October 13, 2008

Offshore Drilling May Not Be Such a Gusher

By Anonymous

Offshore drilling has created a $70 billion-a-year industry and more than 300,000 jobs in Louisiana. It also has fueled a heated debate over tapping oil and natural-gas deposits off the North Carolina coast, though few have asked what kind of impact it would have on the Tar Heel economy. "Nobody knows," says Jim Smith, an economist at Western Carolina University in Cullowhee. "That's the only answer." UNC Greensboro economist Andrew Brod agrees. Though it would be a drop in the bucket compared with Louisiana, there might be some surprises.

"I can't come up with a scenario in which, even if they found the biggest oil field in history, you'd build a refinery in North Carolina," says Smith, a professor at Western Carolina's Institute for the Economy and the Future. "You've got refineries in Philly and New Jersey already Besides, no new refineries have been built in the U.S. since 1973." Brod, director of UNCG's Office of Business and Economic Research, says the state probably would miss another economic plum - construction of drilling rigs. They're built ashore in segments and assembled at sea, but the platforms - $500 million to $1 billion each - wouldn't come from North Carolina. Foreign shipbuilders furnish most, and if a domestic rig-building and - service industry did develop, it likely would be near the deep- water ports of Norfolk, Va., or Charleston, S.C. It's not clear whether the state would collect lucrative licensing and other fees. Drilling would be in U.S. territorial waters, far beyond North Carolina's three-mile limit. Two coastal counties - Hyde and Dare - have ordinances that prohibit pipelines across their portions of the Outer Banks, raising the question of how oil or natural gas might come ashore.

Drilling wouldn't be an economic bust, though. Smith and Brod say oil-rig workers, who rotate between platforms and shore, probably would live near what Brod calls transit points, the Tar Heel ports in Morehead City and Wilmington. And Smith, a longtime drilling proponent, says the biggest impact might be incidental to drilling. "Most oil experts are dubious that there's much oil east of Cape Hatteras, but they believe there are enormous amounts of natural gas." That could provide cheap, abundant fuel for development of energy-intensive manufacturers in Eastern North Carolina. "Aluminum leaps to mind," he says.

Gov. Mike Easley opposes offshore drilling, which he says could threaten a vital part of the state's $16-billion-plus tourism economy and endanger marine industries valued at more than $682 million a year. "People should not be tricked into believing that offshore drilling would solve our dependence on oil." Brod agrees, noting that it would have little effect on prices or supplies. "Any benefit would be diluted by the fact oil will be injected into a global market. It might have a few pennies' effect, but it is so small it would not be part of the calculation." The state, he says, needs a study balancing costs and risks. Some aren't willing to wait. In late August, Carteret County commissioners voted to support offshore drilling.

Copyright Business-North Carolina Oct 2008

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