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APGA, Industrials Urge Interior to Allow Leasing in Areas Under Drilling Moratoria

Citing high gas prices and declining production, industrial companies and municipal gas utilities urged Interior Secretary Gale Norton last week to include language in the agency's next five-year oil and gas leasing plan (2007-2012) that will allow for lease sales in areas currently subject to drilling moratoria.

American Public Gas Association (APGA) CEO Bert Kalisch told Norton that it doesn't have to be an "either-or" choice between drilling for gas and environmental protection. "We certainly understand that several coastal states are concerned about drilling in their offshore area," Kalisch said. "However, the supply challenges that our nation is facing require that we keep all options open, including production from areas currently placed off limits. Given the advances in drilling technology, APGA firmly believes that we can increase access and supplies in an environmentally safe and sound manner."

Increasing the domestic supply of natural gas has to be done to bring down gas prices, Kalisch said. APGA, a nonprofit trade organization representing about 950 public gas systems in the United States serving more than 4.8 million customers, said gas prices have taken a toll on communities nationwide, "siphoning" off "tens of billions of dollars" that could have been used to support local businesses, infrastructure and education.

The Industrial Energy Consumers of America (IECA) told the secretary the five-year natural gas crisis already has claimed 2.5 million manufacturing jobs. During that time period consumers have paid nearly $200 billion more for natural gas than they paid in the previous five years. Natural gas prices now "are 344% of 1998 levels and the highest in the world; U.S. production declined by 4.9% and Canadian imports declined 23% from 2001 to 2004," the group said.

"Supply has not been able to keep pace with demand in large part because of federal policies that have restricted the exploration and production of natural gas," said Kalisch. "This restriction is ironic in light of other federal policies which favor gas use because of its clean-burning properties. These two policies cannot coexist if our economically competitive economy is to continue."

He noted that in the Lower 48 states an estimated 213 Tcf of gas reserves are off limits because of moratoria or regulatory restrictions. "We are in a crisis and now is not the time to take off the table potential solutions to the crisis."

Calling for "rational development" of resources, IECA suggested that DOI "pursue an education program that shows offshore drilling can be done in a very environmentally safe way with today's technologies. The public needs confidence you will continue to regulate and inspect for compliance."

The fact that last year's Hurricane Ivan, one of the most powerful storms to hit the Gulf of Mexico, did not cause any environmental damage from wrecked oil and gas operations offers a good example of safe and clean operation of E&P activities, the group said. "Other nations such as the UK, Australia and Norway continue to increase their offshore leasing programs, yet we keep significant offshore areas under moratoria and, as a result, U.S. competitiveness is diminished."

Had it not been for demand destruction, a cool summer and a mild winter, prices over the last year could have been even higher, and there could even have been rationing, the industrials advised.

The Interior Department is expected to come out with a request for comments for the five-year leasing program in the next few weeks. The five-year plan determines where and when companies can lease Outer Continental Shelf (OCS) lands for energy production. Areas in the plan are considered for leasing but do not necessarily have to be leased. However, areas not included in the plan may not be leased until the plan runs its course.

"The decision is actually being made right now on what area to accept comments for, and when that decision is made we will put out a notice in the Federal Register requesting public comments on whatever areas are defined for the next five-year program," said Curtis Carey, a spokesman for Interior's Minerals Management Service.

There are two moratoria that affect the leasing in the OCS off both the U.S. East and West Coasts and in the eastern Gulf of Mexico (anywhere near Florida) through 2012. One is a Congressional moratoria written into an appropriations bill each year so Congress would have to rescind that for drilling to be allowed. The second is a presidential moratoria that would have to be lifted by the president for drilling to take place.

"The president has made it clear that he supports the moratoria and has no intentions of lifting the moratoria," said Carey.

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