Environment

If Florida’s offshore oil rush ever happens, only one side of the state is likely to see it

A line of oil rigs sits in the Santa Barbara Channel off the California Coast. A Trump administration plan to expand oil drilling included Florida, surprising industry analysts. This week Florida was withdrawn after Gov. Rick Scott raised concerns.
A line of oil rigs sits in the Santa Barbara Channel off the California Coast. A Trump administration plan to expand oil drilling included Florida, surprising industry analysts. This week Florida was withdrawn after Gov. Rick Scott raised concerns. Los Angeles Times/TNS

The offshore drilling rigs that pepper the central Gulf of Mexico off Louisiana and Texas tap some of the nation’s richest oil and natural gas reserves.

That proven and profitable productivity is why the energy industry has pushed for decades to open vast Gulf waters off Florida’s West Coast to exploration and drilling.

But it’s far less likely for rigs to rise off Miami Beach, Islamorada or anywhere else along Florida’s heavily populated Atlantic coast — and that was the case even before the Trump administration last week pulled state waters “off the table” after a Tallahassee meeting that seemed intended to boost Gov. Rick Scott’s rumored run for U.S. Senate.

There is one big reason why: Money.

Even industry experts see little chance of making much of it plumbing the depths of the Florida Straits and Atlantic coast, at least barring the discovery of some unexpected mother lode or a skyrocketing upturn in oil and gas prices.

“I’ve been involved in the oil and gas industry a long time, but even I am sitting back scratching my head,” said David Dismukes, head of Louisiana State University’s Center for Energy Studies. “If you look at where crude is trading now, we’re not in a favorable environment for high-cost risks.”

Florida’s Gulf waters have long been considered the next offshore frontier for the energy industry. It’s a thoroughly studied region that could be easily and economically connected to an existing network of pipelines, supply ships and refineries. Florida’s Atlantic coast, on the other hand, represents an expensive gamble in a region with a history of losing bets.

The last time the shelf along the nation’s east coast was explored was in 1984, and most previous drilling efforts, including some off the Florida Keys more than a half century ago, were shut down and classified as “dry holes.” Florida’s east coast — packed with hotels and condos — boasts no pipelines or refineries to support offshore projects.

And, under the current energy environment that includes high prices, low demand and far more oil available through unconventional drilling, there’s little economic incentive to open up yet another frontier. Oil production this year is expected to hit 10 million barrels a day, double what was projected a decade ago. Prices now hover around $70 a barrel, a four-year high, but about half the peak price in 2008.

While the Trump administration’s proposal would potentially open much of the nation’s offshore waters to exploration, the energy industry has to calculate the payoff before pulling the trigger to actually drill. Exploration is expensive and developing a new area can take years or decades. There has to be enough of a resource to cover the massive costs of producing oil or gas offshore.

“You don’t just snap your fingers and say we’re going to be energy dominant,” Dismukes said. “These are decisions that run 40 years, not four years.”

Exploration in Florida waters has not been fruitful in the past. Only 11 leases have ever been purchased off the state, most in the Gulf of Mexico and the last in 1985. In 2005, former Gov. Jeb Bush settled a lawsuit from an Apalachicola oil company looking for natural gas by buying its leases for $12.5 million.

For decades, objections from state politicians and overwhelming public resistance also have helped keep the state out of play, a line-in-the-sand reinforced after BP’s Deepwater Horizon rig exploded in 2010, killing 11 workers and dumping nearly 3 million barrels of oil.

boem gom florida buffer
A map of the eastern Gulf of Mexico includes a buffer zone for Florida. However, it’s not yet clear how far that zone will extend. U.S. Bureau of Ocean Energy Management

That’s not to say the Atlantic Coast may not hold prospects.

The federal government estimates there may be 4.6 billion barrels of oil and 38 trillion cubic feet of natural gas under the Atlantic sea floor.

