With the current sharp upswing in wholesale natural gas prices and the continuing prospect of further increases this heating season, the American Gas Association (AGA) on Tuesday said it plans to ask the Bush administration to open up areas of the federal Outer Continental Shelf (OCS) that are off-limits to oil and gas producers.

The AGA’s statement came as the Interior Department’s Minerals Management Service (MMS) solicited public comments on the development of its five-year (2007-2012) leasing plan for energy activity on the OCS (see Daily GPI, Aug. 23).

“The futures price of natural gas is inching toward $10 for September deliveries — a clear indication that demand for natural gas is outpacing producing capabilities. We plan to recommend that the Interior Department expand the offshore areas available for natural gas production in order to help ease prices for consumers,” said David Parker, president and CEO of AGA, which represents gas utilities.

“Given the projected 40% growth in demand for natural gas by 2025 — about two-thirds of which will go to generate electricity — many areas of the Outer Continental Shelf currently off-limits to natural gas production must be opened up.”

Citing surveys conducted by AGA in June, Parker said public opinion favors offshore energy production, especially if coastal states have greater control over offshore development and receive a portion of the royalty revenues from energy leases. The surveys were carried out in California and in five southeastern states: Virginia, North Carolina, South Carolina, Georgia and Florida.

More than 25% of the gas produced in the United States already comes from the OCS, mostly from the western and central Gulf of Mexico, and the majority of future gas and oil resources are expected to be found in U.S. offshore areas, according to the MMS. Yet more than 85% of the OCS in the Lower 48 states is closed to energy development under current federal restrictions, the AGA said.

Republican leaders in Congress are considering offering a proposal to open up more of the OCS to exploration and production as part of the filibuster-proof budget reconciliation process when they return after Labor Day.

The proposal would give states an opportunity to opt out of the congressional and presidential moratoriums on drilling that have been in effect for more than 20 years, and it would provide producing states with greater royalty income from offshore drilling (see Daily GPI, Aug. 23).

Republican leaders believe an OCS moratorium proposal would fare better now than it did during negotiations on the energy bill because it would be brought up during the omnibus budget reconciliation process. The budget reconciliation measure cannot be filibustered under Senate rules, meaning that pro-OCS drilling Senate forces won’t have to muster 60 votes to overcome a filibuster by anti-OCS drilling lawmakers. Instead, the measure would require only a simply majority vote (51) to pass.

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