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House Lawmakers Spar with Administration Point Man on OCS

The Obama administration's five-year (2012-2017) plan for oil and natural gas leasing in the Outer Continental Shelf came under heavy attack Wednesday from Republican members of the House Natural Resources Committee, who claimed that it reinstated the ban on shelf drilling that had been lifted in 2008. The head of Interior's Bureau of Ocean Energy Management (BOEM) defended the proposed plan, saying it focuses on offshore areas where oil and gas deposits are known to be the richest and also are verifiable by reliable seismic data.

The Obama administration is pursuing an agenda that keeps 85% of the nation's offshore areas closed to "new" energy production, said Committee Chairman Doc Hastings (R-WA) during an oversight hearing. The plan would only allow drilling in the Gulf of Mexico (GOM) and parts of offshore Alaska -- "areas that have been open in some cases for decades," he noted.

"We [won't] know the oil and natural gas potential of new areas until we begin development of those areas," Hastings said. He cited the Marcellus Shale as an example. Just about a decade ago, the U.S. Geological Survey stated that the undiscovered technically recoverable resources of the Marcellus were estimated at 1.9 Tcf of natural gas. It's now estimated that the Marcellus has 44 times that amount, Hastings said.

Testifying before the committee, BOEM Director Tommy Beaudreau said "our plan proposes leasing where the oil is," and where the government has reliable seismic data on resource potential. The Central GOM "remains by far the offshore areas with the richest oil and gas potential, [with] nearly 31 billion bbl of undiscovered but technically recovered oil."

The Chukchi Sea offshore Alaska is the second richest offshore area, with approximately 15 billion bbl of oil, while the Western GOM and Beaufort Sea off Alaska's coast have more than 12 billion bbl and 8 billion bbl, respectively, he said.

"Together these areas, along with the Cook Inlet and a portion of the Eastern Gulf of Mexico not subject to congressional moratorium...contain more than 75% of the untapped oil and gas resources that we estimate exist offshore the United States," Beaudreau said.

The five-year leasing plan, which Interior released in November, includes five annual area-wide lease sales in the Western GOM, beginning in fall of 2012; five sales in the Central GOM, beginning in the spring of 2013; two sales in the Eastern GOM in 2014 and 2016; one sale in the Beaufort Sea in 2015; one sale in the Chukchi Sea in 2016; and one special interest sale in Cook Inlet, "which is initially scheduled for 2013 but may be moved to later in the program depending on industry interest in the sale" (see Daily GPI, Nov. 9, 2011).

Hastings noted that the proposed leasing plan would not take effect on July 1 as scheduled due to the administration's failure to submit it to Congress in early May for a 60-day review. Beaudreau assured Hastings that the new plan would be submitted to Congress before the expiration of the current five-year leasing plan (2007-2012) on June 30. Congress would then have July and August to review the plan, during which time no lease sales are scheduled, he noted.

"The first sale [under the 2012-2017 plan]...is scheduled for November or December later this year. We're not in jeopardy of postponing any sales" as a result of the department's delay in issuing the plan, Beaudreau said.

Excluded from the proposed plan were the Eastern GOM and Straits of Florida lease sales that are subject to a congressional moratorium, as well as the Mid- and Central Atlantic and areas of the Pacific. Industry and state of Virginia officials were both disappointed that the lease sale off the state's coast was not part of the plan.

Before Interior can move forward with any lease sales off the Atlantic Coast, Beaudreau told House lawmakers that the department needs better seismic data. He said that the existing seismic data on the resource potential of the Atlantic Coast is 30 years old.

In March Interior released a draft programmatic environmental impact statement (PEIS) for seismic exploration in the Mid- and South Atlantic Planning Areas, the first step toward a survey of the oil and natural gas potential off the East Coast (see Daily GPI, March 29). However, the offshore industry was far from hopeful that the seismic survey would lead to a lease sale in the Atlantic in the next couple of years.

Said one industry association, "when it comes to oil and gas exploration, it appears the department has given the offshore industry a canoe with no oars, since there are no lease sales planned anywhere off the East Coast in the upcoming 2012-2017 OCS leasing plan." Beaudreau said seismic activity off the East Coast could start as early as next year.

Long-time offshore drilling opponent Rep. Frank Pallone (D-NJ) said he was particularly opposed to Interior's plan to move forward with seismic testing in the Atlantic. "Seismic testing is the first step in the direction of opening up the Atlantic Coast to drilling." He doesn't believe the technology is yet available to prevent another spill of the magnitude of the BP plc Macondo well blowout spill that occurred in the GOM two years ago.

Rep. Louie Gohmert (R-TX) pressed Beaudreau on why Southern California was not included in the five-year offshore plan. The region currently has about 6 billion bbl of estimated oil resources. "If it turned out to be 7 or 8 billion bbl, "would you then open up that area to permitting?" Gohmert asked.

Resource potential is only one factor that Interior considers when it decides which areas to include in its offshore plan, Beaudreau said. "Another factor is we must consider...the interests of the state."

So "it's OK to mess up Louisiana's coast, but [southern] California being Democratic is much more delicate," Gohmert said. "If there were 20 to 50 billion bbl of oil, would you open that area up for the good of our own national security? You would still say 'it's too politically indelicate to risk smudging the California beaches.'"

Rep. Edward Markey (D-MA), the ranking member of the House panel, said offshore drilling should only be one part of the nation's energy plan. "We need a plan to end excessive Wall Street speculation in oil markets. We need a plan to get oil companies to start drilling on the tens of millions of acres that they already have under lease...We need a plan to ensure that American fuel and natural gas stay here to help American consumers and is not just exported."

As for opening up the East and West coasts to drilling, Markey said Interior last year found that there was nearly as much oil and more natural gas under the nonproducing leases than the U.S. could ever get from drilling up and down these coastal regions.

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