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First Lease Sale Proposed Off East Coast in Nearly 30 Years

Interior Department's Minerals Management Service (MMS) last Wednesday took its first step toward preparing an environmental statement and gathering public information on the first lease sale proposed off the East Coast in nearly three decades.

This is an "important day," said MMS Director Randall Luthi in announcing the agency's plans to hold a proposed lease sale offshore Virginia in 2011. The proposed sale area, which is at least 50 miles offshore and covers 2.9 million acres in water depths of 100 feet to 10,000 feet, is believed to contain 1.14 Tcf of natural gas and 130 million bbl of crude oil, he said.

However, Chris Oynes, associate director of the Offshore Minerals Management Program, acknowledged that the agency's geologic information was "somewhat limited" and "somewhat based on old data" due to the fact that the last time oil and natural gas drilling occurred off the Atlantic Coast was in the late 1970s and early 1980s.

The sale is expected to be for both oil and gas resources. "It is going to be technically difficult to limit it [the sale] to gas," although "our best guess is that this is a gas-prone area," Luthi said.

"If the incoming administration decides to proceed with this sale," this will "actually [be] an important step in our nation's energy and security picture," he told reporters during a teleconference in Washington, DC. While President-elect Obama could reverse direction on the sale, Luthi indicated that he doesn't think this will happen. "This to me just plays an important part of making those kind of [campaign] promises come true...This gives the new administration an opportunity."

The start of the process for offshore Virginia is possible because outgoing President Bush in July lifted the presidential ban that placed the East and West coasts and parts of the eastern Gulf of Mexico off limits to leasing and drilling activity, and the congressional moratorium on leasing in those areas expired on Oct. 1, leaving the Outer Continental Shelf free of restrictions for the first time in decades (see NGI, Sept. 29; July 21).

While renewable fuels are expected to grow in importance in the future, Luthi said he believes oil, natural gas and coal will continue to provide 60-80% of the nation's energy supply through 2030.

He noted that producers have expressed a "considerable amount" of interest in drilling off the East Coast in the past. He hopes the agency's "call for information" will help to gauge the current interest in offshore Virginia.

He acknowledged that producers will face infrastructure problems off the coast of Virginia. Unlike in the Gulf of Mexico, there are no platforms, pipelines or processing facilities. "There will not be production tomorrow as a result of this sale." Once companies buy leases offshore Virginia, they will "need to start also worrying about what will the transportation system be to get the energy back to the shore," Luthi said.

Luthi said he couldn't predict whether states neighboring Virginia might take action to halt the proposed lease sale. "Right now we think [that] we can make that [2011] deadline" for the proposed sale. "We are moving as fast as we can," but "we don't want to do it in a rushed fashion," he noted.

Luthi further said that there would be no royalty sharing with Virginia, unless Congress takes action to change the current law.

The proposed lease sale off the coast of Virginia was included in the five-year lease program (2007-2012) that Interior Secretary Dirk Kempthorne approved in July 2007 (see NGI, July 9, 2007). The leasing plan was updated this summer after Bush removed the presidential restrictions on offshore development (see NGI, Aug. 4).

State Sen. Frank Wagner, R-Virginia Beach, has been lobbying for years to get the state and Congress to open up Virginia's coastline. In February 2005 both the Virginia Senate and House of Delegates approved legislation that would have cleared the way for leasing, but it was subsequently vetoed by then-Gov. Mark Warner, who earlier this month was elected to the U.S. Senate (see NGI, April 11, 2005). Current state Gov. Tim Kaine, however, recommended to the MMS that it move forward on the offshore lease sale, Luthi said.

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