Florio Fails To Persuade

Jim Florio, the former New Jersey governor who helped create the current fiscal mess in New Jersey, and who never met a tax he didn't like, has come out in opposition of offshore oil drilling along New Jersey's coast.

Never mind that New Jersey is home to one of the nation's largest refinery operations in Linden, New Jersey. Florio opposes drilling offshore:

The ban established by Congress in 1982, and supplemented by an executive order by the first President Bush, prohibits oil or natural gas leasing to private energy companies on the outer continental shelf, from three miles to 200 miles offshore. New Jersey political leaders of both parties have supported it, as have most other coastal state officials.

The reasons for opposition, offered in the format of a cost-benefit analysis, have been fairly straightforward. The benefits of drilling are limited. For the nation, such drilling, according to federal estimates, is limited to a few years' worth of consumption. New Jersey's contribution to that supply would be minuscule.

The actual flow of supply from such drilling is at least a decade away.It would therefore have virtually no impact upon current prices.

Notwithstanding these facts, McCain, while addressing oil industry representatives in Houston recently, stated his support for the administration's effort to repeal the ban on offshore drilling as a response to the current $4-per-gallon gasoline price crisis.

Critics maintain that in reality this is just an effort to allow the oil industry to tie up potential leases that they will explore at their leisure. The fact that there are thousands of miles of already issued oil leases that have not yet been explored lends some credence to the critics' argument.

On the other hand, the costs – or potential costs – for New Jersey's multibillion-dollar tourism industry are fully understood as a result of viewing the impact of accidental oil spills around the nation and world.

That fact has driven the support for the ban in New Jersey for years.

NIMBY has driven the ban for all those years, but now that the price of oil is beginning to seriously put a crimp in people's pocketbooks, they're starting to take another look at the potential major resource to be found offshore.

No one is claiming that offshore drilling will be a quick fix or panacea to the high price of oil, but doing nothing is not going to solve matters either. You simply cannot conserve your way out of this mess because the economy runs on petroleum - not simply to run cars and trucks, but to manufacture most every good that people take for granted. Indeed, the argument that offshore drilling is not a quick fix is often employed by those who opposed to drilling to counter an argument that proponents don't even make. It's a strawman argument that doesn't hold water because the only way to bring down the price of oil over time is to increase supply and reduce consumption - but you have to do both.

The concern about oil spills is a legitimate one, though the technology has improved tremendously from where it was just a decade ago, and there haven't been major oil spills in the US in quite a few years.

New Jersey could also do something that Florio would have loved to do had he thought about it back when he was in office - create a severance tax on oil and gas located offshore. Indeed, New Jersey could follow Louisiana's model by imposing severance taxes and regulatory fees. Louisiana has offshore drilling, and collected 12.5% of the value of the oil at the time it is recovered. Louisiana also imposes regulatory fees that go to administering the offshore drilling and response to potential oil spills. All those fees and taxes on offshore oil drilling has led to Louisiana posting a state surplus for their budget at a time when many other states are looking at shortfalls.