DURHAM — North Carolina is among a group of coastal states pressing the Obama administration to end a two-decade moratorium and allow offshore exploration for oil and natural gas. Advocates here are hoping to get North Carolina included on the federal list of ocean waters to be set aside for future exploration.
Gov. Pat McCrory was recently made vice chairman of the two-year-old Outer Continental Shelf Governors Coalition, giving the state a higher profile in offshore drilling. McCrory described his involvement at an energy conference Wednesday organized by the N.C. Chamber, the state's influential business lobbying organization.
Offshore drilling in U.S. waters is dependent on federal permitting, a process that got underway several years ago and stalled in the wake of the Deepwater Horizon blowout and oil spill in the Gulf of Mexico three years ago.
North Carolina is in its strongest position in years to promote offshore energy exploration, which remains highly controversial, especially in tourism-dependent, coastal regions. The state legislature is controlled by a business-friendly Republican legislature and McCrory has expressed strong support for offshore energy exploration.
“We have got to get into the exploration business in North Carolina,” McCrory, a former Charlotte mayor who previously worked for Duke Energy, said Wednesday. “We're reeling from sitting on the sidelines for the past decade, which we should have never done.”
McCrory said he continues to promote his “all of the above” approach to energy, endorsing such options as shale gas exploration in the state's midsection as well as offshore wind farms. But he also said the time is approaching for a hard look at the costs of subsidizing renewable energy resources such as solar and wind, with the ultimate goal of phasing out those subsidies.
Another speaker at the conference, John Morrison, chief operating officer at Strata Solar, took issue with McCrory's view. Morrison said in an interview that it’s a common misconception that renewable energy increases utility bills but building power plants doesn't.
Morrison said that as the cost of nuclear and coal power has risen significantly, solar energy costs have plummeted in recent years to the point that the cost of building a solar farm is marginally above the cost of conventional electricity.
“That's the thing that’s so distressing,” Morrison said about McCrory's remarks. “Our core base generation costs are going up. Solar, on the other hand, is coming down.”
Advocates of drilling predicted that offshore exploration would generate thousands of jobs in North Carolina, as well as a financial windfall through shared revenue agreements with the federal government from the lease proceeds.
Decision years away
The offshore coalition is made up of eight coastal states, including Alaska, Texas, Virginia and South Carolina.
Offshore leasing in the Atlantic Ocean is off-limits through 2017, but coastal states are working to persuade federal authorities to include leasing in the five-year plan through 2022. The states also want to begin seismic testing of ocean bottoms, which is opposed by some environmental organizations that say the testing causes explosions that are harmful to whales and marine life.
About a half dozen companies have expressed interest in conducting seismic tests and selling the test results to the energy industry, said Andy Radford, senior policy adviser for offshore energy at the American Petroleum Institute, the oil-and-gas lobbying organization.
The U.S. Department of Interior is expected to begin its review next fall. A federal decision on opening the Atlantic Ocean to seismic testing would likely come in early 2017, Radford said.
The Interior Department was prepared to include the area in the 2012-2017 period for potential exploration but balked after the Deepwater Horizon accident. Seismic testing would precede drilling exploratory wells to assess the offshore area’s energy potential.
“The five-year plan is how you get on the dance ticket to have a lease sale,” Radford said.
The development cycle from initial testing to energy production can take a decade, he said.
The mid-Atlantic region, which includes offshore North Carolina, is estimated to contain about 1.4 billion barrels of oil and more than 19 trillion cubic feet of natural gas. (By comparison, the three-county area in North Carolina’s midsection eyed for fracking is estimated to have about 1.7 trillion cubic feet of natural gas.)
McCrory has also embraced offshore wind farm development, the production of which would almost certainly require government subsidies. On Wednesday, however, McCrory told the N.C. Chamber audience that the state needs to assess the long-term benefits of renewable subsidies.
“At what point in time do the subsidies decelerate, end or decrease?” he said. “One of North Carolina’s recruitment selling points is our low energy costs.”
McCrory left the Sheraton Imperial hotel in Durham upon concluding his remarks and was not available for comment.
North Carolina households have typically paid less than 50 cents a month for renewable energy produced by Charlotte-based Duke Energy and Raleigh-based Duke Energy Progress.
Duke residential customers currently are receiving a 4-cent monthly credit on their utility bills because the power company had overestimated renewable costs and overcharged customers. Progress households are paying 19 cents a month.