Interior Panel Recommends Limited Drilling in Moratoria Areas

A Natural Gas Subcommittee of the Interior Department's Outer Continental Shelf (OCS) Policy Committee is scheduled to submit recommendations this week for a pilot program that would allow limited drilling on the five top natural gas geologic plays currently in offshore moratoria areas. The proposed pilot is among a host of others measures, designed to encourage the production of natural gas on the OCS, encourage energy alternatives to natural gas and increase conservation measures.

The Natural Gas Subcommittee was formed last fall to gather information on gas development and present an assessment of the contribution the OCS can make in meeting the short-term and long-term gas needs of the country. The Department of Energy projects an increase in gas demand to 35 Tcf/year from the current level of 21 Tcf, only 18.7 Tcf of which is met by U.S. production. Currently the OCS accounts for about 26% of the gas produced in the United States, and most of its contribution comes from the Central and Western Gulf of Mexico with a small amount arriving from offshore California.

There are growing concerns about the ability of the OCS to maintain its current level of production in the coming decades, despite the apparently abundant gas resource. The total federal offshore holds 362 Tcf of undiscovered conventionally recoverable gas, according to the MMS' "Outer Continental Shelf National Petroleum Assessment 2000." It is estimated that the economically recoverable gas at $2.11/Mcf is about 117 Tcf and at $3.52/Mcf is about 168 Tcf. However, moratoria currently restrict access to areas containing 62 Tcf, according to the subcommittee's assessment. Among the restricted areas are: the Atlantic (28 Tcf); most of the Eastern Gulf (8.5 Tcf); offshore California, Washington and Oregon (19 Tcf); and the North Aleutian Basin (6.8 Tcf).

The Natural Gas Subcommittee recommends that the Mineral Management Service, in consultation with industry and affected states, identify the five top geologic plays in the moratoria areas, and if possible, the most prospective areas for gas in the plays that industry would likely explore if allowed. These five areas would provide the basis for a pilot to see if limited activity is possible in moratoria areas.

In order to accomplish this, the OCS Policy Committee would encourage funding to MMS for the acquisition of seismic data to assist in narrowing down prospective areas. It also would encourage congressional funding for environmental and social impact studies on the areas should they be considered for leasing. In addition the committee should establish a site-specific stakeholder consultation process that would permit sharing of information and discussion of a limited lifting of the moratoria.

The report lists of series of additional recommendations, several of which could have a significant impact on U.S. gas production. The subcommittee recommends that the Department of the Interior do the following:

  1. Acknowledge that the OCS is a long-term source of gas supply for the United States;
  2. Obtain congressional funding for MMS and other agencies critical for encouraging and furthering development of the nation's gas resources;
  3. Provide new economic incentives be provided to encourage gas drilling in deepwater, subsalt and deep formations;
  4. Have the MMS encourage the increased production of natural gas from existing OCS leases;
  5. Improve the existing leasing process;
  6. Have the MMS in cooperation with DOE encourage an international program with a goal of launching a pilot in 10 years to investigate and develop gas hydrates;
  7. Encourage congressional funding for and educational outreach on the leasing program;
  8. Have MMS, partnering with DOE, expand research with other agencies and industry to seek technical solutions on leading production issues such as seismic imaging of subsalt and deep formations;
  9. Facilitate the permitting process for a gas pipeline from Alaska to the Lower 48;
  10. Help in determining the mitigation of local, social and economic impacts from an Alaskan pipeline and in determining the special requirements of allowing greater input from local Alaskan communities;
  11. conduct a comparative assessment of onshore and offshore Alaskan gas development; and
  12. Encourage producers to provide gas to Alaskan communities.

The report will be voted on this week at a meeting of the OCS Policy Committee in Alexandria, VA. The Policy Committee can vote to adopt it, reject it or change it. If adopted, the report will be presented to Interior Secretary Gale Norton.

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