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Kempthorne Starts Preparation of Next OCS 5-Year Plan

September 11, 2008

By Snow, Nick

Citing dramatically higher prices, US Department of the Interior Secretary Dirk A. Kempthorne started the Minerals Management Service’s next 5-year Outer Continental Shelf lease plan preparation 2 years ahead of schedule. “When our current 5-year plan was launched in July 2007, oil was selling for $64/bbl. Today, a barrel of oil costs more than $ 120, almost double the price a year ago. Clearly, today’s escalating energy prices and the widening gap between US energy consumption and supply have changed the fundamental assumptions on which many of our decisions were based,” he said July 30.

“Areas that were considered too expensive to develop a year ago are no longer necessarily out of reach based on improvements to technology and safety. The American people and [US President George W Bush] want action and this initiative can accelerate an offshore exploration and development program that can increase production from additional domestic energy resources,” Kempthorne said.

He said he directed MMS to take the initial steps by issuing a call for information from all parties on what the next 5-year OCS leasing plan should consider. It is seeking comments to ensure all interest and concerns are considered, Kempthorne said. The governors of all 50 states will be specifically asked for their comments, particularly on issues unique to each state, he indicated. The call for information appeared in the Aug. 1 Federal Register. Comments will be accepted through Sept. 15.

“The president believes coastal states should have a voice in how OCS resources are developed off their shores while ensuring those environ- ments are protected. Also, Congress should provide a way for the federal government and states to participate in revenue sharing from those new leases,” Kempthorne said.

‘Send a clear signal’

On July 14, Bush lifted the executive OCS withdrawal which his father, President George H.W Bush, instituted 18 years earlier, but congressional oil and gas leasing moratoriums which have been in place for up to 26 years in some cases remain on 85% of the OCS. “Now, its up to the United States Congress to make a decision as to whether or not you’re going to continue to face high gasoline prices at the pump or whether or not the United States will send a clear signal to the world that we’re tired of being dependent on oil from overseas and we’re going to find it right here,” the current president told an audience in Euclid, Ohio, on July 30.

President Bush said, “The American people must understand that new technologies make it easier to protect coral reefs, for example, when we drill offshore. New technologies enable us to explore for oil and gas in ways that were not possible 20 years ago. You can have one platform and directionally drill from it. So I signed an executive order that said: Why don’t we explore for oil and gas offshore? If we’ve got a problem with not having enough oil, let’s go after some right here in the United States of America in environmentally friendly ways.”

The current 5-year OCS plan runs from July 1 , 2007, through June 30, 2012, and includes 21 lease sales in eight of the 26 OCS planning areas in the Gulf of Mexico, Alaska, and the Atlantic Ocean, according to DOI. It does not include any areas covered by congressional bans with the exception of a single sale in 2011 off Virginia, which MMS added after the state included possible OCS activity in a comprehensive energy strategy Gov. Timothy M. Kaine signed into law in early 2006.

Kempthorne noted that the next 5-year OCS plan could consider any part of the OCS although leasing of any area currently covered by a moratorium would require congressional action. Currently banned OCS portions contain an estimated 18 billion bbl of oil and 76 tcf of natural gas, according to DOI.

It said that Kempthorne used authority under the 1978 OCS Lands Act Amendments which allows the Interior secretary to develop “out of cycle” leasing programs and requires various procedural steps, including several public comment rounds and multiple environmental reviews.

Initial reactions

National Ocean Industries Association Pres. Tom Fry, a former director of MMS and the US Bureau of Land Management, said Kempthorne’s action will allow DOI “to reverse two decades of poor public policy where we have refused to even consider the energy available on the vast majority of our public submerged lands.”

Fry said, “It’s as if we’ve been bypassing several large grocery stores with a wide selection to shop instead at a small convenience store with a limited selection.”

Fry said the OCS s energy resources are vital to US economic prosperity, and safety records show that they can be produced in an environmentally responsible manner. “Now, with global demand for oil increasing, gasoline prices soaring and an American public looking for relief at the pump, we must consider the entire offshore area that is owned by all the American people,” he said.

The Institute for Energy Research (1ER) applauded DOI ‘s plan to include OCS areas currendy under moratoriums in its next 5-year leasing plan. 1ER Pres. Thomas PyIe said, “Assuming the congressional ban expires, this decision sets the stage for the opening of hundreds of millions of offshore federal lands that have never been explored for their energy potential. It’s the kind of proactive step we rarely see the government take, but given the urgent need to increase domestic energy supplies, it’s the right thing to do. The United States has been fighting its economic and energy battles with one hand tied behind its back for too long.”

US Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) , said, “This is very good news. The administration has embraced the proposals that Senate Democrats have been calling for all this week. Recently, I praised Secretary Kempthorne for speeding up lease sales in the National Petroleum Reserve- Alaska. Secretary Kempthorne appears to be using his authority wisely.”

An ‘unworthy’ hoax

Other congressional Democrats reacted more to Bush’s remarks than to Kempthorne’s action. US House Speaker Nancy Pelosi (D-Calif.) called the president’s proposals to expand OCS oil and gas leasing “a hoax unworthy of the serious debate we must have to relieve the pain of consumers at the pump and to promote energy independence….” She said, “Americans know that, thanks to the two oilmen in the White House, consumers are now paying $4/gal for [gasoline] . But what Americans should realize is that what the president is calling for is drilling as close as 3 miles off of America’s pristine beaches and in other protected areas.”

US Senate Majority Leader Harry M. Reid (D-Nev.), noted: “If the president truly cares about Americans paying record-high energy prices to fill their tanks and heat their homes and wants to make them more secure, he can release oil from the Strategic Petroleum Reserve, accelerate production in the 68 million acres already open for drilling, open up new leases in areas that are not environmentally protected, crack down on greedy oil traders who artificially in- flate energy prices, and support efforts in Congress to extend renewable energy tax credits that spur investment in clean energy sources. Unfortunately, he has shown no interest in doing anything but continuing more of the same failed policies that have produced the highest oil and gas prices ever.”

Congressional Republicans continued to press Pelosi and Reid (D- Nev.) to allow votes on proposals to remove leasing bans on the OCS and elsewhere before Congress recesses on Aug. 1. House Minority Leader John Boehner (R-Mo.) said, “The American people understand that the only ones standing in the way of lower [gasoline] prices are the Democrats in charge of Congress. Rank-and-file Democrats have a choice this week: Vote to leave town for 5 weeks, or join us in demanding a vote.”

Senate Minority Leader Mitch McConnell (R-Ky.) said, “The Democrat leadership has already tried to take us off this issue four times in the last 5 days. About eight in 10 Americans disagree with them. The American people think $4/gal gasoline is a crisis that must be dealt with now.”

After the House formally voted to adjourn a week earlier than originally scheduled, Republican Conference Chairman Adam Putnam (Fla.) said Democrats “should be held in contempt for voting to skip town without dealing with America’s energy crisis,” adding, “Democrats are out of touch, out of support, out of excuses and out of time.”

“Areas that were considered too expensive to develop a year ago are no longer necessarily out of reach based on improvements to technology and safety. The American people. . . want ction and this initiative can accelerate an offshore exploration and development program that can increase production from dditional domestic energy urces.”

– US Department of the Interior Secretary Dirk A. Kempthorne

Nick Snow

Washington Editor

Copyright PennWell Corporation Aug 11, 2008

(c) 2008 Oil & Gas Journal. Provided by ProQuest LLC. All rights Reserved.




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