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Zinke Tells Senate Panel First Draft of OCS Drilling Plan Coming in Fall

Department of Interior (DOI) Secretary Ryan Zinke told a Senate panel Tuesday that a first draft of the Trump administration's proposal to open more than 90% of the U.S. Outer Continental Shelf (OCS) to oil and natural gas exploration would be released in the fall.

During more than two hours of sometimes contentious testimony before the Senate Committee on Energy and Natural Resources, Zinke said areas with "enormous opposition" to oil and gas drilling would be removed from the draft proposed program (DPP) for the OCS Oil and Gas Leasing Program for 2019-2024, which the DOI's Bureau of Ocean Energy Management unveiled earlier this year.

"I put everything on [the table] so we can have a dialogue and then take what's appropriate off," Zinke told the committee's ranking member, Sen. Maria Cantwell (D-WA). He added that the offshore of Oregon, Washington, Maine and most of California have "no known resources of any weight.

"I'm going to mark down Washington as opposed to oil and gas drilling. I know where every state is, every governor, every member of Congress across the board...I know where people are."

Zinke added that the public comment period for the DPP, which ended last Friday, would not be extended another 60 days, as some lawmakers had requested. The DOI received more than 630,000 public comments on the DPP, according to the website regulations.gov. Most of the comments appeared to be negative.

"I've committed, and the president has committed, to make sure...our proposal will have the interests of Washington reflected in that plan, as well as Florida [and] the Gulf states," Zinke said. "And where there is enormous opposition we'll do that."

'Florida is Different'

Sen. Angus King of Maine, an independent who caucuses with the Democrats, urged Zinke to remove his state from the drilling plan, citing Maine's dependence on fisheries, lobsters and tourism. He added that the state's legislature and its congressional delegation are unanimously opposed.

"I hope you will take into consideration the interests of the states involved," King said. "You took Florida off. I'm hoping you do the same for Maine."

Zinke countered that "Florida is different for three reasons," starting with the fact that every member of Florida's congressional delegation had written him letters immediately opposing the Sunshine State's inclusion in the DPP. Also, Florida is unique in that it is part of the Eastern Gulf of Mexico moratorium, which doesn't expire until 2022.

But while Florida Gov. Rick Scott was against offshore drilling, Zinke told King that Maine Gov. Paul LePage "is for it." Both governors are Republicans.

"Had I left Florida off in the beginning, it would have been arbitrary and capricious," Zinke said. "But Florida is still in the process."

"I'm not arguing you made the wrong decision in Florida," King replied. "I'm arguing for a similar decision in Maine based on our circumstances."

Converse County Concerns

Sen. John Barrasso (R-WY) told Zinke that he had concerns over a draft environmental impact statement (EIS) that the DOI's Bureau of Land Management (BLM) issued in January for the Converse County Oil and Gas Project (CCOGP), which would cover 1.5 million acres.

Five oil and gas producers -- Anadarko Petroleum Corp., Chesapeake Energy Corp., Devon Energy Corp., EOG Resources Inc. and SM Energy Co. -- first approached the BLM about drilling in the area in 2014. Under the CCOGP, up to 5,000 oil and gas wells would be drilled over a 10-year period, potentially producing about 94 million bbl of oil and 5.8 Tcf of natural gas.

A 45-day public comment period for the CCOGP ended on Monday.

"The draft EIS doesn't include clear guidance for year-round drilling, and it doesn't fully acknowledge the ongoing work by the State of Wyoming specifically to implement our guidance on the Greater Sage Grouse core area of protection," Barrasso said. "The timely correction of these errors and completion of the environmental review for this project is critical to the state's economy in our nation's energy security."

Zinke pledged that the BLM would make "sure the [final] EIS is fair and make sure it takes into consideration the stewardship responsibilities as well as the president's energy dominance policy...

"I am not oil and gas centric, I'm American energy centric. There are places where drilling for oil is absolutely appropriate, and there are places that are not. That's why we have NEPA [the National Environmental Policy Act]. That's why the process of NEPA has been the backbone of what is strong and appropriate policy in this country."

'Good' Interest in Upcoming Lease Sale

Sen. Bill Cassidy (R-LA) asked Zinke about the DOI's upcoming lease sale in the Gulf of Mexico (GOM). Lease Sale 250, scheduled for March 21, is to include all available unleased areas in federal waters in the offshore of Alabama, Florida, Louisiana, Mississippi and Texas. Totaling some 77.3 million acres, the lease sale would be the largest in U.S. history.

Specifically, Cassidy asked if the 12.5% royalty rate for leases in less than 200 meters of water depth would negatively impact offshore revenue sharing under the Gulf of Mexico Energy Security Act (GOMESA).

"I get that," Cassidy said of the 12.5% rate. "There's been a real difficulty in jump-starting development out there. Without the development there won't be money for GOMESA [or] the Land Water Conservation Fund, so there's a national interest in that.”

Zinke answered that "it will be interesting to see what the level of interest [is]. We think the interest is good on that."

Cassidy then asked if interest in the lease sale was sparked by the lower royalty rate. "You could go either way in the data," Zinke replied. "[By] lowering the rate, one could say it increases the production. What we're seeing, though, is more production onshore than offshore."

Case in point, Zinke cited ExxonMobil Corp.'s announcement in January that it plans to triple Permian Basin production to more than 600,000 boe/d by 2025, and that the company would boost domestic investments by more than $50 billion over the next five years.

"Still, offshore is more risky and it's more expensive," Zinke said. "The Gulf has an advantage in that it has subsea infrastructure...as opposed to both the East and West coasts. I think this lease sale will be a bellwether on offshore probably within the next 10 years."

Zinke offered to share the DOI's modeling vis-à-vis royalties with lawmakers.

"It's a supply and demand model," the DOI secretary said. "You lower the royalties, you make it more attractive [to drill]; production increases and revenue, in some cases, can increase. You want to make sure your royalties are fair, appropriate [and] don't penalize production...

"What I'm hearing from the [oil and gas] industry is regulation that incorporates innovation, best science and best practices that aren't punitive are as much of an economic driver as royalty rates."

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