Worth the Risk? The Debate Over Offshore Oil Drilling Looms Large

State leaders hungry for cash look to the lure of oil money while environmental and tourism leaders warn of potential economic disaster associated with lifting the decades-old ban on offshore drilling in Florida’s waters

By John Kennedy

Originally published Feb/Mar 2010 issue of 850 Business Magazine

The white sand and lapping waves of the Gulf outside his Seaside restaurant draws Dave Rauschkolb almost every day. He’s been surfing 32 years and likes nothing better than to slip away with his board.

“I’ve seen beaches all over the world,” said Rauschkolb, who opened Bud and Alley’s 24 years ago, when sandspurs dominated what eventually would become a high-end community. “Florida’s Gulf Coast has the best beaches anywhere. They’re really the legacy we’re leaving for our kids.”

But when Rauschkolb squints out at the Gulf from the backdoor of his restaurant, he fears seeing a new legacy on the horizon.

Oil rigs.

Three-dollar-a-gallon gas, a $2.6 billion-plus state budget shortfall, and the quiet maneuvering of a handful of self-described independent oil producers have combined to ignite a drive to open Florida’s Gulf waters to oil exploration, possibly as close as three miles offshore.

Proponents are mixing a potent sales pitch that combines petro-dollars, patriotism and the prospect of thousands of new jobs in a struggling economy. But they also must combat the state’s $50 billion tourism industry, environmentalists and the U.S. Defense Department, which jealously guard the state’s Gulf waters for their own interests.

“It’s a classic Florida story,” said Norman Guinasso, a Texas A&M University oceanographer. “There are promises of big money, shaky characters and water leases. Usually in a Florida story, it involves a land deal. But either way, it’s got the makings of a Carl Hiaasen novel.”

The waters off Northwest Florida’s coastline are seen as one of the most likely drilling spots. But other potential exploration sites could dot state coastal waters off Sarasota and Southwest Florida, proponents say.

State Rep. Dean Cannon, a Winter Park Republican in line to become House speaker later this year, floated the drilling proposal late in the 2009 legislative session. Despite the lack of extensive public debate, it quickly won overwhelming approval in the Republican-controlled House. But the move fell flat among the more cautious GOP leaders of the Florida Senate.

Like Rauschkolb, Cannon said he loves the Gulf waters. But trying to steady a state reeling with a million people unemployed, a collapsed housing industry and few signs of an economic turnaround, Cannon continues to insist that Florida needs the jump-start that oil drilling might bring.

“We are very carefully now trying to take input on all of these big issues — going from the general to the specific — so that when a bill emerges, it will be a fully vetted product,” he said.

A moratorium on offshore oil and gas drilling in Florida waters (up to 10 miles offshore) has been in place for 20 years. But Cannon’s plan would give the governor and Cabinet authority to lift that prohibition and begin accepting applications from energy companies looking to drill.

Cannon said such applications could be priced at $5 million each, but supporters say those fees will be dwarfed by royalties pouring into the state treasury once drilling begins.

An economic study commissioned by Florida Energy Associates — the Daytona Beach-based organization behind the effort — says drilling could bring more than $2 billion annually into recession-ravaged state coffers.

Environmentalists, state officials and even those close to the industry have cautioned that those promises appear wildly high. But in a state scrambling for dollars, oil drilling has become alluring to some.

Cannon, a lawyer by trade, chooses his words carefully. But he said that whatever the amount, without drilling, Floridians can’t “put our heads in the sand and do nothing to end our dependence on foreign oil.”

“This bill would allow free and open debate regarding whether or not we want to continue to be dependent on (foreign oil),” he said. “The bill would also allow the Florida Cabinet to set restrictions to safeguard our beautiful beaches and precious oceans.”

Momentum behind the oil-drilling movement has cooled in recent months. But with Florida’s economy continuing to struggle, drilling could emerge again as a divisive issue during the 60-day spring legislative session that begins March 2.

Proponents, including the politically potent Associated Industries of Florida, a business lobby hired to pitch the oil-drilling proposal, had hoped to sweep the measure through the Legislature last spring — with the economy crumbling and the Republican presidential campaign theme of “drill here, drill now” still echoing.

But when the state Senate only sniffed at the idea, proponents turned their attention toward the future — pushing Gov. Charlie Crist and legislative leaders to take up the oil-drilling measure in what was seen as a possible autumn special session.

