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Record Energy Prices Breathe New Life into Push for Offshore Drilling

Posted on: Wednesday, 26 October 2005, 12:00 CDT

By Kevin G. Hall, Knight Ridder Washington Bureau

Oct. 26--WASHINGTON -- Record energy prices caused by back-to-back hurricanes are driving a new push to expand offshore drilling for oil and natural gas.

Congress is weighing measures to allow state governments to opt out of federal moratoriums on drilling near America's coastlines. As an incentive, states could keep half the royalties from new offshore production.

The measures wouldn't necessarily mean that environmentally conscious states such as California, Washington, Florida or North Carolina suddenly would have offshore oil rigs just over the horizon. But they could allow commerce-hungry states such as Virginia, Georgia and Alabama to explore beyond their shores.

Even if lawmakers fail to reach a drilling compromise this year, the Bush administration could use administrative powers within months to expand drilling in the Gulf of Mexico.

Only about 15 percent of the nation's coastlines are open to offshore drilling, as environmental values have trumped energy-industry arguments. But with gasoline and home-heating prices at new heights because of tight supplies, many politicians under pressure from angry constituents are wondering whether expanding offshore oil and gas production might help.

Sen. John Warner, R-Va., thinks so. Earlier this month he introduced legislation allowing state legislatures such as Virginia's to opt out of drilling moratoriums, saying "many Americans have begun to see the need to re-evaluate the situation."

Most experts think that expanding drilling won't lead to enough new oil to significantly reduce U.S. reliance on foreign suppliers, who provide slightly more than half of the 21 million barrels of oil that Americans use daily.

But expanded drilling could yield significant quantities of natural gas, which is desperately needed by manufacturers to power their plants or as a feedstock. Hurricanes Katrina and Rita exposed just how much the nation depends on the Gulf of Mexico for natural gas, and to some they were a wakeup call.

However, a lack of good data makes the drilling debate vexing.

The Minerals Management Service, part of the Interior Department, estimates that there are 76 billion barrels of recoverable oil on America's outer continental shelf -- about 10 years' worth of current U.S. consumption. The agency estimates 406 trillion cubic feet of recoverable natural gas there. The United States consumed 22 trillion cubic feet in 2003, an appetite projected to grow to 30.7 trillion cubic feet in 2025.

"However, except for two-thirds of the Gulf of Mexico and Alaska, the numbers are predicated on very, very old data, because we haven't done anything in the Atlantic, Pacific or eastern Gulf (of Mexico). It's hard to tell you that any numbers are reliable," said Rejane "Johnnie" Burton, the director of the Minerals Management Service, which awards offshore drilling leases.

The latest best guesses on drilling suggest that the Atlantic Coast may have 3.5 billion barrels of recoverable oil, the Pacific Coast 10.5 billion barrels, the Alaska coastline 25 billion barrels and the Gulf of Mexico -- some of it already open to drilling -- 36.9 billion barrels.

Estimates for recoverable natural gas are greater. The Atlantic is thought to have 33.3 trillion cubic feet, the Pacific 18.2 trillion cubic feet, Alaska's coastline 122 trillion cubic feet and the Gulf of Mexico 232.5 trillion cubic feet.

There's little doubt about production potential off the Alabama-Florida coastline.

"Everyone pretty much agrees it is the best gas-rich area that we know of today," said Bruce McKay, the manager of federal policy for Dominion, an energy company based in Richmond, Va., that runs a natural-gas pipeline and operates an offshore-drilling affiliate.

After more than a decade of emotional debate, drilling companies think high prices boost their case.

"I think what we've seen from the hurricanes is the nation needs to diversify," said Tony Lentini, a spokesman for Houston-based Apache Corp., one of the world's largest drilling companies. "We do have the technological advances and the drive to do this in an environmentally safe and correct manner, and we're just not developing like we should be."

Environmental-minded states such as Florida, North Carolina and California, fearful of oil washing up on their tourist-rich beaches, traditionally have blocked expanded drilling. That coalition is fraying, partly because Florida Gov. Jeb Bush, the president's brother, has backed away from his previous no-drilling stance.

He's been negotiating with Republicans in the U.S. House of Representatives over language in an offshore-drilling bill that would guarantee no drilling within 125 miles of Florida's coastline. In exchange, he'd support language letting governors and state legislatures opt out of federal drilling moratoriums.

Gov. Bush, who's been assailed for the reversal, said times had changed and that the nation needed more domestic production, providing it didn't threaten Florida's coast.

The legislation could pass the House this year, but Senate Energy Committee Chairman Pete Domenici, R-N.M., intends to wait until early next year to debate the matter.

The Bush administration doesn't have to wait for Congress.

By early February, the Minerals Management Service must present a draft proposal for offshore drilling from 2007 to 2012. The National Association of Manufacturers, along with the energy industry, wants President Bush to put an oil- and natural gas-rich area off the Alabama coast called Lease 181 on the auction block.

Covering about 5.9 million acres of seafloor, Lease 181 contains, according to the government's conservative estimates, at least 240 million barrels of oil and 3.2 trillion cubic feet of natural gas. The administration withdrew most of the area from leasing in 2001 because of opposition, including from Jeb Bush.

Since then, Interior Secretary Gale Norton has assured Gov. Bush that a portion of the lease area near the Florida Panhandle will remain off limits if Lease 181 is developed.

Manufacturers and the chemical sector, which needs natural gas to make fertilizers and other products, are lobbying hard to open Lease 181.

"I think there is an environment to make it much easier for the president to act," said John Engler, the president of the influential National Association of Manufacturers and a former governor of Michigan.

Environmentalists oppose expanding offshore exploration.

"It's the same old solution: drill, drill, drill. They've been trying to do this for years, and they use every blip in the economy or Katrina to try and get these policies passed," said Karen Wayland, the legislative director for the Natural Resources Defense Council in Washington. "If Congress had passed real energy-efficiency standards we wouldn't be in the position we are in right now. There are other solutions besides drilling."

Burton, the director of the Minerals Management Service, wouldn't say whether Lease 181 would be included in the draft five-year plan. But she said Katrina and Rita showed that new technologies prevented catastrophic oil spills.

"Two hurricanes of Category Five force go through those facilities and you come out with no single disastrous pollution, no loss of life and no major injury of people. Really, we've done a good job," Burton said.

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Copyright (c) 2005, Knight Ridder Washington Bureau

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Source: Knight Ridder Washington Bureau

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