Revision of Offshore oil and gas development dependent on legal protection of UNCLOS from Wed, 10/08/2014 - 22:16
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
With respect to our oil and gas and deep seabed mining industries, however, there are especially compelling reasons why the United States needs to promptly adhere to the Convention. Our oil and gas industry is simply unlikely to move forward in development of the continental margin of the United States in areas beyond 200 nautical miles until United States adherence solidifies the legal regime for them in such areas. And our deep seabed mining industry is now moribund, and will remain so, absent United States adherence to the Convention. The United States led the world toward development of the technology for the recovery of deep seabed minerals. Our industry collectively expended more than $200 million to identify and obtain international recognition for five prime mine sites. At present three of those sites lie abandoned and the other two are on hold with zero chance of activity absent United States adherence. The Congress should clearly understand that accepting the arguments of the critics and opposing moving forward with the Convention is to permanently put the innovative United States deep seabed mining industry out of business, and to accept a reality that only the firms of other nations will be able to mine the deep seabed.
The Foreign Relations Committee heard testimony by Paul Kelly, on behalf of petroleum and other industrial associations, advocating Treaty accession as a means of facilitating energy development on the continental shelf beyond 200 nautical miles. While the Convention allows for continental shelf claims to 350 miles and in some cases even beyond this, as a non–state party, the United States has no treaty-based means of making such a claim. Kelly painted a picture of an energy industry ready, willing, and able to move oil and gas extraction production into deepwater areas beyond 200 nautical miles of the United States.85"Statement of Paul L. Kelly: On the United Nations Convention on the Law of the Sea ." Testimony before the Senate Foreign Relations Committee, October 21, 2003. [ More (6 quotes) ] Citing technology that now allows for oil and gas development in water depths approaching two kilometers, Kelly pointed out that “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 and production technologies.”86"Statement of Paul L. Kelly: On the United Nations Convention on the Law of the Sea ." Testimony before the Senate Foreign Relations Committee, October 21, 2003. [ More (6 quotes) ] While Kelly touted the ambitious and environmentally sound plans of industry, the environmental community had its own advocate citing the myriad reasons for Treaty accession.
Offshore oil and natural gas exploration along the extended continental shelf – an area beyond the 200-nautical-mile EEZ – is expected to increase U.S. reserves over the next decade. However, the United States cannot secure internationally recognized sovereign rights to those resources unless it ratifies LOSC. While the United States enjoys national jurisdiction over living and non-living resources above and below the seabed out to 200 nautical miles, claims to resources beyond the EEZ must be formally made to the U.N. Commission on the Limits of the Continental Shelf, the international body established by LOSC for parties to adjudicate claims to the extended continental shelf. Without the United States ratifying LOSC, U.S. companies operating beyond the EEZ would be considered on the high seas and beyond the formal legal protection of the United States. As a result, offshore drilling companies have increasingly expressed their concern about the lack of legal protections afforded to U.S. companies and have indicated a reluctance to assume significant risk in operating in areas beyond U.S. jurisdiction. In short, U.S. failure to ratify LOSC could have a chilling effect on commercial resource exploration and exploitation on the extended continental shelf.
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.