Crist, while auditioning for the vice presidential slot on John McCain’s ticket, had already reversed course and embraced the idea of giving Florida leaders a shot at considering oil drilling. But with Crist now a candidate for U.S. Senate, his hold over the Legislature has weakened some even as Senate President Jeff Atwater, R-North Palm Beach, has emerged as a pivotal player and a tough sell on drilling.

Atwater, himself a statewide candidate for the Cabinet post of chief financial officer, may have effectively put the brakes on the oil-drilling proposal by announcing that the Senate planned to conduct its own extensive review of the measure.

Among the organizations working with a Senate environmental panel are Florida State University’s Institute for Energy Systems, Economics and Sustainability; the Century Commission; and the Legislature’s Office of Economic and Demographic Research.

While House leaders have raced ahead with workshop sessions, building a case for drilling legislation, Atwater is showing no signs of hurrying.

Sen. Lee Constantine, R-Altamonte Springs, chairman of the Senate Environmental Preservation and Conservation Committee leading the Senate’s study, said the focus “will be primarily about how best we can protect Florida’s resources, not about how much can we drill for and how fast.”

Atwater also has indicated that he is in no hurry to approve drilling — as an election year dawns.

“This analysis will be driven by the need for a dispassionate review, not timelines or schedules,” he said.

Talk of drilling in Florida’s Gulf waters, however, isn’t likely to go away.

While Cannon is poised to assume House leadership after the November elections, another drilling proponent — Sen. Mike Haridopolos, R-Merritt Island — has been named to succeed Atwater. That virtually ensures that the measure will be back in 2011, and could pass, if it fails to gain traction this year.

“I’m inclined to support drilling off the coast, but I have a lot of questions,” Haridopolos said. Suggesting the plan may take more than a year to unfold, he added, “I think we take our time.”

As a result, Florida Energy Associates in January began scaling back on its team of 30 lobbyists.

“Its very hard to keep an army in the field without a war to fight,” said David Rancourt, the group’s lead lobbyist. “This should not in any way be taken that we are retreating. But it’s clear that the issue is in something of a quiet period right now.”

Florida Energy Associates had hoped to speed up the timetable. The firm claims it’s not a front for major oil companies, yet only identifies its principals as out-of-state, independent oil producers. However, it certainly knows how to play the politics of petroleum.

The organization spent $234,000 on its lobbying push during the 2009 legislative session, according to lobbyist disclosure reports. Since the spring of 2009, Florida Energy Associates has steered $40,000 to the Florida Republican Party and $30,000 to Florida Democrats, campaign finance reports show, and continues to court lobbyists with connections to lawmakers from both parties.

The pro-drilling side says the money drawn from leases is desperately needed to replace the billions of dollars in federal stimulus money that has sustained Florida’s recession-ripped budget, but which is on track to disappear within a year.

Supporters also point out that drilling has been going on off neighboring Gulf states since the 1940s, mostly without serious accidents. U.S. Interior Department maps show there are more than 4,000 oil and gas rigs off the shores of Texas, Louisiana, Mississippi and Alabama.

“I think the environmental risk is overplayed,” said Quenton Dokken, executive director of the Gulf of Mexico Foundation, a nonprofit conservation group based in Corpus Christi, Texas, that draws financial support from the energy industry. “I think you’ve already got a much greater risk in Florida with tankers going by that leak or clean out their bilges in the Gulf. These oil rigs are pretty sophisticated, and they don’t want leaks.”

Support companies — refineries, processors and the like — would have to be constructed in Florida to provide the jobs backers of drilling promise, Dokken pointed out. But it’s just as likely the industry could pump Florida oil to already-existing locations in other Gulf states, reducing the prospects of jobs but preserving the state’s coastline, industry experts said.

Offshore drilling alarms most environmentalists, who warn against the prospect of damaging oil leaks and the unsightly image of rigs dotting an otherwise pristine horizon.

But technology has reduced some of the risk. Drilling operations rely on automatic shutoff valves on the seabed floor and devices that diminish the risk of blowouts caused by pressure buildup — vastly changing the level of pollution associated with rigs over the past 30 years, experts said.

State and federal regulations also have toughened restrictions aimed at limiting the amount of chemicals and toxins that can be released into the water at drilling sites. Spills from platforms have become far less frequent in recent decades, according to the federal Minerals Management Service.

During hurricanes Rita and Katrina in 2005, 115 oil platforms collapsed. As much as

10 million gallons of oil spilled during those catastrophic storms, most of it coming from damaged tankers and pipelines.

Indeed, officials say the most serious threat derived from drilling comes in transporting the oil back to shoreline refineries, with pipelines, barges and tankers more likely to seep oil than the rigs themselves.

