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Oil Drilling in Florida: All Quiet on the Eastern Front?

Terence Buckley - 2/22/2006

Drilling in Florida’s eastern section of the Gulf of Mexico has recently come under attack. Lately, the oil companies, which claim that offshore oil drilling will not threaten Florida’s tourism or environment, have gained some ground in opening Florida’s water for offshore oil drilling. Florida’s state government is torn on the issue, and the federal government is closing in. The differences among politicians lie in the perception of Florida’s ability to contribute to U.S. energy needs, and that contribution is less than minimal at best.

Florida’s governor Jeb Bush’s stance on the issue wavers. In 2001, the governor expressed his concerns about tourism and the environment by sending a letter to the White House requesting that offshore drilling in Florida remain banned. Florida tourism generates millions of dollars for private business and significant tax dollars via sales tax for the state. Recently, the governor, who is soon stepping out of office, supported his brother’s (President George Bush) proposals for Florida drilling but demands that drilling remain at least 150 miles offshore.

Remembering landmark cases of contamination, such as the Exxon Valdez, may define some of the public’s view on the issue, but many less devastating incidents occur in the Gulf of Mexico.

The Minerals Management Service (MMS) reports that Hurricane Katrina caused 211 minor pollutant incidents (less than 500 barrels and no contact with the coastline), and Rita caused 207 minor pollutant incidents. In 2005, MMS reported six incidents of 50 barrels or more, where 1,877 barrels of synthetic drilling mud (SBM), synthetic-based oil (which is largely bio-degradable), and calcium chloride were spilled into the Gulf of Mexico at an average of 81 miles from shore. Other sources state that the majority of pollution, as it occurs in smaller increments, remains unreported. Despite the statistics, one only has to visit the Louisiana and Texas coastline and then take a trip to Florida to understand the differences in landscape.

The risk of environmental contamination is mildly offset by tax revenue collected by states bordering the Gulf. In 2005, Texas claimed a little over 2.3 billion in tax revenue from oil and gas production, or 3.5% of their annual collected taxes. According to the 61st Annual Report, Louisiana’s taxation on natural resources constitutes 2% of their annual revenue. Alabama received 28.7 million in taxes from oil and gas production, a small percentage of the 6.3 billion total tax revenue for the state. Presently, Florida’s sales and use tax comprises 59% of state revenue, according to the state’s 2005 annual report. A few extra percentage points from oil and gas production do not seem on the upside of risk analysis.

President Bush’s Advanced Energy Initiative maintains the importance of producing more energy to alleviate the nation’s dependency on petroleum products. In a televised speech on February 20, 2006, given at Johnson Controls in Milwaukee, Wisconsin, Bush noted that the nation needs to move away from oil dependency by investing in alternative fuel strategies. In his recent State of the Union Address, Bush states, “Consumers and businesses need reliable supplies of energy to make our economy run -- so I urge you to pass legislation to modernize our electricity system, promote conservation, and make America less dependent on foreign sources of energy.” But in a speech recently delivered in Tampa, Bush pushed legislative initiatives to open Florida’s eastern section of the Gulf for drilling100 miles from the coastline.

President Bush’s State of the Union Address contradicts his demands for drilling in the eastern Gulf of Mexico. He claims that America needs to decrease dependency on foreign and domestic oil, but the private sector must produce more domestic oil and gas, especially in Florida. Many Americans may support Bush’s initiatives, especially agreeing with his attitudes about the Middle East and those countries’ latent threat to U.S. economy and security.

The perception of Middle Eastern oil dependency may be a little overstated. The Energy Information Administration reports that the U.S.’s largest importer of oil is Canada, which constitutes over 10% of total imports (Mexico ranks second, Saudi Arabia is third, and the fourth-largest importer of oil is Venezuela). Venezuela supplies the U.S. with an estimated 1.52 million barrels a day, or approximately 9.5%, compared to approximately 18% from all OPEC-member Middle Eastern countries combined.

If fully developed, Florida’s oilfield may produce less than a tenth of a percent of U.S. energy needs: 6 million barrels a year (the U.S consumes 21 million barrels a day) and 23 billion cubic feet of natural gas per year (the U.S. consumes 23 trillion cubic feet of natural gas per year). Given the present energy demands in the U.S., developing Florida’s oilfield seems like a drop in the bucket.

Weighing the considerations for offshore development in Florida also involves an explanation of the global climate for oil consumption, an explanation painting an even grimmer picture.

China’s rapid industrialization and population of 1.3 billion people has positioned the nation as a formidable competitor for petroleum products. A recent controversy erupted over Venezuela’s distribution of oil, although Rafael Ramirez, Venezuela’s Oil and energy Minister, recently reassured the U.S. that oil exports would continue. Hugo Chavez, president of Venezuela, also reassured the U.S. of continuing economic relations, but he cannot ignore the growing market in China or the demands of India. Chavez also threatened to cut-off oil exports to the U.S. on February 17, 2006, if the U.S. did not stop meddling with the legitimacy of his government.

Over the next thirty years, China’s and India’s rising economies may place the U.S. in a precarious position. Economically coping with global competition for fuel may prove taxing on the U.S. economy.

The question, then, remains: how much can Florida really help? Risking the tourist industry and the environment does not seem to outweigh the risks for drilling in Florida, especially since drilling in Florida will not contribute much to alleviating political tensions over oil resources or offset China’s and India’s competitive demand for fossil fuels.