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AGA: Failure to Overturn OCS Moratorium Biggest Drawback of Energy Bill

The biggest disappointment of the newly-enacted energy bill is its failure to overturn the moratorium on oil and natural gas drilling in much of the federal Outer Continental Shelf (OCS), an American Gas Association (AGA) official said Friday.

"The most significant provision that we would have liked to have seen is affirmative action with regard to opening the Outer Continental Shelf to exploration and production," said Jeff Petrash, AGA's senior managing counsel and director of regulatory affairs, during a conference call with reporters and energy industry analysts.

"We were gratified, however, that the debate on that topic began" during the negotiations on the energy bill this year, and that a provision calling for the Interior Department to conduct an inventory of OCS oil and gas resources, including those in moratoria areas, made it into the measure, he said.

This year the issue of the OCS moratorium was at least "put on the table," Petrash noted. "Two years ago we weren't even discussing this in the context of the energy bill."

It's estimated that North America has approximately 70 years supply of natural gas in "areas where we know it exists," Petrash noted. "We need to get to that gas." He said the AGA and other industry groups plan to keep the pressure on lawmakers to open up the OCS. "While we're still digesting this victory, I think a high priority in the several years ahead will be in that direction...I think others in our industry will be aligned with [us] in that regard."

With natural gas demand projected to grow 40-50% in the next 20 years, Petrash said "it will be essential to take further steps to open the offshore" to more oil and gas production.

But the task won't be an easy one, according to Petrash. "I think it's going to be a challenge. Frankly, I think we're going to need more political heat, so to speak, on Congress...to make this happen," he said.

"I think it will be a difficult discussion," but "I think it ultimately has to happen." But, Petrash added, "I wouldn't presume to project when that will happen."

Turning to another issue, Petrash said he wasn't convinced that the provision in the energy bill that clarifies FERC's exclusive jurisdiction over the siting of liquefied natural gas (LNG) import terminals will put an end to the lawsuit in California.

In the lawsuit, which is pending in the U.S. Court of Appeals for the Ninth Circuit, the California Public Utilities Commission (CPUC) challenged FERC's claim of exclusive jurisdiction over LNG import terminals. The flap began last year when the Federal Energy Regulatory Commission asserted exclusive jurisdiction in a case involving a Mitsubishi Corp. subsidiary's planned LNG terminal for the Port of Long Beach, CA.

"One of the issues is that this [energy] statute became effective this week," while the controversy surrounding the planned Long Beach terminal began more than a year ago, Petrash said.

He was asked whether the Mitsubishi subsidiary, Sound Energy Solutions, could withdraw its filing at FERC and refile to take advantage of the language in the energy bill, which gives FERC jurisdiction over its project. "I've thought about that prospect too. I think that might be possible," Petrash responded.

"California will probably maintain that this statute has no effect on that controversy," but opposing parties in the lawsuit may argue that the new energy law moots the case, he noted. "I don't think it's entirely clear cut that the LNG provision in this bill resolves that controversy." AGA is a party to the court case.

"It would not surprise me to see one side or the other...file something with the court asking that the court solicit views on the effect of the statute on the proceeding, which I think would delay it somewhat," Petrash said. He does not expect the appellate court to hand down a ruling this year in the case.

Harvey Morris, an attorney for the CPUC, said he could not comment on the future of the commission's lawsuit. "Until I talk to the [CPUC], I can't really take an official position on what will happen to the lawsuit," he told NGI. Like Petrash, Morris said he expects the court to closely examine the impact of the new energy law on the pending lawsuit.

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