“These oil companies know the (public relations) damage that can come from a leak or oil spill,” said Larry McKinney, director of the Harte Research Institute for Gulf of Mexico Studies at Texas A&M University. “They’re out there trying to collect oil. They don’t want to spill it.”

Yet even with the improvements, spills can occur. The Minerals Management Service forecasts at least one oil spill of 1,000 barrels annually in the Gulf of Mexico, based on the amount of work already under way.

Eric Draper of the Audubon Society of Florida said that if such spills washed onto a Panhandle beach, it could be devastating.

Oil drilling is “dirty, dangerous and ugly,” and incompatible with Florida’s tourist-driven economy, Draper said.

“It ain’t safe because they say it’s safe,” he said.

Little is known about oil reserves within Florida’s state waters, which stretch up to 10 miles offshore. Thirty-nine exploratory wells drilled in the 1970s and 1980s from Pensacola to Tampa Bay yielded vast reserves of natural gas. Some of the drilling also produced light, low-grade crude oil — but hardly the gushers envisioned by proponents of the latest push.

In fact, the Minerals Management Service has estimated that reserves within the first 100 miles of Florida’s coast will produce only natural gas — not oil.

“The economic benefits don’t seem huge,” said Guinasso, the Texas A&M oceanographer. “The idea that there’s just as much oil off Florida as there is off Louisiana just doesn’t make geologic sense.”

Guinasso said there may be oil off Florida — just not anywhere close.

“The oil that we know about is in deep water — hundreds of miles offshore,” he said. “These major oil companies, Shell and Chevron, they know what they’re doing. They’re not interested in drilling in Florida waters. Unless there’s some geology we don’t understand, I don’t think there’s much to be had.”

Jerry Karnas, a Florida director for the Environmental Defense Fund, warned that the near-shore drilling proposal is part of a larger scheme to open deep waters off Florida to oil exploration.

Once the Florida Legislature backs off its prohibition on drilling in state waters, industry advocates in Congress are likely to push for lifting the federal moratorium that shields the state from widespread drilling, Karnas said.

U.S. Sen. Mary Landrieu, a Louisiana Democrat, has proposed giving states that agree to eliminate drilling prohibitions off their coasts — past the 10-mile limit of state waters — a share of royalties that now go chiefly to the federal treasury.

“This whole idea in the Legislature is a scam,” Karnas said. “There’s no oil that close to shore. But the plan is to use it to get approval for drilling further out. That’s where the big boys really want to drill.”

Rancourt concedes that there is little known about what kind of finds may exist off the state’s coast. But it’s still worth looking, he said.

“We’ve said for years that this is just one arrow in the quiver of energy independence,” Rancourt said. “We can’t get to energy independence on alternative fuels. We simply can’t.”

A punishing economy also seems to help drilling proponents.

Five years ago, then-Gov. Jeb Bush and the Florida Cabinet earned praise in opinion polls and from newspaper editorial boards when they reached a $12.5 million settlement with Apalachicola-based Coastal Petroleum, a company that had secured World War II-era permits from state officials to drill off the coast. At the time, the settlement seemed to erase what had been a 60-plus-year cloud hanging over Florida’s near-shore waters, with the leases being a concern of state administrations going back 20 years.

Bush also pushed to strengthen a deep-water drilling moratorium with his brother, then-President George W. Bush. Drilling off Florida is currently barred within 125 miles of the Panhandle coast and 235 miles off Tampa Bay.

But the latest bid to renew drilling has also revived much of the rhetoric on both sides.

“This just defies reason,” said Florida’s U.S. Sen. Bill Nelson, who has been a central player in the opposition to oil drilling dating to his days on the state Cabinet in the 1990s. “Why would we want to undo the coastal protections wisely put and kept in place by governors (Bob) Graham, (Lawton) Chiles and (Jeb) Bush?”

Nelson also suspects that the new effort contains deeper goals aimed at tying the state to the oil industry.

“These protections have spared our state’s economy and environment from the ravages of industrializing and degrading our coastline,” he said. “Those who now propose to allow drilling and refineries know full well their plan will do nothing to reduce energy prices or our country’s reliance on oil. This simply is the agenda of big-oil interests hiding behind advocacy groups seeking to control Florida’s lawmaking.”

But opinion polls show Floridians no longer have the same hard-line approach against drilling that they formerly held, one that earlier united Democratic and Republican lawmakers against the industry.

