Senate Votes to Keep Eastern Gulf Sale to December Timetable

The Senate last week overwhelmingly voted to retain a controversial oil and natural gas lease sale in the eastern Gulf of Mexico scheduled for December, pushing back attempts by the Florida delegation to delay it until next year, as part of a major energy spending bill. Interior Department's Minerals Management Service (MMS) last week tentatively scheduled the lease sale for Dec. 5 in New Orleans.

By 67 to 33, a Senate bipartisan coalition led by Louisiana lawmakers defeated an amendment to an $18.5 billion Interior appropriations bill that would have deferred all leasing in the eastern planning area of the Gulf --- including Lease Sale 181 --- until April 1, 2002. The measure was co-sponsored by Sens. Bill Nelson and Bob Graham of Florida.

The Senate action came only weeks after the House had voted in favor of a Florida delegation's proposal to delay the lease sale. Because the two chambers disagree on the issue, the odds are that it may not be included in the final bill that emerges from conference. Even if it is, President Bush is likely to veto any legislation that would postpone the eastern Gulf lease sale beyond the scheduled December timetable.

"I have a feeling that the Senate position will prevail [in conference], but it's hard to tell at this point," said a Capitol Hill observer. The Bush administration's plans to limit the size of Lease Sale 181 "may take some of the wind out of the House vote."

The Senate vote last week was "all the more important" in light of Interior's recent decision to scale back the size of the lease sale, said Tom Michaels, a spokesman for the National Ocean Industries Association (NOIA). If the vote had gone the other way, it would have given the Florida delegation more time to "stall and ultimately halt Lease Sale 181," he claimed.

Sens. Mary Landrieu and John Breaux of Louisiana led the drive to block the measure. "We have a problem in this nation. Our demand for energy is too high and our supply is not great enough. We use 30 Tcf of natural gas [a year]. We only have 25 Tcf. We think that the Gulf of Mexico, places far from the shores of Florida, has ample supply of natural gas. Let us not move in the wrong direction," Landrieu said on the Senate floor.

Nelson and Graham urged Senate lawmakers to repeat their action of last Wednesday, when they adopted an amendment to bar drilling on federal lands designated as national monuments (See related story). "This [the Florida coastline] is a matter of national treasure to us. You all honored that...in passing the...amendment" sponsored by Sen. Richard Durbin (D-IL).

In related action, the Senate also voted to adopt an amendment, sponsored by Sen. John Kerry (D-MA), clarifying that a section of the Interior spending bill, which renews the presidential offshore moratorium, would apply to pre-leasing activities (seismic and geophysical testing, for example) as well as leasing. The bill renews the moratorium on drilling off the West Coast, in the North Atlantic and eastern Gulf of Mexico south of 26 degrees north latitude and east of 86 degrees west longitude (near the bottom part of the Florida Panhandle).

"The simple, straightforward amendment I have proposed adds pre-leasing to the list of prohibited activities...It would clarify congressional intent and serve as a preventative step against any challenge to the meaning of the prohibition," said Kerry in offering his amendment last week.

Elsewhere on Capitol Hill last week, Landrieu made it quite clear during a Senate hearing Thursday that her home state of Louisiana disapproved of the Bush administration's decision to cut back the amount of acreage that will be offered to producers in the upcoming Lease Sale 181 in the eastern Gulf.

The administration's decision to limit the eastern Gulf sale was "quite perplexing," she said. While the White House talks about the "great demand for natural gas," it has taken "not one but several positions to minimize...gas production," Landrieu said before a Senate Energy and Natural Resources Committee hearing on comprehensive energy legislation.

The Bush administration earlier this month, in a major concession to Florida, announced plans to scale back the numbers of blocks on which producers will be able to bid during the lease sale --- to 256 blocks on 1.5 million acres from 1,033 blocks on 5.9 million acres (NGI, July 9). The blocks are situated more than 100 miles off the Florida-Alabama coast and more than 285 miles west of Tampa, FL. Future drilling in the eastern Gulf will be limited principally to the deep-water areas off of Alabama. As a result of the administration's action, "we've now cut off a huge section of opportunities for drilling," Landrieu said.

"Florida and Louisiana have very different views" on drilling in the eastern Gulf, said Interior Secretary Gale Norton, who appeared before the Senate panel last week. She noted that the Bush administration tried to reach a "reasonable compromise" between the divergent sides.

Landrieu asked Norton what right Florida had to stifle drilling so far off of its coasts. "First of all, these are not [Florida] state waters. They're federal waters. They don't belong to the state of Florida. [The offshore acreage is] actually closer to Louisiana," she said.

