Offshore drilling plays a crucial role in meeting the global demand for oil and gas. In the face of the rise in energy prices and demand, it is very likely that offshore drilling production will continue to grow. One market projection expects that the offshore drilling market will reach $160 billion by 2036 with a 7% annual growth rate. Currently, approximately 30% of the world’s crude oil production is derived from offshore resources, with the United States being the largest producer among all offshore oil producers. For instance, offshore oil drilling contributed around $21 billion to the U.S. economy in 2019. Additionally, Saudi Arabia, Brazil, Norway, and China are also major producers of offshore oil and gas.

Despite its economic and energy importance, offshore drilling still raises environmental and economic concerns in various ways.One of the major environmental risks associated with offshore drilling is the potential for oil spills and gas leaks, which could contaminate marine ecosystems, harm marine life, and damage coastal habitats for years on end. In the Gulf of Mexico alone, where the majority of the United States’ offshore oil and gas is extracted, multiple significant oil spills have occurred in recent decades and proven the severity of this danger. These include the infamous Deepwater Horizon oil spill in 2010 which, in addition to severely impacting the local living conditions, killed thousands of birds, sea mammals, and turtles and caused hundreds of thousands more to get sick. There are also many other less severe incidents that have taken place yet remain unnoticed. Offshore oil spills have substantial economic repercussions as well, with the cost to recover natural ecosystems, human habitats, and tourist sites to original levels being formidable and often underestimated. The Deepwater Horizon oil spill alone resulted in $17.2 billions-worth of environmental damage and is still impacting local tourism, trade, and habitats. Moreover, as calls for energy transition and carbon neutrality grow stronger, an increasing number of voices are beginning to advocate for countries to gradually reduce offshore drilling production and replace the energy demand with other renewable energy sources, including offshore wind power that is deployed in the same location.

Recent Events

Normally speaking, offshore drilling issues do not attract general attention. However, two recent legal challenges against the Biden administration of the United States have brought the issue of offshore drilling to widespread discussion. On February 12, the U.S. oil and gas industry and environmental groups—two groups of organizations with notably opposing views—filed two separate lawsuits against the Biden administration almost simultaneously over the same issue: the Biden administrations’ controversial plan to offer three new oil and gas drilling lease sales in federal waters over the next five years in the Gulf of Mexico. The three sales are currently scheduled for 2025, 2027 and 2029, and the decision also rules out the possibility of lease sales off of the State of Alaska’s Cook Inlet. In comparison, former President Trump originally proposed to offer 47 new drilling lease sales over the same period of time.

According to the Submerged Lands Act (SLA) of 1953 of the U.S., state jurisdiction over territorial sea extends from the coastline to no more than 3 nautical miles (5.6 km) beyond the coastline, except for a few places where state jurisdiction can reach 3 marine leagues (16.2 km). Otherwise, the majority of spaces of the United States’ exclusive economic zone (EEZ), which  extends up to 200 nautical miles from the national coastline, are regulated by the federal government. For offshore drilling, this means that oil and gas companies need to lease the sea areas from the government before drilling oil and gas resources, and offshore oil and gas production is directly related to the number of new drilling lease sales approved by the federal government. The American Petroleum Institute (API), the oil and gas trade group that filed a lawsuit on behalf of the industry in February, argues that the Biden administration’s policy restricts the country’s access to affordable and reliable energy and would leave Americans at risk of relying on foreign energy sources. 

Meanwhile, despite the significant reduction in the number of new drilling lease sales approved, Earthjustice, an environmental law organization, filed a separate petition on behalf of eight Gulf-based environmental organizations to “hold the Interior Department accountable” considering the climate, public health, and environmental concerns of offshore drilling. In addition, they believe that the Biden administration has broken its campaign promise to stop all new offshore drilling and say the government should instead support the development of offshore renewable energy such as offshore wind power.

Keep In Mind

Traditionally, climate and energy-related topics would make one party displeased while making another group satisfied. It is extremely rare that both environmental organizations and energy companies are aligned in being upset by a governmental policy. The seemingly contradictory “double lawsuit” reflects the uncertain future of energy development: as energy-related issues begin to increasingly touch upon the core interests of different stakeholders, disputes and confrontations among them could very well become more frequent. 

From the government’s perspective, balancing the interests of all parties is very important. The recent situation in February is the result of the fact that neither party was satisfied with the Biden administration’s decision on offshore drilling and now hope to negotiate for better terms through the lawsuits. However, the Biden administration’s reluctance to approve new offshore drilling has, in fact, already demonstrated a determination to gradually reduce the country’s reliance on offshore oil and gas through offshore wind. In other words, it means that environmental groups have less reason to react aggressively about green transition as the Biden administration appears to already be supporting this transition while still abiding by U.S. laws. According to section 50265 of the Inflation Reduction Act of 2022 (IRA), “Bureau of Ocean Energy Management (BOEM) may not issue a lease for offshore wind development unless the agency has offered at least 60 million acres for oil and gas leasing on the outer continental shelf (OCS) in the previous year.” Thus, the Biden administration’s approval of new offshore drilling lease sales is essentially to pave the way for more offshore wind development. 

The relevant sections of the IRA include trade-offs between the different sides in Congress, understandably aiming to protect energy security and traditional energy industry stakeholders in the process of green development and energy transition. Indeed, reducing fossil fuel use and reliance on offshore drilling is inevitable in the long run for the U.S. to achieve its net-zero objective by 2050. However, one essential element of green development is actually ensuring a ‘just transition’—the idea that no one’s interests should be severely impacted or no one should be left behind during said transition. In this case, the interests of people like workers of offshore drilling rigs and low-income communities who rely on cheaper energy should all be seriously considered because no one should be left behind in combating climate change—a cause that aims to protect human civilization.

This issue’s Spotlight was written by Zhangchen Wang, ICAS BCCC Part-time Research Assistant Intern.