Off Florida, the Bureau of Ocean Energy Management estimated in 2016 that the Blake Plateau basin, a 38,000-square-mile Jurassic formation, may hold an average of about 330 million barrels of oil and about 460 billion cubic feet of gas. The South Florida Basin, which includes the Florida Straits, could hold about 250 million barrels and 238 billion cubic feet of gas. But that’s just a fraction of the more lucrative Gulf, which holds 10 times more oil and nearly four times more gas than the entire Atlantic.

There is also significant doubt about those numbers among energy industry analysts. Those federal assessments are based on decades-old data from previous drilling, they say, or models using information from geologic formations with similar architecture. They were also completed under the Obama administration.

“I don’t know of anyone who has done a comprehensive analysis that would really give you a true understanding of what’s out there right now,” Dismukes said.

That’s why ongoing activity in Cuba has drawn so much interest. Cuba opened up its waters in 2013, and so far a handful of companies have sunk wells. None has scored a significant find yet, but they’re collecting valuable information.

“You have some of the most relevant information coming in,” said Kevin Book, managing director of ClearView Energy Partners. “Companies operating in those waters are not being horribly successful, but they’re looking and drilling exploratory wells and why they’re doing it is because geologists, when they reassembled the Pangaean jigsaw puzzle, they thought it could be a thing, that it could be a simulacrum of West Africa and Nigeria.”

To translate the oil tech talk, that means geologists suspect the continents that were once joined share the same vast oil reserves. So what’s true of Africa’s west coast could be true of America’s east coast. But without more data, it remains a risky gamble.

“If you don’t know what the rocks have in them, there’s a decent chance of spending a lot of money for nothing,” Book said. “And the history of that area is spending a lot of money for nothing.”

boem proposed lease sale map
Interior Secretary Ryan Zinke said that the state would be ‘off the table’ for offshore drilling leases after Gov. Rick Scott raised concerns. U.S. Bureau of Ocean Energy Management

The only time oil was explored off the Atlantic coast was between 1976 and 1983, when the U.S. auctioned off nine areas. Nearly 400 leases were purchased that covered more than 2.3 million square miles. Of those, 51 wells were drilled. Only natural gas was discovered in 450 feet of water off the northeast coast in the Baltimore Canyon, according to the BOEM. The wells were ultimately abandoned because production would have required numerous wells with not enough production.

Florida has only had three lease sales off its east coast and eight, including the state’s first lease sale off the Florida Keys in 1959, in the Gulf. So far, only natural gas has been found in the Destin Dome off the Panhandle. But the state blocked drilling, which landed it in court and eventually resulted in Bush’s settlement.

Still, old wells that turned up dry might now be considered productive with advances in technology, said David Mica, executive director of the Florida Petroleum Council. That’s why the industry wants clearance to take a new and more sophisticated look.

“In the Straits, what would getting new seismic look like there, or getting an MRI?” Mica said. “If you look at our assessments of the resource potential, it’s continually being disproven, in that there’s more than we thought there was.”

It’s also not clear how much of the eastern Gulf will be opened to drilling. While Interior Secretary Ryan Zinke, after a brief meeting last week with Scott, said he was taking Florida “off the table,” he has not released details.

A map still included in the plan shows various buffer zones drawn off Florida, starting at 50 miles from shore and extending to 125 miles. It’s likely that adjacent states that support drilling — and collect up to $500 million annually in revenues — will push to include as much of the eastern Gulf as possible in the leases, Book said.

Florida “is off the table, but the question of how you define Florida is unsettled,” Book said.

U.S. Sen. Bill Nelson, who has long opposed drilling, wrote Zinke earlier this week asking for details before the 60-day window to comment on the draft plan closes.

“The public has a right to know exactly what Interior’s plan is,” Nelson wrote, “and it is unreasonable to expect Floridians to provide input on a plan that may or may not be the plan that your agency is actually considering.”

Interior officials did not respond to emails asking for additional information.

Follow Jenny Staletovich on Twitter @jenstaletovich

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