The original agreement for Lease Sale 181, which was brokered between the Clinton administration and former Florida Gov. Lawton Chiles, stipulated that the Lease Sale 181 would involve offshore acreage located 100 miles from the Florida coastline, which "I thought was a quite reasonable arrangement." But that wasn't enough for Florida, she noted.

Prior to the Senate vote last week, NOIA President Tom Fry wrote President Bush that he was concerned that "even this vastly smaller Sale 181 region...is in grave danger of being placed off limits to development," and urged the administration to take action.

"The area remaining in Sale 181 is estimated to hold vital quantities of natural gas and oil that will be critical to maintaining a stable energy supply for Americans over the next decade. We ask that you and your administration work proactively to ensure that these tracts remain open for timely leasing and development," said Fry in a July 6 letter to Bush.

He noted that NOIA was "greatly disappointed" by his administration's decision to "drastically reduce" the offshore acreage to be made available to producers in Lease Sale 181.

The "administration's decision to slash all of the shallow water, natural gas prone-tracts in the Sale 181 region will pose serious problems for our nation," he warned. The National Petroleum Council "has forecasted a 33% increase in domestic natural gas demand over the next ten to 15 years," but gas production in the maturer central and western Gulf --- which historically has accounted for more than one-third of the U.S. gas supply --- "has been declining in recent years," he said. Canada has been making up the supply shortfall, "but its industry is having a difficult time in meeting its own domestic needs."

The gas potential of the scaled-back Lease Sale 181 has been put at 1.25 Tcf, while the oil potential has been estimated at 185 million bbl.

Meanwhile, in its final environmental review of leasing in the eastern Gulf, Interior has concluded that the impact of drilling on the state's beaches and tourist trade would be minimal. Florida all along has argued otherwise, saying that drilling would be a major threat to its tourism-based economy.

While eastern Gulf drilling could result in "small pollution events that could temporarily affect the enjoyment or use of some beach segments in Alabama or Florida," it will have "little effect...on the number of beach users or tourism," said Interior's MMS in its final environmental impact statement (EIS) on the original, much-larger Lease Sale 181.

The MMS EIS, which was issued July 6, said that the probability of an oil spill of any kind occurring as a result of drilling in the eastern Gulf was "very low," ranging from 5-37% depending on the volume of resources developed. It estimated the chance of a large spill occurring at 1-23%, while small spills would be more prevalent. "Although up to 870 small (50 bbl or less) offshore spills are projected to occur throughout the life of the proposed [lease sale], they are assumed to be mostly very small events (average size less than one barrel), with spills greater than 50 bbl occurring very infrequently (0-2 spill events)."

Even in the event of a spill, there is a "low probability" that it would come in contact with the barrier beaches, the Interior agency said. "Mechanical cleanup at sea is assumed to collect up to 10% of the oil and approximately 30% is assumed to be chemically dispersed, thereby reducing the probability and severity of beach contact. Mechanical cleanup onshore would occur with minimal sand removal. Should offshore spill cleanup proceed as prescribed, impacts would be minimal to insignificant."

If beach contact should be made, the areas most susceptible would be the Chandeleur Islands of Louisiana, Baldwin County, AL, and Escambia and Santa Rose Counties, FL, the EIS said.

Moreover, the impact of spills and "effluent discharges and runoff from the use of onshore [support] infrastructure" on coastal water quality is likely to be small, according to MMS. Given that so few spills are likely to happen and those that do would be very small (78% are estimated to be one barrel or less), "oil-spill events are not likely to become major contributors to regional petroleum contamination of Gulf coastal waters," the EIS noted. Spills occurring in or reaching coastal waters "are expected to cause acute, localized, short-term impacts," and "are not expected to disrupt current activity uses designated for these waters."

Nor are spills or well blowouts in the eastern Gulf likely to have "significant impacts" on onshore air quality, according to the agency's EIS. "Pollutant concentrations reaching onshore will generally be low due to dispersion of the emissions with distance over water and due to the fact that emissions decrease with time and become more diffuse as the spill spreads over a large area with time. Any potential air quality impacts from a large spill could be rare, very localized and of short duration."

As part of its EIS, the MMS also evaluated three alternatives to Lease Sale 181: one option sought to cancel the lease sale altogether; another proposed the removal of 126 blocks in the easternmost part of the Gulf from the sale because of potential conflicts with the military; and the last one called for 144 blocks in the northernmost part of the Gulf --- the Florida Panhandle --- to be eliminated from the sale in deference to the state of Florida. Interior granted the latter two proposals earlier this month when it scaled back the size of the planned Lease Sale 181.

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