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Virginia Lawmakers Back Offshore Gas Exploration

Virginia's Senate last Thursday passed an amended bill that advocates opening for the first time the state's coastal waters to natural gas exploration and production (E&P) activities.

The Senate's approval of the amended measure, by a vote of 40 to 0, came one day after the revised bill cleared Virginia's House of Delegates by 54 to 43. The bill, which was sponsored by Sen. Frank Wagner, R-Virginia Beach, is now on its way to Gov. Mark R. Warner for his signature.

The governor's office has "some concerns" about the legislation, said Wagner, but "I think we're in pretty good shape" to get the bill signed into law.

Virginia is taking the lead in the effort to open more of the offshore to producers, while other coastal states are studying the issue, said Jose Simon, a spokesman for utility Virginia Natural Gas (VNG), a subsidiary of AGL Resources, and proponent of the Virginia legislation.

In addition to backing E&P activities off Virginia's coast, the state bill directs the Virginia Liaison Office to work with Virginia's congressional delegation to develop and enact federal legislation that would bolster states' authority over coastal and offshore resources, as well as provide for state and federal sharing of leasing revenues.

Specifically, the state measure supports congressional passage of the proposed federal State Enhanced Authority for Coastal and Offshore Resources Act (SEACOR), which would provide states with more control over their offshore oil and gas resources, said Simon.

The SEACOR legislative language would give Virginia and other coastal states 50% of the revenues from leasing activities up to 12 miles off their coasts, 35% of leasing revenues out to 80 miles and 20% beyond 80 miles, he noted.

Del. Harry R. Purkey, R-Virginia Beach, who offered the measure on the House floor, said the leasing income could be as much as $2 billion for the state, the Richmond Times-Dispatch reported. Wagner said the leasing income (excluding taxes) would be more like $1.2 billion over 30 years.

"This is great stuff for the states because it gives the states tremendous control" over their offshore resources, said Simon. "I think Congress should do something" to lift the moratorium on drilling along the East Coast. "We have significant oil and natural gas reserves on our [land] and we can't get to them."

Wagner thinks Congress may sit up and take notice in the wake of Virginia's action. "I think what we have for the first time is a state coming forward and saying 'we're concerned...about gas prices'," and as a solution it advocates offshore exploration. "We want to take advantage of what's off our coast," he said. '"I'm worried about the affordability of gas for my constituents."

The Virginia Manufacturers' Association, whose members have been hard hit by gas prices, also endorsed Wagner's bill. "This is a great step forward for the Commonwealth [of Virginia] ...to help manufacturers compete by increasing the supply of natural gas for fuel and raw material," said President Brett Vassey in a prepared statement.

Environmental groups opposed the Virginia measure, but Wagner dismissed claims that offshore drilling would cause environmental damage as "scare stories." He said "there's no substance to them."

It's believed that the geological formations offshore Virginia are similar to those found off the coast of eastern Canada, VNG's Simon noted. He said the Department of Interior has estimated that potential gas resources could range from 30 Tcf to 50 Tcf.

Simon said offshore drilling would be a major boon for the customers served by Virginia Natural Gas in eastern and southeastern Virginia, who he says are often overlooked by gas pipeline companies.

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