Drilling for dollars

2009-09-25 / Business

By John Temple Ligon temple@thecolumbiastar.com

According to its Web site, the Consumer Energy Alliance is a nonprofit, nonpartisan organization created to help expand the dialogue between the energy and consuming sectors to improve understanding of energy security, more effectively develop and use both renewable and oil and gas energy resources in an environmentally conscious manner, create sound energy policy, and maintain stable energy prices for consumers.

The CEA reports South Carolina’s total energy consumption in the state equals 398 mil. Btu per capita, which gives it a rank of 15 in the U. S. The state’s largest energy–consuming sector is industry (38%) while the rest of the state’s consumption is distributed among the transportation

25%), residential (21%), and commercial (15%) sectors. S.C.’s rate of electricity consumption per capita is higher than the nationwide average due to high industrial use and high air–conditioning demand during the hot summer. Nearly three–fifths of S.C. households use electricity (58%) as their primary energy source for home heating.

S.C.’s natural gas supply is transported from the Gulf Coast by two major interstate pipeline systems.

In the last days of his administration, President Bush (#43) directed the U.S. Department of the Interior’s Minerals Management Service to create a new five–year plan for energy production. About a year ago, last October, Congress allowed a moratorium on off–shore drilling to expire.

Running along the S.C. and Georgia coasts is an area ripe for oil exploration called the Carolina Trough, which has been identified as possibly having more than 100 million barrels of oil and maybe 16 trillion cubic feet of natural gas. Compared with the American Southwest and Alaska, say, that’s not so much. The gamble in going after what’s in the Carolina Trough is there might be more, much more, which sets up incentives to explore.

The real incentive is the price of oil, now not so high, but if there’s a belief in peak oil, there’s incentive. Peak oil, the argument goes, has already hit. We just don’t know it yet. Peak oil is when oil exploration and production cannot possibly keep up with consumption, which eventually results in high demand and low supply and thereby outrageously high oil prices and deliriously happy shareholders in Big Oil.

Leases for blocks of the sea floor offshore S.C. are right now already scheduled to go on sale in 2014. Offshore Virginia leases go on sale in 2011, where the state government forbids any drilling closer to shore than 50 miles. S.C. still has no such restriction, but most law makers appear to be leaning that way, maybe as much as 60 miles.

Citizens are sometimes led to believe offshore S.C. oil would be S.C. oil. Not so. Oil found anywhere in the world sells to a world market at a world price. Oil produced offshore S.C. would not be anywhere near to a refinery complex. The nearest and largest available to rig operators is probably Philadelphia, so that’s where S.C. oil would be sent for processing. Offshore S.C. oil would add to the world supply, which in theory means little S.C. would help hold down or even drive down the world price of oil, but not measurably.

Natural gas, on the other hand, doesn’t take much processing, just delivery.

The Southeast Energy Alliance recently released a study that suggested offshore energy exploration would create 2,254 new jobs in S. C. while generating $45 billion in state, federal, and local government revenues.

On Monday, September 21, the 90–day comment period U.S. Interior Secretary Ken Salazar imposed on offshore oil and gas leasing closed. The Southeast Energy Alliance was hoping South Carolinians would send Salazar letters in favor of S.C.’s inclusion in the federal government’s five–year plan before the September 21 deadline.

More than a year ago, Gov. Mark Sanford sent a letter to President Bush asking for protection of coral reefs near the Carolina Trough. The protected areas could be miles of coral mounds reaching heights up to 300 feet. He wanted Bush to use the Antiquities Act to preserve an area of coral called the Charleston Bump, a deepwater bottom feature 100 miles southeast of Charleston. The Charleston Bump could be designated as a Marine National Monument, Sanford argued, which was part of Sanford’s strategy to stop all drilling off the S.C. coast.

Sanford has been quiet lately about drilling offshore, as he has somewhat withdrawn while he tries to head off further investigative inquiries and possibly impeachment proceedings. He has, though, begun to look at natural gas drilling as entirely different from oil drilling, favoring the natural gas route.

Whether it be for natural gas only or in conjunction with oil drilling and whether it be among the valued coral or away from the protected coral, some S.C. lawmakers say the state can use the economic impact of offshore drilling and production. To put it in perspective, the state is now challenged to draw up a comprehensive energy plan.

To also put the possibilities in a different perspective, compare the endowments at the University of Texas and the University of South Carolina. Ask President Pastides what he thinks.

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