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Offshore, Oil Shale Free of Bans, But for How Long

President Bush last Tuesday signed a $630 billion stopgap funding measure that ended the decades-old moratorium on offshore oil and natural gas drilling and one-year ban on oil shale development in the Intermountain West. Surprisingly there was little reaction from producers, who have long sought expanded offshore access, due largely to the fact the upheaval in the financial markets has overtaken events Producers also realize that, given that there will be a changing of the guard at the White House and possibly in Congress, the removal of the bans could be short term.

The temporary funding measure, which would keep the federal government operating through March 2009, cleared both the Senate and House by veto-proof majority votes (see NGI, Sept. 29). Democrats leaders opposed to offshore drilling were forced to let the ban expire after the White House threatened to veto the continuing resolution if it renewed the drilling moratorium.

Congress has renewed the moratorium every year as part of the House appropriations process since 1982. Now that the ban has expired oil and gas leasing will be permitted as close as three miles from the Atlantic and Pacific coasts and in the eastern Gulf of Mexico -- except off the western coast of Florida. Remaining in place will be a 125-mile buffer off the Florida coast until 2022.

The reprieve from the 26-year-old ban could be short-lived if Democratic presidential candidate Barack Obama is elected in November. He could easily reinstate all or part of the offshore moratorium. However, if Republican presidential contender John McCain wins the election and Republicans gain a majority in one or more houses of Congress, the chances that the ban would be reinstated are less likely.

In mid-July President Bush removed the executive ban on oil and natural gas drilling in much of the federal Outer Continental Shelf (OCS). But the president's action alone did not permit leasing on restricted areas of the OCS to proceed. The Democratic-controlled Congress also needed to lift its ban to clear the way for expanded offshore exploration and production (see NGI, July 21).

Shortly after the president's action Interior Secretary Dirk Kempthorne directed the Minerals Management Service (MMS) to begin preparations of a new five-year offshore oil and gas lease program (2010-2015) that would include development of areas that were heretofore off limits (see NGI, Aug. 4).

Lease sales for the restricted areas could begin in mid-2010, said MMS spokesman Nicholas Pardi. He believes it will require a "long lead-up time" for the development of leases off the Atlantic Coast because of the lack of infrastructure there -- platforms and rigs, and pipeline, gathering and processing facilities.

"The end of the drilling ban represents a fundamental shift in U.S. energy policy, but the Interior Department's [MMS], which would lease and manage offshore energy production, says the process of completing environmental reviews, holding lease sales, conducting geologic studies and building new infrastructure means it could be five to 10 years before any new offshore drilling could actually begin," CQ Today reported.

"Meanwhile, Democrats and environmental groups are already marshaling their forces in hopes of working with the next administration to impose limits on new drilling. But Democratic leaders concede that it's unlikely the full ban could be reinstated," it said.

In the House Rep. Edward Markey (D-MA) has introduced legislation to shield the Georges Bank area off the coast of Massachusetts from drilling. At the same time Rep. Joe Barton of Texas, the ranking Republican on the House Energy and Commerce Committee, proposed a bill that calls for the president to appoint someone to coordinate all federal agencies involved in oil and gas permitting on public lands onshore or offshore. The aim of the measure is to speed up the permitting process.

Sen. Jim DeMint (R-SC) last Wednesday introduced a bill to permanently erase the bans on OCS drilling and oil shale development. "It's real important we realize ending the moratorium doesn't solve the problem. It just opens the door. And we need to pass a piece of legislation that tells the Interior Department to expedite the vetting of these leases and to set up the structure that gives states a percent of the royalties so it will encourage states to get active behind this and stop frivolous lawsuits. The environmental lawyers can hold up leases and permits for years using the courts. And we need to change that," he said.

DeMint's measure (S. 3646) would allow the MMS to begin preleasing and leasing activities immediately in the OCS, without the need to completely write a new five-year leasing plan. It also provides for 50-50 sharing of offshore production royalties between coastal states and the federal treasury, and it would give environmentalists only 90 days to file lawsuits in federal courts. Appeals of federal court rulings would have to be filed with the U.S. Court of Appeals for the District of Columbia Circuit.

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