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House Subcommittee Weighs Offshore Energy Development Overhaul

As lawmakers in the House continue to debate federal oversight of offshore energy development, representatives for the oil and natural gas industry said Obama-era policies put the nation at a competitive disadvantage and should be reversed.

During a hearing Wednesday, the House Subcommittee on Energy and Mineral Resources took up the Accessing Strategic Resources Offshore Act (ASTRO). The bill would establish a revenue sharing structure toexpand distribution of revenues from oil and gas leasing on the Outer Continental Shelf (OCS) to new potential producing states.

Specifically, ASTRO would provide revenue to Virginia, North Carolina, South Carolina and Alaska and be modeled after the Gulf of Mexico Energy Security Act (GOMESA) of 2006. Like the states of Alabama, Louisiana, Mississippi and Texas provided for by GOMESA, the four additional states would receive 37.5% of revenues generated by leasing and development on the OCS off their shores.

ASTRO also calls for, among other things, limiting the president's authority to withdraw areas of the OCS from oil and gas leasing and that any new moratoriums on offshore drilling would require an act of Congress. The bill would also grant the secretary of the Department of Interior (DOI) the authority to hold additional lease sales in planning areas outside of an approved national leasing plan, as long as the lease sales comply with environmental standards.

Industry At 'Huge Disadvantage'

American Petroleum Institute’s Erik Milito, director of upstream and industry operations, told the subcommittee that limiting development to only two of 26 planning areas in the OCS -- the Western and Central Gulf of Mexico (GOM) -- puts the U.S. at "a huge disadvantage."

"From a knowledge and information gathering aspect, there's been really no opportunity for us to look in places like the Atlantic to see what the geology looks like," Milito said. "So because we have this limitation within this five-year plan, we don't even have the ability to go look and see what might be out there from a geologic perspective -- to see what oil and gas deposits might be there."

Milito said Canada, Cuba, Mexico and countries in South America have already begun exploration activities in the Atlantic. "A lot of geologists believe that the trends you see in these other areas of the Atlantic, you would also see them carry through our portion of the Atlantic, creating great prospects for potential oil and natural gas development," Milito said.

Michael Bromwich, who also testified, formerly headed of DOI's Bureau of Safety and Environmental Enforcement (BSEE). The BSEE and twin agency the Bureau of Ocean Energy Management (BOEM) were part of the Minerals Management Service (MMS) until 2010 following mismanagement at the federal agency. He now runs the Bromwich Group, a consulting firm based in Washington, DC.

"I hope we're not returning to that kind of an era," Bromwich said. "In the past, it was definitely the case that the top priority of DOI's Mineral Management Service was to maximize revenues for the federal treasury. And although that's an important goal, what many people found was that the other missions of the agency -- balanced resource development, the development of appropriate regulations and enforcement -- were starved for resources. If you set revenue maximization as your principal goal, the other very significant and important functions will suffer."

Lawmakers Divided

Republicans on the subcommittee skewered the Obama administration for removing the Beaufort and Chukchi seas from the BOEM's OCS Oil and Gas Leasing Program for 2017-2022 last year, and for withdrawing 115 million acres in the Arctic OCS and 3.8 million acres in the north and mid-Atlantic OCS from future oil and gas drilling.

"The previous administration took incredible liberties when it came to locking up OCS lands from offshore oil and gas exploration and development," said Rep. Paul Gosar (R-AZ), chairman of the subcommittee. "This bill attempts to restore access and to provide a more practical and functional path to development for all stakeholders."

Rep. Don Young (R-AK) blasted "the Oil and Gas and Sulfur Operations on the OCS -- Requirements for Exploratory Drilling on the Arctic OCS" Rule, also known as the Arctic Rule.

President Obama “basically took us out of the playground with those added requirements," Young said.

Milito agreed. "There is some question as to whether or not the additive Alaska Arctic rules were actually providing an additional benefit when it comes to safety and environmental management," he said. "The new rules that were in place followed a more prescriptive approach, which really limits the ability of the industry to advance technologies and apply a fit-for-purpose approach to the well design, well execution, and to the safety system overall. When you're prescriptive like that, you're really limiting the ability of the industry to put the best system in place.

"What we would have liked to have seen, and what we're hopeful to see, is working with the DOI to make sure that there is a system in place that promotes technology advancement innovation and allows us to be a global leader in Arctic exploration, which we can't be now with this rule."

But Democrats on the panel voiced strong opposition to the ASTRO Act. Ranking member Rep. Alan Lowenthal (D-CA) called the provision giving the DOI secretary the authority to hold lease sales "wherever and whenever he wants" the most egregious part of the bill.

"The point of a five-year planning process would be gone," Lowenthal said. "Instead of carefully gathering and balancing stakeholder input, and providing certainty to coastal areas for five years at a time, every coastal area would be perpetually at risk. Lease sales would be entirely at the discretion of the secretary, who would be free to ignore the five-year plan altogether."

Rep. Anthony Brown (D-MD) added that "stakeholders would no longer have a say in where future drilling would occur and their opinions would be meaningless. This sounds like the 'Big Government' overreach the majority often decries."

Industry Wants Action

Randall Luthi, president of the National Ocean Industries Association, did not appear at the hearing, but he later called the legislation "a slam dunk" and urged the House to move forward with. In a letter published in MarineLink magazine, he said lawmakers should also consider amending the five-year program planning process outlined in the OCS Lands Act.

"Instead of swinging from administration to administration, imagine an energy plan that would provide guidance for 10, 15 or even 25 years," Luthi wrote. "If we truly want a comprehensive energy policy, we should consider a rational offshore energy plan that lasts a generation, incorporates all the energy resources of our OCS, including fossil fuels and renewables, and balances the multiple uses of our oceans among all ocean stakeholders."

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