A poll taken in October 2009 by the St. Petersburg Times and The Miami Herald showed that 54 percent of voters supported drilling off Florida’s coast and 40 percent opposed it. Republican voters overwhelmingly backed drilling; Democrats were opposed; and registered independents went along with drilling by a double-digit margin.

Support was strongest in Central Florida — perhaps not surprisingly home to the House and Senate’s prime backers of the drive. More Panhandle voters supported drilling than opposed it, while in the Tampa Bay area, it was basically an even split.

“There is a vocal minority out there opposed to oil exploration in the Gulf,” said Associated Industries of Florida President Barney Bishop. “The opposition is certainly entitled to be heard. But they’re not entitled to overrule the majority.”

The opposition, though, contains some unusual cross-currents.

Northwest Florida communities and Gulf Coast chambers of commerce are among the unlikely allies being gained by environmentalists and legislative Democrats fighting the drilling plan. Along the Gulf, 30 cities, counties, local chambers and other organizations have approved resolutions denouncing drilling — with critics rooted in some of Florida’s most conservative-leaning voting districts.

Panama City Mayor Scott Clemons, a former Democratic state legislator, said that like many Panhandle locales, his city’s resolution against drilling stems chiefly from concerns that oil exploration could interfere with military missions from nearby Tyndall Air Force Base and Naval Support Activity-Panama City that utilize the Gulf Test Range. Military representatives in the past have warned about potential interference to jet-flight training over the eastern Gulf if offshore drilling was approved.

“We would be impacted,” Col. Arnie Bunch, vice commander of Eglin Air Force Base’s Air Armament Center, recently told a state Senate committee. So far, however, defense officials have largely stayed out of the current debate.

The Bay Area Defense Alliance, a group of business and community leaders organized to help maintain the military presence in the county, and the Bay County Chamber of Commerce have also expressed opposition to drilling.

“It’s really a double whammy here,” Clemons said. “We’re very concerned both for the military and for keeping tourists around here. Both are huge employers.”

Dawn Moliterno, president of the Walton Area Chamber of Commerce, said her organization’s opposition also stems from concerns about the effects of drilling on the region’s biggest employers.

“There’s a number of issues we’re concerned with,” she said. “We’ve even heard from experts who say drilling even far away from us could have an effect on beach sand. And our sand is one of the things that makes us different and really attracts people to this area.”

Rauschkolb, the Seaside restaurateur and surfer, said that sand is worth fighting for.

With the oil-drilling fight developing last fall, Rauschkolb began an Internet campaign called “Hands Across the Sand.” His goal is simple: Rauschkolb wants Floridians to go to the beach on Saturday, Feb. 13, hold hands, and literally form a line in the sand as a demonstration against oil drilling.

He has supporters on both Florida coasts now, who plan to help make a statement in the weeks leading up to the legislative session.

“I think the whole metaphor of joining hands is perfect,” Rauschkolb said. “It’s easy. Just go down to the beach and you’ll be doing something that might change Florida forever.”

THE UNLIKELY COST

In 2005, Hurricane Katrina — labeled the worst natural disaster in U.S. History — caused widespread environmental damage. The U.S. Coast Guard worked in tandem with the Environmental Protection Agency, local industry, state and local officials in Louisiana and Mississippi on more than 700 pollution cases of oil and contaminants released into the waterways by the storm. Nine major and medium spills totaled more than 7.1 million gallons of oil.

PROPONENTS

Is drilling an inevitability? Public opinion seems to have turned toward acceptance, especially in the central parts of the state. These proponents of the issue point to economic need and risk mitigation as major drivers.

REP. DEAN CANNON (left) and SEN. MIKE HARIDOPOLOS (right) both seem sold on the idea of offshore exploration. They are tapped to become the Legislature’s leadership in the

2011 session.

DAVID RANCOURT is the main lobbyist behind the drilling push, representing Florida Energy Associates. The oil-backed group has funneled money to both sides of the political spectrum to further the cause.

OPPONENTS

Some may say it’s an unlikely combination, but environmental groups, business owners, tourism promoters and Chambers of Commerce along the vulnerable sugar sand beaches of Northwest Florida have a singular goal in mind: to keep what they see as Florida’s number one natural resource pristine.

DAVE RAUSCHKOLB (right) enjoys the coastline both personally and professionally as owner of Seaside’s renowned Bud & Alley’s restaurant.

SCOTT CLEMONS Panama City’s mayor, is a vocal opponent of offshore drilling and anything else that threatens his city’s biggest tourism draw.