Gas pipelines get bogged down by multiple agency reviews and reports to FERC. The NIMBY’s come out in droves to challenge them, and environmentalists portray them as Black Death - instead of the energy freedom they are.
Even changing ownership of a pipeline can become a nightmare. We've passed several bills to try and fix this. We are working right now on a package of common-sense bills called the “Architecture of Abundance”. This includes infrastructure permitting for pipelines here at home, and cutting red tape for international pipelines. When we get this right, you will get gas or oil from the well-head to a refinery gate or a city much MUCH sooner. It's a top priority for me and my Committee. Of course, all that energy means nothing if we don’t have a market for it. As demand for gasoline levels off here at home, many have looked overseas. In many parts of the world, energy is used as a weapon. Some of the biggest battles in World War 2 were fought over energy. OPEC used it against us in the 70's to spike prices at the pump. Forty years later, Vladimir Putin and Russia are holding the same energy hammer over Ukraine and most of Europe. Putin sleeps without a lot of worry now, but we have the chance to give him nightmares - seeing US tankers pull into European ports filled with American natural gas! Those tankers are coming. The first ship loaded with US LNG will leave Sabine Pass later this year. On natural gas, we are watching DOE like a hawk to make sure they keep up approvals. I have cosponsored bills to speed up the process, and my Committee has approved them.
The energy package we are working on helps make it easier to send American gas abroad. The debate is settled, and in Washington we want our gas headed to allies - like India and Japan - all around the world. It’s good for our economy, good for our offshore, and good for our national security. It's good for the whole world.
That brings us to the current debate on crude oil exports. This debate began 40 years ago. It needs to move into the next gear. It's healthy. I join the debate with one guiding principle that I call the "Energy Hippocratic oath" - first do no harm. Studies are coming out that look at how US oil exports affect the average American. They seem to be trending in the same direction. That is why the next major step is debate and hearings in my committee. We have already had hearings with more to follow. Our model for this debate should be natural gas exports. Reports came out on all sides of the issue. It began an important debate, which helped create consensus. And now, US LNG stands ready for exports. On crude oil exports, I think we will get to a similar consensus. The decision on whether or not to export US crude oil can't be handled lightly - but I think we can find the sweet-spot. Of course - that doesn’t help prices today.
The collapse in prices isn’t just a worry for the current generation of oil and gas workers. It is also a concern for how we attract and train the next generation of energy workers. It's a tough sell to get our best and brightest into energy when they see thousands of folks getting pink slips. We have our work cut out for us getting kids interested in STEM careers. In my committee, there is a bipartisan effort by Chairman Ed Whitfield and Ranking Member Bobby Rush to help train the next generation. They have a great bill that requires the Secretary of Energy to make hiring the next generation of American workers a “National Priority”. This effort allows DOE to provide grants, technical experts, and mentorships. It requires DOE to help write guidelines - NOT A CURRICULUM - for schools at all levels to prepare students for a career in energy. It also emphasizes outreach to future leaders - women and minorities. They have a great deal to contribute. This bill is being worked on to get it moving soon. Four year colleges have a part to play. But, not all kids will go to a four year college. It’s not the oil patch, but a school in my district - Wharton County Junior College - has opened a new campus close to the South Texas nuclear plant to train the next generation of nuclear power workers. Other local colleges are working with the oil and gas industry too. I look forward to working with y'all and educators to train the next generation as well.
In closing, I understand the challenges you face and these days are tougher than years past. But, I'm confident that we will rebound. And as the Vice Chair of the Energy and Power Subcommittee, I will do all I can to clear our path for energy development. With that, I yield back the balance of my time and welcome any questions.