The Gulf Awash In Crude, Arctic Drilling Gets A Bad Name

The future of offshore drilling in US coastal waters may be determined by how much financial and ecological damage is done by the Deepwater Horizon catastrophe. At this point, the reaction against future drilling is bound to be savage among some groups who think that the BP plc incident could be duplicated anywhere that drilling occurs thousands of feet below the ocean’s surface.

There will certainly be pressure on Obama to pull back on his plan to extend drilling off the East Coast. And, now there are new challenges to exploration and production in the Arctic north of Alaska.Democratic Senator Mark Begich of Alaska says that the President “will announce that consideration of any applications for exploratory drilling in the Arctic is suspended until 2011,” according to Reuters. In a sense, the action is retroactive. Shell’s plans in the Alaska, already well underway, may have to be suspended.

Shell says that its drilling is fairly shallow, only a few hundred feet below ocean level, and is in a different class than the Deepwater Horizon.

A number of experts on oil supply and some politicians will say that the Obama plan will set back a move by the US to be less reliant on foreign oil. That is probably true. And, the Administration, under pressure for doing too little to regulate drillers and reacting too slowly to the Gulf disaster, will see shuttering drilling in areas where a spill would cause major environmental disruptions as its only sane political move.

But, the mistake in the move is that it assume that lightning can strike twice, which is improbable. Oil companies will certainly begin to go to great lengths to make sure that there rigs are carefully run and monitored. None of them wants the crippling effects that BP faces. Beyond that, spills of any kind from deepwater drilling are rare, and major spills like the one in the Gulf are unheard of.

The Administration understands the odds of another serious offshore drilling problem are a million-to-one, but politically it can’t take a risk to keep oil pumping in the Arctic, even at those odds.

Douglas A. McIntyre

Sponsor: 3 Recovery Stocks to Own Now – Get the names of the best cheap stocks to rebuild your wealth in 2010 and beyond.