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MMS Plan to Shorten Gulf Lease Terms Blasted

The Minerals Management Service's plan to shorten the initial lease terms for an upcoming Central Gulf of Mexico (GOM) sale "is one more impediment to the development of domestic oil and natural gas," the head of the American Petroleum Institute (API) said.

"The shortening of lease terms does nothing to guarantee more discoveries, but rather takes away from companies the flexibility necessary to operate in an extremely challenging and risky environment," said API President Jack Gerard.

Under the proposed notice of sale for the Central GOM in March, initial lease terms for blocks in 400 to 800 meters of water would be shortened to five years from the current eight years, while initial lease terms for blocks in 800 to less than 1,600 meters of water would be reduced to seven years from 10 years. But a term could revert to its prior higher level if an exploratory well is begun during the initial lease term.

Interior Secretary Ken Salazar believes this would be "an incentive for development," said department spokesman Frank Quimby. "This new approach to lease terms will better ensure that taxpayer resources are being developed in a timely manner," Salazar noted.

Rather than providing incentives for producers, Gerard said the Obama administration has set up "a series of roadblocks that discourage the investment necessary to increase domestic energy supplies."

Quimby said he didn't know whether the shortened lease terms would apply solely to the March GOM sale, or whether they would be the rule in future offshore lease sales and potentially onshore sales.

The proposed sale (213), which is scheduled for March 17, would offer nearly 6,800 blocks, covering nearly 36 million of acres offshore Louisiana, Mississippi and Alabama. The proposed Central GOM lease sale could result in the production of up to 1.3 billion bbls of oil and 5.4 Tcf of natural gas, according to Interior. The acreage is located from three to 230 miles offshore in water depths of about 10 feet (three meters) to more than 11,200 feet (3,400 meters).

The proposed sale area includes 181 South, which has about 4.2 million acres located in the southeastern part of the Central Planning Area.

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