Offshore oil and natural gas drilling in two offshore areas along the Atlantic seaboard could add $10.8 billion to $60 billion in value, and $2.1 billion to $11.6 billion in additional tax revenue for states along the East Coast, according to a report released Wednesday and funded by several right-leaning organizations.
The 61-page report, prepared by University of Wyoming economics professor Timothy Considine, examined the economic, fiscal and environmental impacts of oil and gas development in the Mid-Atlantic Outer Continental Shelf (OCS) and the South Atlantic OCS. The former includes offshore North Carolina and the three states that share the Delmarva Peninsula -- Delaware, Maryland and Virginia -- while the latter includes offshore Georgia and South Carolina.
Last June, the Department of Interior began the process of developing a lease sale schedule that would cover the five-year period of 2017-2022 (see Daily GPI, June 13). The sale would evaluate all OCS planning areas, including the Atlantic.
Under a high production scenario, Considine estimates that output in the study area will reach 943,000 boe/d in 2035, including 388,000 b/d of crude oil and 3.0 Bcf/d of natural gas. The high scenario also results in cumulative production of about 1.5 billion bbl by 2035, leaving 21.9 billion boe of remaining reserves.
"Given this reserve base, the decision to hold lease sales should be viewed as an opportunity to create a long-term asset that pays substantial income in the form of royalties," Considine said. He added that production in 2035 would be more than 484,000 boe/d under a medium production scenario, and 169,000 boe/d under a low scenario.
According to Considine, the high production scenario would require $2.0 billion in 2025, $8.1 billion in 2030 and $10.7 billion in 2035. Meanwhile, the low and medium scenarios would require spending of $1.9 billion and $5.5 billion in 2035, respectively.
In terms of added value, low, medium and high production scenarios would add $10.8 billion, $30.8 billion or $60.0 billion, respectively, to the seven aforementioned states. Additional tax revenues would total $2.1 billion under the low scenario, $6.0 billion under the medium one and $11.6 billion under the high scenario. There would also be an annual average of 12,084 full-time equivalent jobs under the low scenario, increasing to 34,518 jobs under the middle scenario and 67,255 jobs under the high.
"The ranking of the states is clear, with North Carolina, South Carolina and Virginia the largest winners if Atlantic offshore oil and gas production is allowed," Considine said. "Under the high production scenario, North Carolina could realize over $24.5 billion in economic output, $4.3 billion in additional tax revenues, and on average employment levels that are nearly 30,000 higher each year over the 2017 to 2035 period.
"South Carolina also may experience significant economic benefits with over $14.5 billion in additional economic output, $3.5 billion in more tax revenues, and nearly 17,000 jobs per year. Virginia is a close third, with over $13.2 billion in economic product, $2.0 billion in tax revenues, and 13,200 more jobs annually over the forecast period."
Considine added that although there would be environmental impacts as well, they are "considerably smaller than the gains in value added." According to Considine, the environmental impacts would range from $395 million under the low production scenario, increasing to $3.3 billion under a medium scenario and $19.0 billion under a high one.
"Even for the high production scenario with very high estimates for carbon prices -- upwards of $195 per ton -- environmental costs are $6.9 billion for North Carolina compared with $24.5 billion in incremental value added, implying a benefit-cost ratio of approximately 4," Considine said. "The benefit-cost ratios are much higher with the medium estimate for environmental valuations of damages. The results suggest that the economic benefits of offshore oil and gas development are likely to far exceed the economic value of environmental damages."
The report was commissioned by the Interstate Policy Alliance, the Georgia Public Policy Foundation, Delaware’s Caesar Rodney Institute, South Carolina's Palmetto Policy Forum, Virginia’s Thomas Jefferson Institute for Public Policy, the Maryland Public Policy Initiative and Civitas Institute. Most of the groups have conservative ties and are known for having a pro-business, small government agenda.