FL Gov. Bush, Graham Huddle over Lease Buy-Back

Florida Gov. Jeb Bush has signaled that he will step up efforts to lobby his brother's administration to deny drilling permits in the Destin Dome gas field off of the state's coast, where three major producers own 11 leases that have sat idle for more than a decade.

Bush met with Florida Sen. Bob Graham recently to discuss a possible buy-back by the federal government of the Destin Dome leases, which are located about 25 miles from Pensacola, as well as other leases in the Gulf of Mexico, according to a press aide for the senator. Graham already has proposed legislation for a $90 million buy-back of a number of existing Gulf leases, including $38.6 million for those in Destin Dome.

The producers would "certainly consider" a buy-back if it were offered, said David Duplantier, senior counsel for Chevron Corp., which along with Conoco Inc. and Murphy Exploration & Production Co. bought the Destin Dome leases in the mid- to late 1980s. But the price would have to be right. He noted the producers to date have invested more than $100 million in buying the leases, conducting environmental permitting work and drilling gas exploratory wells.

The three partners filed a complaint in U.S. Court of Federal Appeals seeking unspecified damages more than a year ago, alleging that the federal government was delaying and ultimately blocking them from developing the field.

They currently are awaiting a decision from the Department of Commerce on their appeal of a Florida ruling that prohibits the producers from drilling the leases on the grounds that it is inconsistent with the state's coastal management plan, said Duplantier. Commerce has said it won't act on the appeal until the Environmental Protection Agency (EPA) issues the environmental permits for the project, while the EPA has vowed not to complete the permitting until Commerce decides the appeal, according to the producers. "There's nothing new" on that front, Duplantier said.

In their complaint, the producers claim this regulatory "Catch-22" amounts to a breach of the lease contracts by the federal government, as well as a "taking" of property rights in violation of the Fifth Amendment of the Constitution (See NGI, July 31, 2000).

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