What Does The Trump Administration’s Massive Planned Offshore Lease Sale Mean For Louisiana?

Yesterday’s announcement that the Interior Department will offer some 77 million acres of offshore leases in the Gulf of Mexico has a lot of Louisiana’s congressional delegation buzzing.

“The previous administration acted as a predator to the oil and gas and petrochemical industry, costing many thousands of jobs across South Louisiana,” Rep. Clay Higgins said. “Working closely with President Trump and his administration, we are following through on our commitment to unleash American energy potential and create new opportunities for hard-working Americans. This announcement is great news for South Louisiana. Our region has a major role to play in the American energy renaissance. We’re keeping our promise to bring jobs and industry back to our state.”

“This is exactly the type of job-creating activity that the oil and gas industry needs,” said Sen. John Kennedy. “This lease sale is an economic bonanza for Louisiana and makes us less dependent on foreign oil. The last lease sale generated $121 million in high bids. That translates into countless jobs, especially for Acadiana. Our oil and gas families want to work. They just need the jobs.”

“President Trump has stated that he wants our country to exert ‘energy dominance’ throughout the world, and this lease sale is another bold step in that direction,” said Rep. Steve Scalise, the House Majority Whip. “I applaud today’s announcement by Secretary Ryan Zinke to offer the largest offshore oil and gas lease sale in U.S. history. My constituents in Southeast Louisiana will be leading the way in this exploration and development that will create good jobs and kickstart more economic growth. This strong action helps us continue fighting for the responsible development of our natural resources that bring critical dollars to restore our coast.”

All of which is great, and certainly there is reason to believe that with a lease sale that big there will be a goodly amount of oil exploration and drilling done in the Gulf. The size of the area being offered is truly massive – roughly the same area as the state of New Mexico will be up for grabs when the sale happens in March of next year. And there is an enormous bounty of oil out there. This lease sale will amount to everything the feds have yet to offer on the Outer Continental Shelf, which is said to contain some more than 48 billion barrels of oil and 141 trillion cubic feet of gas as yet untapped.

So there’s a lot of oil out there.

But let’s tap the brakes a bit before we get too excited. This is a good opportunity for Louisiana, but for it to make much of a difference in the state’s economy a couple of problems will need to be solved.

First is the price of oil, which isn’t what you’d hope for if you’re going to invest billions of dollars drilling wells out in the Gulf. West Texas Intermediate crude is up a bit of late, checking in today at $52.13 when we looked at it earlier this morning, and that’s a gain of about $5 over the past month, but there is no strong current indicating it’s about to make a major run into the $70-80 range that would send investment dollars into the Gulf looking for oil. Without question, as Don Briggs noted last week, this administration is the most oil-friendly in decades and its policies on offshore drilling in particular should lead to an industry rebound of sorts – but the more supply is poured into the oil markets the more downward pressure that’s going to put on that price.

And second, even if the Gulf returns as a major hot spot of oil drilling activity it doesn’t necessarily follow that Louisiana is getting primary or even much ancillary benefits from the ramping-up. This is, after all, a state where the governor and his cabal of plaintiff attorneys are out actively drumming up lawsuits against oil companies alleging that the support activities from offshore drilling are leading to the loss of coastline, which doesn’t necessarily mean further legal liability from drilling on the Outer Continental Shelf off Louisiana’s coast would ensue but it would likely irritate those oil companies, most of which are based in Texas rather than Louisiana, into finding every opportunity possible to avoid a commercial nexus with this state.

Louisiana had better remedy the poor environment Gov. John Bel Edwards and his friends have created, and it would be a good idea to do that sooner rather than later. Dropping those lawsuits and getting on board with the idea that energy jobs are crucial to his success and/or re-election in advance of that lease sale in March, for example, would be a smart idea.

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