NGI The Weekly Gas Market Report / NGI All News Access

MMS Head: Administration Would 'Seriously' Review Moratorium if States Seek to Opt Out

The Bush administration "would seriously again study" its own moratorium on oil and natural gas drilling for an individual coastal state if Congress "signified that the state wanted to move off the moratorium," the head of the Minerals and Management Services (MMS) told a Senate panel last Tuesday.

Testifying during a hearing of the Senate Energy and Natural Resources Committee, MMS Director Rejane "Johnnie" Burton indicated that the administration might be flexible on its offshore drilling moratorium if individual states sought authorization to opt out to begin exploration and production (E&P) activities off of their coastlines. The current presidential moratorium extends to 2012.

"This is the situation right now in the North Aleutian Basin" in Alaska, part of which was under the moratorium, she said. The Alaska congressional delegation requested that the administration review the ban, and this will probably be studied to "see if the president can consider what can be done about it from his viewpoint," Burton noted.

Sen. Richard Burr (R-NC) said he supported the moratorium protecting the shores of North Carolina, but he thinks that other states should have the opportunity to review whether they want to be included in the drilling ban. "I do believe states should have the ability on their own to make the determination on how they [will] proceed."

Although some states, such as Florida and California, are firmly opposed to the lifting of the drilling moratorium, others, such as Virginia, are indicative of the coastal states that are beginning to consider opening their waters to oil and natural gas activity.

"The [Virginia] General Assembly has spoken. We want to develop our offshore resources," state Sen. Frank Wagner, R-Virginia Beach, told the Senate energy panel. He sponsored a bill in the last session to open up the gas-rich areas of the state's offshore region to producers. The measure passed the General Assembly handily in February, but was later vetoed by Gov. Mark Warner. The state Senate failed to override the veto earlier this month (see NGI, April 11).

Wagner's bill wouldn't solve the run-up in natural gas prices and supply shortfall problem, but it's "one brick in a wall [that] we must build," he said. Initially, "I thought I might have gone out on a political limb in supporting this legislation," he said, but he noted he was soon "overwhelmed by the amount of support" for the bill.

In speaking to the members of the Senate Energy Committee, he said, "You have a lot more support out there than you think" for legislation that would provide producers with greater access to offshore areas.

Unlike Florida and California, "we [Virginia Beach] recognized that we can have a tourism industry and take advantage of [our energy] deposits," the state senator noted during the three-hour hearing. He estimated that there is 30 Tcf of natural gas off the Atlantic Seaboard. Canada already is producing 500 MMcf/d off of Nova Scotia, he noted.

Sen. Mel Martinez (R-FL) made clear that Florida has no plans to reconsider its opposition to offshore oil and gas drilling. The state "is just simply off-limits," he said. "The solution to that [high natural gas prices, low supply] does not rest in Florida's coastlines."

Sen. Dianne Feinstein (D-CA) said she was "adamant" about maintaining the congressional moratorium that prohibits drilling off her state's coastline. California and Florida "will mount a real challenge" to keep the congressional moratorium, which is enacted every year as part of the congressional appropriations bill. The moratorium has been in place since 1981.

California's opposition to removal of the moratorium stems in large part from the memory of the oil well blowout in Santa Barbara, CA, in 1969. But MMS' Burton noted that there has not been a significant platform spill in the past 35 years.

In fact, platforms and pipelines accounted for only 2% of the oil released into U.S. waters between 1985 and 2001, according to Ret. Admiral James D. Watkins, president emeritus of the Consortium for Oceanographic Research and Education in Washington, DC, and former secretary for the Department of Energy.

In comparison, the National Research Council recently reported that 690,000 barrels of oil enter North American waters from land-based human activity, such as urban runoff, he said.

Not surprisingly, Debbie Boger, deputy legislative director of The Sierra Club, said the environmental group objected to the removal of the moratorium. "There are smarter ways to address our energy needs."

Production on the federal Outer Continental Shelf (OCS) accounts for 30% of U.S. oil production, and 23% of domestic gas production, Burton estimated. While the MMS anticipates a "slight decline" in OCS gas production in the near term, she said she expects the OCS to provide an increasing share in the future as deep gas plays in shallow water are being developed. Gas production from the OCS is pegged at 4.7 Tcf annually, or 12.5 Bcf/d.

Overall, the OCS is estimated to hold 60% and 41% of the nation's remaining undiscovered oil and natural gas, respectively, according to Burton. Ten years ago the Gulf of Mexico looked like it was a "dead province," but 'it's incredible what's happening offshore today" from a technological standpoint. It's "on par with the space program," she said.

This "[is] not you grandfather's technology," remarked Sen. Mary Landrieu (D-LA).

Sen. Lamar Alexander (R-TN), a member of the Senate Energy Committee, introduced a bill earlier this month that would, among other things, allow states to pursue natural gas-only leases as a way to protect their coastlines and reap the benefits of drilling (see Daily GPI, April 7).

While "there is no doubt that gas does not pollute like oil does," MMS' Burton said the agency does not have the authorization to issue gas-only leases. It would need authority from Congress to do this, she noted.

There's a lot of technical issues that will have to solved first, according to Burton. What happens when producers strike oil with their natural gas leases? "Do we make them reinject it?" she asked. "I suspect the industry will have to tell you [senators] whether that's suitable or not."

©Copyright 2005 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus