Expanding Offshore Energy Opportunities Means Expanding Opportunities for Entrepreneurs and Small Businesses

By at 6 January, 2018, 11:12 am

by Raymond J. Keating-

On January 4, U.S. Interior Secretary Ryan Zinke announced the Trump administration’s plan to significantly expand offshore drilling opportunities. That’s good news for the U.S. economy, energy leadership and small businesses.

Over the past dozen years, the U.S. has been transformed into the world’s largest energy producer. That occurred thanks to private-sector entrepreneurship and investment pushing innovation and development forward, in key areas like hydraulic fracturing and horizontal drilling. The benefits have been considerable, including in terms of expanded production, job growth, and the well-being and growth of small businesses. (See a recent SBE Council analysis on energy and small business positives for 2017 and 2018, and an SBE Council study highlighting, among other developments, growth in jobs and the number of businesses related to key energy sectors.)

What It Means for Opportunity and U.S. Energy Leadership

As for what this announcement from the Trump administration means, several key points from the press release need to be highlighted.

First, it must be understood that currently 94 percent of the Outer Continental Shelf (OCS) is off limits to exploration for and development of our own energy resources. That would change dramatically under this new plan:

“U.S. Secretary of the Interior Ryan Zinke today announced the next step for responsibly developing the National Outer Continental Shelf Oil and Gas Leasing Program (National OCS Program) for 2019-2024, which proposes to make over 90 percent of the total OCS acreage and more than 98 percent of undiscovered, technically recoverable oil and gas resources in federal offshore areas available to consider for future exploration and development.”

Second, it was reported, “The Draft Proposed Program (DPP) includes 47 potential lease sales in 25 of the 26 planning areas – 19 sales off the coast of Alaska, 7 in the Pacific Region, 12 in the Gulf of Mexico, and 9 in the Atlantic Region. This is the largest number of lease sales ever proposed for the National OCS Program’s 5-year lease schedule.”

Third, in terms of particular areas, the DPP includes 12 sales in the Gulf of Mexico; 19 lease sales in the Alaska Region (3 in the Chukchi Sea, 3 in the Beaufort Sea, 2 in Cook Inlet, and 1 sale each in 11 other program areas in Alaska); 7 lease sales in the Pacific Region (2 each for Northern California, Central California, and Southern California, and 1 for Washington/Oregon); and 9 lease sales in the Atlantic Region (3 sales each for the Mid- and South Atlantic, 2 for the North Atlantic, and 1 for the Straits of Florida).

There have been no sales in the Pacific Region since 1984 (though “there are 43 leases in producing status in the Southern California Planning Area”) and the Atlantic Region since 1983.

When one considers the ongoing improvements in offshore technology, productivity and safety (see this article, for example), removing unwarranted, shortsighted and politically-driven limits on offshore energy exploration and development holds enormous potential to further extend and expand U.S. global energy leadership. (See estimates on added jobs, production and government revenues.)

Katharine MacGregor, Principal Deputy Assistant Secretary for Land and Minerals Management, declared, “This plan is an early signal to the global marketplace that the United States intends to remain a global leader in responsible offshore energy development and produce affordable American energy for many decades to come. This proposed plan shows our commitment to a vibrant offshore energy economy that supports the thousands of men and women working in the offshore energy industry, from supply vessels to rig crews.”

And U.S. House Speaker Paul Ryan tweeted, “Interior’s offshore drilling announcement is great news for the economy. It means more jobs, more revenue, and more energy produced right here in America.”

The Energy Economy is All About Small Business

But let’s be clear. As SBE Council has noted time and again, our energy economy very much is a small business economy. According to the latest data from the U.S. Census Bureau (2015):

89.6% of employer firms among oil and gas extraction businesses have less than 20 employees;

77.3% of employer firms among drilling oil and gas wells businesses have less than 20 workers;

80.7% of employer firms among support activities for oil and gas operations businesses have less than 20 employees,

58.2% of employer firms among oil and gas pipeline and related structures construction businesses have less than 20 workers,

and 51.5% of employer firms among oil and gas field machinery and equipment manufacturing businesses have less than 20 employees.

Secretary Zinke correctly summed up matters this way:

“Responsibly developing our energy resources on the Outer Continental Shelf in a safe and well-regulated way is important to our economy and energy security, and it provides billions of dollars to fund the conservation of our coastlines, public lands and parks. Today’s announcement lays out the options that are on the table and starts a lengthy and robust public comment period. Just like with mining, not all areas are appropriate for offshore drilling, and we will take that into consideration in the coming weeks. The important thing is we strike the right balance to protect our coasts and people while still powering America and achieving American Energy Dominance.”

And it will be small businesses that largely drive America’s energy dominance, if counter-productive government policies are removed, as would be the case with this Interior Department plan, and opportunity is allowed to flourish.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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