Offshore oil and gas development dependent on legal protection of UNCLOS
Offshore operations are capital-intensive, requiring significant financing and insurance. Oil and natural gas companies do not want to undertake these massive expenditures if their lease sites may be subject to territorial dispute. They operate transnationally, and need to know that the title to the petroleum resources will be respected worldwide and not just in the United States.
Quicktabs: Arguments
Offshore operations are capital-intensive, requiring significant financing and insurance. Oil and natural gas companies do not want to undertake these massive expenditures if their lease sites may be subject to territorial dispute. They operate transnationally, and need to know that the title to the petroleum resources will be respected worldwide and not just in the United States. Availability of clear legal title is crucial to realizing the potential of U.S. offshore areas both now and in the future, as drilling technology continues to advance and make new projects feasible. As ExxonMobil emphasized in its recent letter to this Committee, before it undertakes the immense investments required to explore and develop resources beyond 200 miles, “legal certainty in the property rights being explored and developed is essential.”
Until we ratify the treaty, no U.S. companies will operate on the extended continental shelf. Aside from a small pocket of territory in the western Gulf of Mexico where we have bilaterally negotiated a boundary with Mexico, companies cannot be granted the certainty that leases of these regions would not be challenged in international courts.
Without becoming party to the treaty and gaining a seat at the negotiating table where decisions are made about how to partition out extended-shelf claims, we will be unable to assure industries that the international community will recognize a U.S. lease. Businesses, even those with extremely deep pockets such as Big Oil and Lockheed Martin, have been very clear: If we don’t ratify, they won’t operate. Companies want to create those jobs, generate revenue, and increase domestic production. But no certainty means no investment. No treaty means no security, no jobs, no dollars, no resources. It’s that simple.
Critics suggest accession to UNCLOS is not required in order for the United States to claim an ECS, since the 1958 Continental Shelf Convention and the 1945 Truman Proclamation already support a unilateral U.S. claim. Although that may be true, the metric for determining the outer extent of the ECS is more generous in UNCLOS than in the 1958 Convention or the Truman Proclamation, both of which rely on an “exploitability criterion” to identify the outer limit of the ECS.30 More importantly, the U.S. oil and gas industry believes that unilaterally claiming an ECS outside UNCLOS may be challenged by other nations in courts throughout the world, and has therefore repeatedly argued that legal certainty/security of tenure to explore and exploit the resources of the ECS can be obtained only through UNCLOS.31 The bottom line is that U.S. industry will not invest in offshore oil and gas production in the ECS unless the United States is a party to UNCLOS.32
The isolationists were also concerned that U.S. corporations could be subject to the compulsory dispute resolution measures in the Convention. This highlights the limited knowledge of those who signed the letter to Senator Reid. Lawyers who practice international law prefer international arbitration or appearing before an international tribunal rather than local adjudication in a country whose legal system may not be well-established. These U.S. senators seem to believe that by bypassing UNCLOS ratification, disputes will be subject exclusively to U.S. law. This belief is incorrect, as U.S. corporations have subsidiaries worldwide that are subject to lawsuits in local jurisdictions.
Offshore petroleum production is a major technological triumph. We now have world record complex development projects located in 7,500 feet of water in the Gulf of Mexico which were thought unimaginable a generation ago. Even more eye-opening, a number of exploration wells have been drilled in the past four years in over 8,000 feet of water and a world record well has been drilled in over 10,000 feet of water. New technologies are taking oil explorers out more than 200 miles offshore for the first time, thus creating a more pressing need for certainty and stability in delineation of the outer shelf boundary. Before the LOS Convention there were no clear, objective means of determining the outer limit of the shelf, leaving a good deal of uncertainty and creating significant potential for conflict. Under the Convention, the continental shelf extends seaward to the outer edge of the continental margin or to the 200-mile limit of the EEZ, whichever is greater, to a maximum of 350 miles. The U.S. understands that such features as the Chukchi Plateau and its component elevations, situated to the north of Alaska, are not subject to the 350-mile limitation. U.S. companies are interested in setting international precedents by being the first to operate in areas beyond 200 miles and to continue demonstrating environmentally sound drilling development and production technologies.
Today our industry associations and their member companies are devoting much time and money lobbying for increased access to public lands within the U.S. Exclusive Economic Zone. The Law of the Sea Treaty will provide access opportunities to explore vast acreage beyond 200 miles off the coast of any nation that can delineate its shelf in a manner that meets the requirements of Article 76 of the Convention.